A deed in lieu of foreclosure is a derogatory item for your credit report, but it is better than a full on foreclosure. Understanding your options and how to change your credit history is vital to your financial recovery and getting yourself back on track. There is hope for you yet. Let’s cover the basics:
• What exactly is a deed in lieu of foreclosure?
• How does it affect my credit?
• What can I do to fix it?
A deed in lieu (DIL) of foreclosure is a deed instrument in which the borrower passes all the interest in a real property to the lender. They are used to satisfy a loan that is in default in an effort to avoid foreclosure. The DIL offers many benefits to both borrowers and lenders as it saves both parties from many of the drawn-out, complicated proceedings of foreclosure. The DIL is usually initiated by the borrower who then reaches a negotiation with the lender.
Unfortunately, a deed in lieu will affect your credit report negatively, but it is significantly less than a full-blown foreclosure or bankruptcy. It is still a form of delinquency, and it will be marked as such on your credit history. This will red flag any sort of new credit or financing approval you try to get later on, so it is imperative that you find ways to begin fixing it should you decide that you’d like to make any major purchases in the future. You will want to make sure the lender adds “Paid” or “Settled” to your credit report once it has been paid so that it isn’t reported as a major derogatory item like a foreclosure.
The best way to overcome having a deed in lieu of foreclosure on your credit report is to make a financial plan, continue to manage and improve your credit history, and rebuild. It won’t fix itself overnight, but you can definitely make gradual progress. You can establish new credit accounts and make sure you make all payments on time and manage the account as responsibly as possible. Diligently manage any credit accounts you still have at the time of the DIL. Paying revolving accounts on time will raise your FICO score. Do not apply for too many accounts though as this can lower your FICO score.
Get a Mortgage After a Deed In Lieu
Getting a mortgage after a deed in lieu is not impossible – you just have to know where to look. Many lenders will have “private” mortgage programs (sometimes called portfolio loans) that are targeted to people who have went through a hardship like a deed in lieu, and all you need is help getting matched up with a lender who can possibly help you.
The easiest way to get matched up with a lender who specializes in helping people in your situation is to submit your information below and we will work hard at getting you matched up. Get started today – submit your information below. It is easy and free so get started now!
