| If you are facing foreclosure you are probably aware | | | | because there is negative equity in a borrower's home. |
| that two of your last options are a deed in lieu of | | | | Not all lenders are willing to do a short sale, and they |
| foreclosure or a short sale. Both options have their | | | | are even less likely to do a short sale if your |
| benefits and drawbacks. These are your last two | | | | payments are current, although it is possible. It is a |
| options before an actual foreclosure, and unfortunately, | | | | good idea to get a real estate lawyer to contact the |
| you will lose your home with either option you go with; | | | | loss mitigation department of your lender to find out if |
| the goal with a short sale or a deed in lieu of | | | | they accept a short sale and what your options are. |
| foreclosure is to keep a foreclosure off your credit | | | | There have been cases where a short sale has been |
| history. | | | | as damaging to credit scores as a foreclosure; a loss |
| A deed in lieu of foreclosure is an agreement where | | | | of 200-300 points, while there have been other cases |
| you deed your property over to your lender in | | | | where a short sale has only dropped credit scores by |
| exchange for being forgiven all the remaining | | | | 100 points. Since every situation with a short sale is |
| mortgage balance. Your lender has to agree to do a | | | | different - how many days behind the borrower is in |
| deed in lieu of foreclosure, and they are only likely to | | | | their loan, how much negative equity they owe and |
| do this if they feel they will end up better financially | | | | their credit score to begin with - it is impossible to |
| than if they do a short sale. If you and your lender | | | | determine how a short sale will affect your credit |
| decide to go with this deed in lieu of foreclosure option, | | | | before you start talking to a professional. |
| you will sign several documents - the agreement in lieu | | | | However, one benefit of a short sale that may appeal |
| of foreclosure and the deed. The agreement in lieu of | | | | to you is that you can obtain a new mortgage with a |
| foreclosure is the document that lays out the terms | | | | sensible interest rate faster than with a deed in lieu of |
| and conditions of the deed in lieu of foreclosure | | | | foreclosure. After only two years after a short sale |
| agreement, and will be signed by the lender as well as | | | | your lender may be willing to offer you a sensible |
| you. The deed is the document that transfers | | | | interest rate loan. |
| ownership of your property from you to the lender. | | | | It is difficult to judge what option will affect your credit |
| Now the lender will mark your mortgage note as paid | | | | worse, but each option has other benefits and |
| and will provide you with two documents -one that | | | | drawbacks. If you are looking to buy a new home as |
| proves the debt is canceled, and the other which | | | | soon as possible and you are willing to put up with |
| waives the lenders' right to a deficiency judgment (the | | | | selling your home you may want to consider a short |
| lender's right to ask for the difference between what | | | | sale. If you just want the hassle of your foreclosure to |
| you owed on your mortgage and what they were | | | | be over, and you are willing to, potentially, take a bigger |
| able to sell your property for) | | | | hit on your credit score, and you can convince your |
| A deed in lieu of foreclosure affects your credit score | | | | lender to go through with a deed in lieu of foreclosure, |
| only slightly less than a foreclosure. Doing a deed in lieu | | | | that may be your best option. |
| of foreclosure will still show on your credit report as a | | | | Since every situation is different, it is impossible to |
| default on the loan and will drop your credit score by | | | | determine whether a deed in lieu of foreclosure or a |
| 200 points or more. A deed in lieu of foreclosure will | | | | short sale will affect your credit score worse. It may |
| stay on your credit report for seven years. After the 7 | | | | be that a deed in lieu of foreclosure is your best option |
| years you can ask for the deed in lieu of foreclosure | | | | and will affect your credit score the least, while it may |
| to be removed from your credit report and you can | | | | also be true that a short sale will affect your credit the |
| begin rebuilding your credit score. Even if you are | | | | least. Your best options are to get in touch with a |
| working on your credit score from day 1, it will be up to | | | | foreclosure professional as soon as possible and |
| three years before you can buy another house. It may | | | | figure out what is your best option if you are out of |
| take even much longer than this before a lender will | | | | other options. Each day you let pass by, your credit |
| consider extending you a loan with any kind of sensible | | | | score is being more damaged, you are losing more |
| interest rate. | | | | money, and you are getting further away from the |
| A short sale happens when a lender is willing to agree | | | | day your foreclosure is behind you and you are on |
| to accept less for the mortgage than they are owed | | | | fresh financial feet. |