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
Hi i have two house's one in KY and the other in AZ, my situation is my brother lives in AZ but due to medical reasons I'm moving him to KY. I owe more then what the house is worth in AZ, i have talked with my lender about doing a short sale do to medical reasons, they informed me that due to my perfect payment history i don't qualify, now if i missed payments, i could possibly be qualified, unless my finances show i can make the payments. WHAT , does this sound right help.
Hi David,
It is true that a lender will agree to a short sale depending upon your financial situation. You will have to write a hardship letter mentioning your financial hardship to the lender. If the lender comes to know that you're not facing any hardship, he will not be ready to go for a short sale. If your finances show that you will be able to pay off your dues, your lender will never give you a short sale.
I don't think it is a good option to miss your payments and then qualify for a short sale. Check out a discussion as why it is not beneficial to stop payments from the given page:
http://www.mortgagefit.com/shortsale/stop-payments.html
It is true that a lender will agree to a short sale depending upon your financial situation. You will have to write a hardship letter mentioning your financial hardship to the lender. If the lender comes to know that you're not facing any hardship, he will not be ready to go for a short sale. If your finances show that you will be able to pay off your dues, your lender will never give you a short sale.
I don't think it is a good option to miss your payments and then qualify for a short sale. Check out a discussion as why it is not beneficial to stop payments from the given page:
http://www.mortgagefit.com/shortsale/stop-payments.html
my husband is military we have had our sale on the market for 6 months and he is being transfered out of the country in less than 2 months. we got the home on a va loan and i am wondering which one of the two would be best. we are current on payments just there are so many homes being built and still for sale we haven't had any one offer us. we owe more than currently worth and we are needing to be out of the house like now and can't refinance it. which one would you suggest? which one is better as far as the hit with taxes and my mortgage company told me with the short sale the unpaid balance would be forgiven so is it or is the unpaid amount forgiven ont he deed in lieu.
thanks
thanks
Hi Michelle,
In my opinion, a deed in lieu of foreclosure would be a good option in this regard. As far as I know, the deficient balance is forgiven by the lender in deed in lieu. You'll not be liable to pay taxes on the deficient balance depending upon the Mortgage Debt Relief Act.
In my opinion, a deed in lieu of foreclosure would be a good option in this regard. As far as I know, the deficient balance is forgiven by the lender in deed in lieu. You'll not be liable to pay taxes on the deficient balance depending upon the Mortgage Debt Relief Act.
Jessica,
I purchased a condo in Miami as an investment rental property in 2005 for $280k. I paid 10% down in cash. I then took out an 80% loan and a 10% loan to finance the rest (both loans are interest only). I rented it consistently but still lost significant money each month. In October 2008, after discussions with my realtor, I decided to pursue a deed-in-lieu. In June 2009 Bank of America finally agreed in writing to accept my DIL. By the way, I paid both mortgagees on time every month up until B of A accepted the DIL. The property is now worth about $150k. Here are my questions. Will I receive a 1099 for one, both or neither mortgage? I understand a DIL is an "arrangement with the lender that includes surrender of the property to the lender by the borrower in satisfaction of the debt." If the debt is satisfied, I should not get a 1099 - right? In other words, unlike a true foreclosure where a 1099 is applicable, a DIL "satisfies" the debt. Please clarify. Thank you. Mark
I purchased a condo in Miami as an investment rental property in 2005 for $280k. I paid 10% down in cash. I then took out an 80% loan and a 10% loan to finance the rest (both loans are interest only). I rented it consistently but still lost significant money each month. In October 2008, after discussions with my realtor, I decided to pursue a deed-in-lieu. In June 2009 Bank of America finally agreed in writing to accept my DIL. By the way, I paid both mortgagees on time every month up until B of A accepted the DIL. The property is now worth about $150k. Here are my questions. Will I receive a 1099 for one, both or neither mortgage? I understand a DIL is an "arrangement with the lender that includes surrender of the property to the lender by the borrower in satisfaction of the debt." If the debt is satisfied, I should not get a 1099 - right? In other words, unlike a true foreclosure where a 1099 is applicable, a DIL "satisfies" the debt. Please clarify. Thank you. Mark
I am opting for a deed in lieu on one of my homes. The other home I own with my ex-wife has substantial equity. Can the lender that I am turning over the house to go after the equity in my other home when we sell it.
Hi Mark,
If there is deficient amount resulting from the sale of the property after a deed in lieu, it is forgiven by the lender. As a result you would receive a 1099c form as it will be considered as your income and you will have to pay taxes on it. However, if the sale satisfies the debt, then you won't get a 1099c form.
Hi pulido,
In a deed in lieu, the deficient amount resulting from the sale is forgiven. Thus, the lender will not come after your other home to recover the balance amount.
If there is deficient amount resulting from the sale of the property after a deed in lieu, it is forgiven by the lender. As a result you would receive a 1099c form as it will be considered as your income and you will have to pay taxes on it. However, if the sale satisfies the debt, then you won't get a 1099c form.
