Posted on: 01st Oct, 2008 08:41 pm
My ex and I split up about a year and half ago, and I was left with a $1400 mortgage payment. Granted, that really isn't huge, but it's taking it's toll on my income, and this is really just the first part of the story.
The home is in serious disrepair, and I don't think it's something I can afford to invest in long term, given the current economic conditions (I am a small business owner, and business is way down). Not to mention, I am seriously upside down in the mortgage with the loss of value that's taken place nation wide, as well as the repair issues.
The idea of doing a deed in lieu is not something I have taken lightly, and I have been reading about it thoroughly thanks to you fine folks here in the forum. I understand this will effect my credit, which isn't that bad.. it's 680, I had my real estate buddy check it a few days ago.
But I just don't see another way out, and I feel like I am going to keep making these payments and eventually fall behind.. better to try something instead of sitting still and doing nothing.
Here's my question. He claims there is a way to get me into a new house for about half of what I paid for this one (this part is true), AND still manage to get the deed in lieu on my current property. I don't know how this is possible, and without knowing much myself, I am doubting it can be done.
My personal integrity tells me it's a little shady to tell one party you can't pay, and then somehow turn around and buy another property. But I don't mind sharing my feelings that banks have been screwing people for years, and I probably would not lose much sleep over it if there was a way it could be done. So for now, I guess I would like to leave the moral issue of it and just get the expert opinions on whether or not this is feasible at all.
So is this guy dreaming or what? (I should mention, he is a long time friend.. he doesn't stand to benefit financially, so he has no angle or interest in screwing me)
Thanks for any insight you can provide!
The home is in serious disrepair, and I don't think it's something I can afford to invest in long term, given the current economic conditions (I am a small business owner, and business is way down). Not to mention, I am seriously upside down in the mortgage with the loss of value that's taken place nation wide, as well as the repair issues.
The idea of doing a deed in lieu is not something I have taken lightly, and I have been reading about it thoroughly thanks to you fine folks here in the forum. I understand this will effect my credit, which isn't that bad.. it's 680, I had my real estate buddy check it a few days ago.
But I just don't see another way out, and I feel like I am going to keep making these payments and eventually fall behind.. better to try something instead of sitting still and doing nothing.
Here's my question. He claims there is a way to get me into a new house for about half of what I paid for this one (this part is true), AND still manage to get the deed in lieu on my current property. I don't know how this is possible, and without knowing much myself, I am doubting it can be done.
My personal integrity tells me it's a little shady to tell one party you can't pay, and then somehow turn around and buy another property. But I don't mind sharing my feelings that banks have been screwing people for years, and I probably would not lose much sleep over it if there was a way it could be done. So for now, I guess I would like to leave the moral issue of it and just get the expert opinions on whether or not this is feasible at all.
So is this guy dreaming or what? (I should mention, he is a long time friend.. he doesn't stand to benefit financially, so he has no angle or interest in screwing me)
Thanks for any insight you can provide!
Hi Kevin!
Welcome to Forums!
In my opinion, you should go for a deed-in-lieu foreclosure right now because you have said that in future you will not be able to continue with the payments. Once you do the deed-in-lieu, you can then try and purchase another property.
Feel free to ask if you have further queries.
Sussane
Welcome to Forums!
In my opinion, you should go for a deed-in-lieu foreclosure right now because you have said that in future you will not be able to continue with the payments. Once you do the deed-in-lieu, you can then try and purchase another property.
Feel free to ask if you have further queries.
Sussane
Thanks Sussane, for the reply. I didn't want to bog my initial post with too much information, but there is question whether or not I will even qualify for a DIL for a few reasons.
1) I am really not behind in my payments, and could probably keep this game up for another year, maybe even more- but why bother if there is a way I could get into a mortgage that could be literally $70,000 less for something similar, and without all the repair issues? (add on a $ figure of god only knows how much for those) Point being, the bank may well say "sorry, but you don't qualify, come back when you're behind 3 payments and your credit is already destroyed."
I know there are some requirements, like the property having to be listed at fair market value, that we are doing now.
2) Another thing going against me potentially- Country Wide owns my loan-somehow I knew when they obtained it, this would not be a good thing. Anyway, I've come across some articles online that say they've been real sticklers about granting DILs, because they were so aggressive in obtaining mortgages, they have a ton of them already (yeah, my heart is just breaking for them). Not sure how much truth there is to this, or if it's current info.
Anyway, there is a bit more for you to chew on :)
"Once you do the deed-in-lieu, you can then try and purchase another property. "
Well, won't it be next to be impossible for me to get another property if I have what basically amounts to a foreclosure on my credit score? That-I thought- was the tricky part to his plan... trying to get secure a modest property (with my credit rating still in tact) BEFORE the sh!t hits the fan on the property I currently own. Please elaborate.
1) I am really not behind in my payments, and could probably keep this game up for another year, maybe even more- but why bother if there is a way I could get into a mortgage that could be literally $70,000 less for something similar, and without all the repair issues? (add on a $ figure of god only knows how much for those) Point being, the bank may well say "sorry, but you don't qualify, come back when you're behind 3 payments and your credit is already destroyed."
I know there are some requirements, like the property having to be listed at fair market value, that we are doing now.
