Posted on: 10th May, 2006 01:22pm
If you're not able to pay your mortgage and you can't sell the home or get a work out plan, a deed in lieu of foreclosure is your third option. This option allows you to transfer the property to your lender in exchange for being released from your mortgage.
Does deed in lieu of foreclosure affect credit score?
When you go for deed in lieu of foreclosure, it affects your credit score. Your score will drop by 250 points or so and will stay on your credit report for 7 years. After 7 years, you can have the deed in lieu removed from your credit report and start to rebuild your credit. At the end of the 7th year, you can request the bureaus to remove it from the report.
How long after deed in lieu can you buy home?
Because a deed in lieu has a negative impact on your credit, lenders won't offer you a mortgage for the first 2-3 years. In the meantime, if you try and rebuild your credit the chances are that you may be approved for a loan after the 2-3 years has expired. After that you can buy a new home.
Related Forum Discussions:
my wife and i along w/another couple bought a 2 family with an agreement that one resident would buy the property in one year, he defaulted and left us with a ton of damage and bills. long story short we ended up doing a deed in lieu on the property. our wives were the primary lendees on the mortgage as a result we are seeing a major hit on her credit score taking it down to a 660 or so. lenders can't use her on a loan if we want to refinance or anything because they say the hit disqualifies her. we did not enter this deal to go into the hole, we worked real hard for many years to keep our credit very very good and this one property seems to have wrecked us, we don't have a ton of money, we work hard and have a small home of our own that we would like to refinance, i am getting no's from lenders. i really need some help and i feel hopeless at this point. i just don't want to see all that my wife and i are working for shot because of one bad deal that we only entered into because one tenant wanted to buy the place and take care of it and then we got stuck with it. it took thousands out of our pockets before the deed in lieu. as i said other than that we have had excellent credit, mine is over 740-750. please offer any advice, it is truly truly appeciated. i feel that we are good hard working people and we just don't want to feel hopeless.thank you so much, matt long
Can a lender force you file chapter 13 or 7 if you agreed to do a Deed in Leiu of Foreclosure. They acted like over the phone that was ok but the form that came in the mail acted like the only way not to pay for the property was to file chapter 13 or 7 against the property
hi anntharp!
welcome to forums!
your lender cannot force you to file bankruptcy. they definitely have the right to refuse a deed in lieu request but filing bankruptcy will be your choice.
feel free to ask if you have further queries.
sussane
welcome to forums!
your lender cannot force you to file bankruptcy. they definitely have the right to refuse a deed in lieu request but filing bankruptcy will be your choice.
feel free to ask if you have further queries.
sussane
What happens when the home is worth more money than what is owed the mortgage? Homes in our area, comparable to ours, are selling for 200k-225k, we only owe 108k. Due to medical bills and job loss, we cannot afford the mortgage and will probably go through bankruptcy anyways. The bank wants to do a Deed in Lieu and is only giving us a couple of days to sign it. Any suggestions?
Thanks
Thanks
Hi donna,
If your property is worth more than what you owe then you would have a profit when you sell off the property. In my opinion, it is a better option to go for a deed in lieu than filing a bankruptcy. A deed in lieu will not effect your credit as badly as a bankruptcy.
Thanks
If your property is worth more than what you owe then you would have a profit when you sell off the property. In my opinion, it is a better option to go for a deed in lieu than filing a bankruptcy. A deed in lieu will not effect your credit as badly as a bankruptcy.
Thanks
Hi,
I am in the process of selling my home through a short sale. My husband passed away 4 months ago and there is no way I can keep the home financially or otherwise. How long might it be before I can get another mortgage loan? Right now my credit is very good with virtually no other debt. Thank you.
I am in the process of selling my home through a short sale. My husband passed away 4 months ago and there is no way I can keep the home financially or otherwise. How long might it be before I can get another mortgage loan? Right now my credit is very good with virtually no other debt. Thank you.
Hi Valerie,
Though your credit is good, once the short sale is over, you credit score may drop by 75-100 points. You'll have to wait for at least 2 years to get a mortgage in your name after the short sale.
Thanks
Though your credit is good, once the short sale is over, you credit score may drop by 75-100 points. You'll have to wait for at least 2 years to get a mortgage in your name after the short sale.
Thanks
I was told that if we do a deed in lieu, we would still be responsible for the balance difference from the mortgage company if they sell for less than what we owe, is that correct?
aarrgghh -
That is correct.
If the lender eventually sells the home for a price that doesn't pay off the original mortgage amount, they can get a dificiency judgment and try to collect it from you.
However, the lender knows that you can't get bloodout of a stone and probably won't proceed if there doesn't appear the be any money to recover.
That is correct.
If the lender eventually sells the home for a price that doesn't pay off the original mortgage amount, they can get a dificiency judgment and try to collect it from you.
