America is, unquestionably, in the middle of a foreclosure crisis.
If you’re facing the possibility of losing your home because you can’t afford to make monthly loan payments anymore, it can be hard to know what to do to get back on track.
You don’t want to go into foreclosure, but you also want to make sure you’re making the best possible financial decision.
You’ve already tried to get your lender to work with you to come up with a repayment plan, and you’ve even tried to sell your home in the past.
But you weren’t able to have success with either, and now you’re afraid that you’re out of options.
The good news?
A deed in lieu of foreclosure could be the solution you’ve been searching for.
But what is a deed in lieu, and what should you expect from the process?
Keep on reading this post to find out.
What Is a Deed in Lieu of Foreclosure?
We know that, when it comes to staring down a foreclosure on your home, you can feel so many different emotions that it’s tough to know which steps you should take next.
One of the most popular options when it comes to avoiding foreclosure?
A deed in lieu of foreclosure, or a DIL for short.
But what is it, exactly?
In a nutshell, it’s the process of transferring the ownership of your home to a lender so that you no longer need to make payments on your home. Once you’ve signed the deed of your home over to the lender, then you’ll be freed from having to make those payments that are putting you in a financial crisis every month.
Usually, you opt for a deed in lieu once you’ve already been rejected for a modification to your loan or repayment plan, and have not been able to get a forbearance on your home.
You may also consider a short sale as opposed to a DIL. Let’s quickly discuss the differences between those two options now.
Deed in Lieu vs Short Sale
What exactly is a short sale, and how is it different from a DIL?
This is when you actually make the choice to sell your home to a third party (usually your lender) for an amount of money that’s still not enough to cover how much total debt you owe to the mortgage lender.
In the short sale process, your lender is entitled to all of the profits from the sale of your home. This might not sound like a wise move at first — until you realize that, in exchange for those profits, you’re released from the lien on your home.
This is an excellent way to sidestep foreclosure, and is another option you have if you decide a DIL isn’t the best fit for you.
The First Steps of a Deed in Lieu
So, when it comes to deed in lieu vs foreclosure, you’ve decided to go with the former choice to avoid a foreclosure on your home.
What do you need to get started?
The first thing is to complete what’s known as a loss mitigation application. You can get this from your loan provider or even from a third-party lender that you might be thinking of working with.
You’ll also need to collect some specific information about your current financial state.
This should include a budget and financial statement regarding your income and expenses every month. You’ll also need to give your lender a copy of your tax returns, pay stubs or another proof of income, and a minimum of two recent bank statements for your checking and savings accounts.
Finally, you’ll likely also need to write a financial hardship letter to the lender.
This should explain the situation that led you to need to pursue a deed in lieu of foreclosure, and should ask the bank to help you to come up with a solution that allows you to keep your financial obligations.
In some cases, you might also encounter a lender who requires you to show proof that you have put your home up for sale in the past but have not had success in selling it.
A Deed in Lieu and Your Credit Report
We understand that you’re curious about how a deed in lieu of foreclosure will impact your overall credit report.
A deed in lieu will look somewhat better than a total foreclosure will, but of course, you should still expect some consequences.
Since the end result of a DIL still means that your bank takes possession of your home, your credit score will get significantly lower.
The good news?
You likely won’t have to wait to borrow cash or get approved for more credit as soon as you would with a foreclosure on your credit report as you would with a DIL.
Plus, since not taking a DIL might mean that you end up defaulting on your loan, your credit score will be impacted no matter what you do.
The Timeline of a Deed in Lieu
It can certainly feel agonizing to have to wait while someone else makes a decision about your financial future.
But with a deed in lieu of foreclosure, you can expect everything to be settled much more quickly than it would in cases of loan restructuring or even a short sale.
Plus, going with a deed in lieu means that you’ll get to stop making the costly payments that have gotten you into this situation in the first place very quickly.
Its speedy timeline also means that you’ll be able to start rebuilding your credit right away. This is especially important if you’re looking for other housing — as you will be, as you’ll need to move out of your house ASAP.
While crashing in a friend’s basement or moving back home is an alternative?
We know that you’ll be relieved to know that getting a DIL won’t prevent you from renting or buying another home in a reasonable timeline.
Depending on the kind of DIL you’re able to receive, you may get some more financial assistance from the company.
For example, it might be possible for you to find rent-free housing options for a few months while you get your finances back in order.
Finally, it’s good to know that a deed in lieu is much more of a private matter than a home foreclosure is. Especially if you’ve fallen on hard times due to a sensitive and personal matter, we know that you don’t want your DIL to show up in the public records.
Because it’s not a legal case, there’s no way that a DIL will ever be on the public record.
For many, this is an incredibly popular reason for deciding to go with a deed in lieu vs foreclosure.
How to Sell Your House Fast
We know that this post likely has your head spinning.
A deed in lieu of foreclosure does sound like a good option, but you’re nervous about working with another lender. You’re also concerned about how going with this option could impact your overall credit score.
There’s another option that you can pursue — and it’s one we can help you with.
You also have the choice to try to sell your home again, or to try for the first time in order to avoid going with a deed in lieu.
We work with you to close a deal on your home in about seven days — and we’ll even be able to give you a cash offer. It doesn’t matter what the current condition of your home is, or how much work that you think needs to be done on it.
We’re committed to buying homes as they are now, and we even take care of all of the closing costs for you. We also give you free temporary housing, so that you won’t need to worry about the next steps.
Deed in Lieu vs Other Options: Wrapping Up
We hope that this post has helped you to better understand not only what a deed in lieu is, but also whether or not it truly is the best option for you at this time.
There’s no need to feel like you have to remain uncertain about your home for one more moment.
Get in touch with us today to receive an offer on your home, no matter what it looks like now.
When you’re ready to get your financial situation back on track and to learn more about your other options when it comes to selling your home, reach out to us to get started.