2) Another thing going against me potentially- Country Wide owns my loan-somehow I knew when they obtained it, this would not be a good thing. Anyway, I've come across some articles online that say they've been real sticklers about granting DILs, because they were so aggressive in obtaining mortgages, they have a ton of them already (yeah, my heart is just breaking for them). Not sure how much truth there is to this, or if it's current info.
Anyway, there is a bit more for you to chew on :)
"Once you do the deed-in-lieu, you can then try and purchase another property. "
Well, won't it be next to be impossible for me to get another property if I have what basically amounts to a foreclosure on my credit score? That-I thought- was the tricky part to his plan... trying to get secure a modest property (with my credit rating still in tact) BEFORE the sh!t hits the fan on the property I currently own. Please elaborate.
Hi Kevin!
I support Sussane when she says that you should go for a deed-in-lieu foreclosure when you think you will not be able to continue payments. But again, yes, you are right in saying that mortgage companies do not quickly allow a DIL because they will have to forgive the deficient amount. But there are chances that you can qualify for a short sale. In short sale, you will have to pay back the deficient amount to the lender.
If you still do not want to go for any of these, then you can try refinancing your house. By refinancing, you can pay of the initial debt and then start paying the new debt. You can choose easier terms and conditions for that.
You must also note that deed-in-lieu is not similar to foreclosure. It will not hamper your credit as much as a foreclosure will do. A foreclosure will remain in your credit report for 5 years from completion date. Between 5 and 7 years you can only buy personal residence. During this time, you must have a minimum of 10% down payment and 680 credit score. Only a limited cash-out is possible and remember that no regular cash-outs are permitted. After 7 years, it will be out of your credit report.
A deed in lieu will remain in your credit report for 4 years from completion date. You will require 10% down payment when you try purchasing between years 4 and 7. A Short sale will remain in your credit report for 2 years from completion date
Thanks,
Jerry
I support Sussane when she says that you should go for a deed-in-lieu foreclosure when you think you will not be able to continue payments. But again, yes, you are right in saying that mortgage companies do not quickly allow a DIL because they will have to forgive the deficient amount. But there are chances that you can qualify for a short sale. In short sale, you will have to pay back the deficient amount to the lender.
If you still do not want to go for any of these, then you can try refinancing your house. By refinancing, you can pay of the initial debt and then start paying the new debt. You can choose easier terms and conditions for that.
You must also note that deed-in-lieu is not similar to foreclosure. It will not hamper your credit as much as a foreclosure will do. A foreclosure will remain in your credit report for 5 years from completion date. Between 5 and 7 years you can only buy personal residence. During this time, you must have a minimum of 10% down payment and 680 credit score. Only a limited cash-out is possible and remember that no regular cash-outs are permitted. After 7 years, it will be out of your credit report.
A deed in lieu will remain in your credit report for 4 years from completion date. You will require 10% down payment when you try purchasing between years 4 and 7. A Short sale will remain in your credit report for 2 years from completion date
Thanks,
Jerry
kevin, it's refreshing to see someone mention personal integrity. unfortunately, it seems that is in rare supply these days.
as for countrywide, you'll really be dealing with bank of america, as countrywide is kaput (save for the trade name).
a short sale would seem to be your best solution - as you surmised, lenders aren't looking to take a deed in lieu of foreclosure for someone who has no current problems making payments.
i'd venture to guess that your real estate friend is dreaming, but maybe he has some ammunition to back up what he's told you. if so, i'd suggest you ask him for it.
as for countrywide, you'll really be dealing with bank of america, as countrywide is kaput (save for the trade name).
a short sale would seem to be your best solution - as you surmised, lenders aren't looking to take a deed in lieu of foreclosure for someone who has no current problems making payments.
i'd venture to guess that your real estate friend is dreaming, but maybe he has some ammunition to back up what he's told you. if so, i'd suggest you ask him for it.
I agree with George, the short sale is a better option, but that is something that the lender has to agree to as well.
Generally, the lender will not consent with a deed in lieu of foreclosure if the outstanding loan of the borrower exceeds the current market value of the property and you state you are upside down right now.
Any which way you go, it will effect your credit for a few years.
But it might not be a bad thing to just start new, and not committing to a property right away. If you end up giving up this property, taking slow steps might not be a bad idea.
Generally, the lender will not consent with a deed in lieu of foreclosure if the outstanding loan of the borrower exceeds the current market value of the property and you state you are upside down right now.
Any which way you go, it will effect your credit for a few years.
But it might not be a bad thing to just start new, and not committing to a property right away. If you end up giving up this property, taking slow steps might not be a bad idea.
Here is the timeline according to Fannie (Conventional) Time you can purchase after the following has occurred and been discharged.
Bankruptsy, 4 years from discharge
Chapter 13 2 years from discharge (2 years after all debts been paid back)
Foreclosure, 4 years from foreclosure date
Deed in Lieu, 4 years from deeded date
Short sale, 2 years from completion date.
Bankruptsy, 4 years from discharge
Chapter 13 2 years from discharge (2 years after all debts been paid back)
Foreclosure, 4 years from foreclosure date
Deed in Lieu, 4 years from deeded date
Short sale, 2 years from completion date.