However, the lender knows that you can't get bloodout of a stone and probably won't proceed if there doesn't appear the be any money to recover.
I recently just had to do the Deed in Lieu on my home. I didn't want to go this route, but I couldn't afford it and the house didn't sell. It's located in a Dominion Home Subdivision where there were so many foreclosures taking place. People were getting loans for homes they could no longer afford once the property tax was assessed after the first year. (I was one of those people) I am currently renting now and don't like it one bit! Is there any way possible that I will be able to buy another home within a year or two? (without having to pay extremely high percentage rates?)
Hi stucknrut,
You won't be able to get a mortgage at a low interest rate just 1-2 years after a deed in lieu. You will have to wait for 3-4 years in order to get a mortgage after deed in lieu. There may be some lenders who can agree to give you a loan but they would charge you an extremely higher interest rate.
Thanks
You won't be able to get a mortgage at a low interest rate just 1-2 years after a deed in lieu. You will have to wait for 3-4 years in order to get a mortgage after deed in lieu. There may be some lenders who can agree to give you a loan but they would charge you an extremely higher interest rate.
Thanks
Thanks for the info
I purchased my home in 2005 for $115,900. In 2007, I refinanced so had my home appraised - $134,000. Now, 2009, my home is worth less than $115,000. I can not refi because I owe $120,000 on the home (I borrowed down payment and closing costs). I can no longer afford the monthly mortgage payment and am currently 1/2 a month behind on my mortgage - soon to be more. What effect would a deed in lieu have on my future?
My son and I bought a 2-family property. At the time, I had had a bankruptcy for the loss of a business so we had to put the property and the mortgage in this name, but I put the down payment and all the subsequent repairs and renovations in the house -around 25,000 so far.
Last year, my son got married and now he does not live in the house any more. Even renting the other unit, I have not been able to keep up with the mortgage payments. In addition, I lost my job in March so we stopped paying the mortgage. I have not been able to find a new job so far.
My son applied for a loan modification right away but the bank -Chase- has not responded. Now we has been served with foreclosure papers.
We are really confused as what we should do, on one side, his credit is getting ruined because I cannot afford the payments, and now he has more financial obligations, so he can't help me either.
On the other side, we thought to try a short sale, and I was thinking to make an offer as a buyer -yes, I have to repurchase my own house. However, some people are telling us that the bank won't allow it because we are related.
If we sell the house to someone else, not only I lose my house but also I lose all the money I invested in it, and in addition, we might have to pay deficiency and taxes.
What would you suggest is our best way to deal with this problem? Can you give me some scenarios, pros and cons?
Also, is New Jersey -where I live- a deficiency state? And if so, how much would they want?
I'm afraid I will get sick with all this!
Last year, my son got married and now he does not live in the house any more. Even renting the other unit, I have not been able to keep up with the mortgage payments. In addition, I lost my job in March so we stopped paying the mortgage. I have not been able to find a new job so far.
My son applied for a loan modification right away but the bank -Chase- has not responded. Now we has been served with foreclosure papers.
We are really confused as what we should do, on one side, his credit is getting ruined because I cannot afford the payments, and now he has more financial obligations, so he can't help me either.
On the other side, we thought to try a short sale, and I was thinking to make an offer as a buyer -yes, I have to repurchase my own house. However, some people are telling us that the bank won't allow it because we are related.
If we sell the house to someone else, not only I lose my house but also I lose all the money I invested in it, and in addition, we might have to pay deficiency and taxes.
What would you suggest is our best way to deal with this problem? Can you give me some scenarios, pros and cons?
Also, is New Jersey -where I live- a deficiency state? And if so, how much would they want?
I'm afraid I will get sick with all this!
Hi Guest!
Welcome to forums!
Deficiency judgments are allowed in New Jersey. If your property is short sold, the lender will sue you for the deficient amount. Deficient amount is the difference between the mortgage owned by you and the price at which the property is sold off at the auction. If you are unable to pay off the deficient amount, the lender may wither garnish your savings account or can place lien on your other property. I would suggest you to contact the lender once again and apply for a loan modification. If the lender accepts it, then you would be able to save the property as well as your son's credit.
Feel free to ask if you've further queries.
Sussane.
Welcome to forums!
Deficiency judgments are allowed in New Jersey. If your property is short sold, the lender will sue you for the deficient amount. Deficient amount is the difference between the mortgage owned by you and the price at which the property is sold off at the auction. If you are unable to pay off the deficient amount, the lender may wither garnish your savings account or can place lien on your other property. I would suggest you to contact the lender once again and apply for a loan modification. If the lender accepts it, then you would be able to save the property as well as your son's credit.
Feel free to ask if you've further queries.
Sussane.