Tips and Traps When Negotiating Real Estate: A “Deed in Lieu of Foreclosure”

A “Deed in Lieu of Foreclosure”

While offering a “deed in lieu of foreclosure” is much better, from a credit perspective, than having a foreclosure on the records, it’s still not wonderful. Jerry’s credit record still noted months of non­ payment. And today many mortgage lenders ask in their applica­tion if a would-be borrower has ever given a “deed in lieu.”

An answer of, “Yes” might still mean no new mortgage. However, a “Yes” accompanied by a letter of explanation plus several years of good credit might indeed secure a new loan—because there was no foreclosure on the record. In short, foreclosure is the worst possi­ble way to lose a house. A “deed in lieu of foreclosure” shows an effort was made by the borrower to protect credit. It’s far, far better than foreclosure.

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