Hi pulido,
In a deed in lieu, the deficient amount resulting from the sale is forgiven. Thus, the lender will not come after your other home to recover the balance amount.
I am getting ready to be discharged from the military and own a house in Florida. We do not plan on moving back there but we can not sell our house, is a deed in lieu an option and how long does it take? We would like to buy another house once we get to where we are going. How long will we have to wait? I am not really worried about the credit score since no matter what I do it will take a hit. Do we have to be behind to do a deed in lieu?
does a deed in lieu of foreclosure have the same negative credit score rating on a 1031 exchange property?
Hi scotttriplett,
You can apply for a deed in lieu in order to get rid of the property. However, approving the deed in lieu would be completely the lender's discretion. It will take at least 90 days to complete the whole process. After a deed in lieu, you won't be able to get a mortgage immediately. You'll have to wait for 3-4 years in order get a loan. Also, it will lower your credit report by 250 points. You should have some kind of financial hardship in order to get qualified for deed in lieu.
Hi alice,
As far a I know, the negative affect of deed in lieu in case of 1031 exchange property will be the same. Your credit score would get reduced by 250 points.
You can apply for a deed in lieu in order to get rid of the property. However, approving the deed in lieu would be completely the lender's discretion. It will take at least 90 days to complete the whole process. After a deed in lieu, you won't be able to get a mortgage immediately. You'll have to wait for 3-4 years in order get a loan. Also, it will lower your credit report by 250 points. You should have some kind of financial hardship in order to get qualified for deed in lieu.
Hi alice,
As far a I know, the negative affect of deed in lieu in case of 1031 exchange property will be the same. Your credit score would get reduced by 250 points.
i have been trying to refinance / loan modify my mortgage. i have contracted with american residential law group to help me do this. in july of 2006 in attempt to rebuild by credit took on a mortgage with a company in ca. we were at the closing table and still did not know the conditions of the loan. as it turned out i was signing a contract that had an 8.5% 30yr interest with a >$466 pmi. my mortage payment on a $216,000 loan was and is >$2400.00 a month. i had for three years been faithfull on this loan but due to a finacial hardship was despartely needing to refinace this loan. this attempt has been unsuccessful. i tried many times to refinace but have been turned down. i paid amrican residentioal law group $2000 to help us get a loan modification. this has been going on since nov. with no decision. i can not afford this loan and need advice on what to dol i feel helpless and feel my attempt to better myself has come to a deadend. this home has depreciated $40,000 in less than a year so now i owe more than the house is worth. jessica what should i do???
Hi TLM,
As your property is underwater, lenders will not be ready to refinance your loan. In my opinion, you should apply for a loan modification and check out if your lender accepts it. If the lender accepts your request, then you would get better terms and conditions to pay off the loan.
As your property is underwater, lenders will not be ready to refinance your loan. In my opinion, you should apply for a loan modification and check out if your lender accepts it. If the lender accepts your request, then you would get better terms and conditions to pay off the loan.
I have undergone credit counsellings, adjustments of mortgage and finally Mortgage Modification Loan within four years of struggle to save my house.Starting Feb. 2010,my monthly mortgage has gone up again to almost same mortgage prior to Modification Loan. Only 200 dollars monthly has lowered my mortgage(fr.the modification Loan). Now, I'm really exhausted and would like to seek a shortsale or Deed In Lieu of my house. I paid $469 for my house. I still owe around $402. The market value is much lesser,because my neighbors are selling their houses much lesser than my house. Please give me an advise on what to do?
As stated in my previous e-mail I have been trying to get a loan modification since November.
Hi!
Welcome to forums!
To Margie,
You should apply for a deed in lieu of foreclosure by writing a hardship letter to your lender. He would judge your financial situation based on that and then let you know whether or not your request is accepted. If your lender accepts it, then you will have to surrender the property to the lender. He will sell off the property and try to recover his dues. The deficient amount will be forgiven.
To TLM,
Did you speak to your lender and requested them to speed up the process of loan modification? If not, then you should do so. You should contact your lender and check out whether or not they would give you a modification. If the modification is not accepted then you may apply for a deed in lieu of foreclosure and try to sell off the property.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
To Margie,
You should apply for a deed in lieu of foreclosure by writing a hardship letter to your lender. He would judge your financial situation based on that and then let you know whether or not your request is accepted. If your lender accepts it, then you will have to surrender the property to the lender. He will sell off the property and try to recover his dues. The deficient amount will be forgiven.
To TLM,
Did you speak to your lender and requested them to speed up the process of loan modification? If not, then you should do so. You should contact your lender and check out whether or not they would give you a modification. If the modification is not accepted then you may apply for a deed in lieu of foreclosure and try to sell off the property.
Feel free to ask if you've further queries.
Sussane