Does anyone know if doing a deed in lieu of foreclosure is just as bad on your credit as an actual foreclosure
Question:
Answer:
A deed in lieu would be slightly better, although not much. That is because of how either will look to future potential creditors that you request loans from.
In both cases, lenders will see that you took out a loan for a large amount of money and failed to meet your obligation to pay it back on time. Obviously, this is not what creditors want to see when determining if you will be able to pay back new loans.
But with the deed in lieu of foreclosure, new creditors will be able to look at the fact that you recognized your inability to pay back the loan. You voluntarily gave the bank the collateral for the loan (the house) and were willing to put the foreclosure situation behind you, even if it meant losing the property.
Having a full foreclosure means that the bank had to go through the entire legal process to take the house from you, and most creditors do not want the extra expenses of suing you, trying to get the property, and repairing any damage that foreclosure victims occasionally cause to their homes.
Go for the deed in lieu of foreclosure if you can get it accepted, but also work on your credit after everything is settled. You should be able to qualify for a new home loan in a few years, if you have a down payment and stable income.
Good luck.
ForeclosureFish
http://www.foreclosurefish.com/...
The effect is almost identical for the borrower but a deed in lieu can be accomplished more quickly than a foreclosure so the borrower starts on the road to credit recovery that much sooner.
Both are really bad... deed in lieu is not quite as bad.
Have you spoken to the bank to see if you can do a short sale... if they will allow it, get in writing that it is WITHOUT RECOURSE so they cant sue you later for the balance.
From best to worse...
1. Buyer that pays on time (or sells and pays off balance in full)
2. Buyer that is late, then gets current, and pays on time.
3. Short sale of the home to get out from under it.
4. Deed in lieu
5. Standard foreclosure
Also, deed in lieu will help you avoid some court costs.
Your credit score drops with every late payment. If your home is going into pre-forclosure then you have missed many payments, and thus considerably lowering you credit score. I am assuming that you mean by doing a deed in lieu of forclosure means you are deeding your property to another person who will make up the back payments on your house and assume the note. This is also assuming that you have an assumable loan ( I would be surprised if you do because these are rare) Regardless your credit damage has already been done. Yes a foreclosure on your credit report doesn't look good, but really by not making the payments and letting it get to foreclosure is just as bad. I really need more info to access you situation correctly, but judging by the info you have already given the damage is already there.
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