Can you answer these 3 real estate/creditor questions?

Question

1. Will Deed in Lieu of Foreclosure show up on my credit report negatively?

2. Will it affect my chances of buying a home in the future?

3. Why is it said to be a last resort when it sounds like a clean cut and run?

Answer 1

1   Yes, by about 260 points

2    yes, for about 10 years

3    Not so clean, it is documented that you took the money, cut and run, but that can also be seen as "unethical person willing to f*** others over.

Answer 2

Your credit score will drop to 619.

It will negatively affect your getting a mortgage at a low interest rate. That doesn't mean you can't buy a house.  You can do that easily.

It used to be a last resort.  Since home prices have dropped $100,000, it is now a "clean cut and run" that may save everyone time and money.

Answer 3

1.  h**l YES.  Oh my, yes it will.  BIG TIME.  

2.  h**l YES.  In the next 2-4 years it completely eliminates any possibility of you buying a home with less than 50% down.  

3.  Because it isn't much better (from a credit perspective) than a full blown foreclosure.  It's just voluntary and reduces the loss experienced by the bank.  

good luck!

Answer 4

1. Usually, but it doesn't have to. Sometimes you can negotiate with the bank that as part of handing over the deed and you leaving the house in good condition that they report to the credit reporting agencies that the loan was "paid as agreed." You want this in writing that they will do so.

2. Most loan applications ask the question: Have you ever had a foreclosure/deed in lieu/part of a mortgage forgiven(short sale). If you answer yes, no loan for you. If you answer no, that would be loan fraud.

3. I think foreclosure is a last resort. All alternatives to paying your mortgage on time in full will be inferior alternatives.

Good luck.

Answer 5

1. Yes. It's worse than a short sale, but not quite as bad as a foreclosure.

2. Yes. Both because it affects your credit score and because the black mark is related to a home purchase/sale/transaction.

3. It's not a "clean cut and run." It follows you, as noted above. It's the next-to-last resort. Foreclosure is the final one. It means you failed to pay your mortgage. It means you failed to sell your home conventionally. It means you failed to sell your home even at a loss (via a short sale).

One final point: Don't ever, ever even consider a deed in lieu of foreclosure unless the lender approves it in advance. Reason: You deed the property back to the lender. Until the lender releases you, you're still on the mortgage. Worst-case scenario (and this has happened), people have transferred the deed back to the lender and returned the deed to the lender. Lender accepts the deed, but doesn't let the borrower off the hook. Now the borrower is obligated to pay the mortgage, but has no security at all.

Answer 6

Yes Deed in Lieu is a short sale, and in the world of home mortgage most places look at that equal to a foreclosure. This will cause your credit to drop drastically.  You will not be able to obtain a mortgage for about 36 months, and then only if you have no late payments on anything!  It is a last resort because what it does to your credit is devastation.  Do you know that in addition to loans and credit cards, your credit profile is used to do things like determine your auto insurance?  Ask anyone with a bankruptcy or foreclosure if the aftermath was clean.