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 anyone come after me for the difference of what they sell the house for and what I owed? What if my mortgage company refuses to do a deed in lieu of foreclosure? What should I do then?
Hi ratrat,
If your deed in lieu of foreclosure is accepted by the lender, then he would forgive the deficient balance resulting from the sale of the property. However, if the property is foreclosed upon by the lender, then you would be responsible for the balance amount.
If your lender refuses the deed in lieu, then you can re-negotiate for it. If the lender still does not agree, then you've hardly anything to do. The lender would foreclose your home and recover the dues.
Take care.
If your deed in lieu of foreclosure is accepted by the lender, then he would forgive the deficient balance resulting from the sale of the property. However, if the property is foreclosed upon by the lender, then you would be responsible for the balance amount.
If your lender refuses the deed in lieu, then you can re-negotiate for it. If the lender still does not agree, then you've hardly anything to do. The lender would foreclose your home and recover the dues.
Take care.
How is your credit score impacted if you go through a Deed in Lieu and your mortgage is never late and there is no deficiency? Also, can you negotiate how it will be reported on your credit report prior to agreeing to a settlement?
Hi KarenZ!
Welcome to forums!
Your credit score would be lowered by 250 points if you sell off your property though a deed in lieu of foreclosure. You can negotiate regarding the report of deed in lieu to the credit bureau. But it would be the lender's discretion whether or not he would accept your request.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
Your credit score would be lowered by 250 points if you sell off your property though a deed in lieu of foreclosure. You can negotiate regarding the report of deed in lieu to the credit bureau. But it would be the lender's discretion whether or not he would accept your request.
Feel free to ask if you've further queries.
Sussane
which is best in terma of credit affect.
1 deed in lieu
or
2 short sell
1 deed in lieu
or
2 short sell
Hi aquam!
Welcome to forums!
Short sale will have a lesser negative effect on your credit report compared to a deed in lieu. A short sale will reduce your credit score by 80-100 points and you may be able to get a loan after 2 years. In case of a deed in lieu, your score would get lowered by 250 points and you'll be able to get a loan after 3-4 years.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
Short sale will have a lesser negative effect on your credit report compared to a deed in lieu. A short sale will reduce your credit score by 80-100 points and you may be able to get a loan after 2 years. In case of a deed in lieu, your score would get lowered by 250 points and you'll be able to get a loan after 3-4 years.
Feel free to ask if you've further queries.
Sussane
My husband and I went in and talked to a financial advisor, when we left his office I think that we were both confused by what he had to say. We are not behind on our mortgage but we are having a hard time paying our other bills. When we bought this house two years ago my husband had a really good paying job and we could afford the house but then his boss retired and now we are having a hard time staying above water. Can we please get some kind of advise on what way we should be thinking? A short sale? Deed of Lieu or some other way to get out of this house, so that we can get back on track. Thank you so much, Shelley
welcome shelley,
if you want to save the property, then you can apply for a loan modification with your lender. you will get modified terms and conditions to pay off your mortgage. if you want to get rid of the property, then it would be a good option to go for a deed in lieu of foreclosure. this will not only help you in selling off the property but you won't be liable for the deficient balance. however, your score would go down by 250 points.
if you want to save the property, then you can apply for a loan modification with your lender. you will get modified terms and conditions to pay off your mortgage. if you want to get rid of the property, then it would be a good option to go for a deed in lieu of foreclosure. this will not only help you in selling off the property but you won't be liable for the deficient balance. however, your score would go down by 250 points.
Lawyers for bank of am. and federal national mortgage association gave me a warrenty deed to fed.nat.mort.assoc. for property after a forclosure papers were recorded as lis pendens. bank america said they had forclosed but attorneys said it was not completed as i gave them a warrenty deed to fed.nat.mort.assoc. can bank america still charge me with forclosure on credit report???? bank of am recorded a satisfaction of mortgage. what is up?? lawyers say do not worry..
before i was late in first payment i called and wwrote to bank telling them of my situation. my husband was diagnosed with III stage lung cancer and i had to quit work to take him for treatment etc. our children moved us as my husband could do no lawn etc work. they kept me hanghing for a year until i contacted their lawyers and got ball moving.
Hi janet,
If Bank of America has sold off the property in a foreclosure auction in order to recover the dues, then the lender has the rights to report it to the credit bureau. You need to contact the bank and ask them to clarify the whole issue.
If Bank of America has sold off the property in a foreclosure auction in order to recover the dues, then the lender has the rights to report it to the credit bureau. You need to contact the bank and ask them to clarify the whole issue.
My 30 year old son is in the military now after being unemployed for over a year. He is a college grad who got laid off. His home is worth half of what he paid for it and all he can do is make the payments thanks to his girl friend and her brother making rental payments for 2/3 of the mortgage payment. After the car payment & college loans payments there is nothing left for him to spend on clothes or any relaxation much less saving anything. Why should he go for a short sale and then get slammed with paying income taxes on the balance owed the mortgage company or continue to make payments on that unpaid balance left after the short sale? Why would he pay back the $70 to $100,000 when there is nothing he will gain from it? Also, he'd never be able to buy another home because he'd never be able to afford a new mortgage in addition to the old mortgage payback. And if he can't save anything how would he ever be able to afford the down payment on a new mortgage? With a deed in lieu of he can be rid of this albatross, repair his credit in a few years and save the bank the trouble of going through an expensive foreclosure proceeding. He's maintained excellent credit since being out of college and been a responsible homeowner. He is not to blame for the predicament he is in. Why don't financial advisors really explain the small print of the other consequences of going for a short sale - the taxes and the paybacks?
Welcome SML,
It is always better to go through the mortgage docs once the lender originates the loan. The consequences of not paying off the mortgage are written on the loan docs. If your son would have gone through the doc, then he would have come to know about the consequences of the non payment of the dues.
I think it is always better to go for deed in lieu of foreclosure in order to get rid of the property. Though, this will lower your score by 250 points, your son won't be liable for the deficient balance resulting from the sale of the property.
It is always better to go through the mortgage docs once the lender originates the loan. The consequences of not paying off the mortgage are written on the loan docs. If your son would have gone through the doc, then he would have come to know about the consequences of the non payment of the dues.
I think it is always better to go for deed in lieu of foreclosure in order to get rid of the property. Though, this will lower your score by 250 points, your son won't be liable for the deficient balance resulting from the sale of the property.
my exhusband wanted to keep our 8,000 square ft. home on 5 acres to help his ego after our divorce. now, 2 years later he won't keep up the payments and he is unable to refinance because he has such poor credit scores. some debt solution company took his $4000.00 and told him to stop payments so that he could get a "hardship loan" and get the principal reduced. my name is on the 1st loan with his but is the only one on the $250,000 2nd loan. a total of $650,000 is owed on the house. a man told me instead of forcing my ex to sell the home that i should "deed in lieu of forclosure." i've purchased a small home for myself and am unable to make my home payment along with my exhusbands. what should i do? i'm taking him to court for contempt but if i force a sale of the house i could get 1-3 years of late pays on my credit before it sells which i don't want. is a deed in lieu for me?
please help,
ann
please help,
ann
If we decided to purchase a second home with the intent to sell our first home and we are unable to sell it, we then decided to forclose on the home. Once the bank sells the home (if there is a difference in ht owed amount and the sold amount ) will this be a loss to the bank or the forcloser? :shock: