Deed In Lieu Of Foreclosure - Know Your Options (part 4)

Deed In-Lieu of Foreclosure:  This is a settlement which is made voluntarily between you and the bank  in which you “give back” your house to the lender and move on with nothing owed.  In most cases your bank will only accept a Deed In-Lieu if there are no other liens on the property or if these liens can be significantly reduced.

vReview the HUD Requirements for a Deed In-Lieu of Foreclosure at:

§www.hud.gov/offices/hsg/sfh/nsc/rep/dilfact.pdf

vHow Does A Deed In-Lieu of Foreclosure Affect My Credit? 

§Negotiate with your lender how they will report a Deed In-Lieu of Foreclosure.  Possibilities are:

•Foreclosure ~ credit scores typically drop 50-250 points

•Paid Settlement ~ credit scores typically drop 50-150 points

•Paid As Agreed ~ credit scores drop due to prior late payments but this option could allow the purchase of another home in a short period of time

vWaiting Period To Buy Another Home:

Fannie Mae & Freddie Mac guidelines state that the waiting period for a Deed In-Lieu of Foreclosure is 2 to 4 years from the date of completion.  Some additional requirements after 4 years and up to 7 years from the completion date may apply including down payment requirements of 10% or more.  Extenuating circumstances, such as loss of employment, that caused the need for you to complete a Deed In-Lieu shorten the waiting period to just 2 years.