BILL'S ANSWER
The voluntary surrender of a home in the manner you describe is often referred to as a "deed in lieu of foreclosure" in the mortgage industry. In this procedure, a borrower negotiates with the lender to turn over the deed to the lender in order to avoid formal foreclosure proceedings in the court system. I will explain more about voluntary surrender of a home in just a moment.
I generally recommend negotiating a deed in lieu agreement when a homeowner can no longer afford his mortgage payments, has explored all other options to save his home, and when foreclosure is imminent.
It sounds like you are able to make your monthly mortgage payments, but that you would like to rid yourself of the home so you can move. Before you consider surrendering the property to your mortgage lender, you should do everything in your power to sell the home. If you can find a buyer, you should be able to rid yourself of the home without the credit damage caused by a foreclosure or a deed in lieu. For further information about foreclosure, you should review the foreclosure information from the US Department of Housing and Urban Development.
Unfortunately, in the current housing market, many homeowners find themselves owing more on their mortgages than their homes are worth, a situation which the mortgage industry refers to as being "upside down" on a mortgage. Even if you cannot find a buyer willing to pay enough for the home to pay off what you currently owe, you still may be able to sell the property for less than the mortgage balance, though you will need to negotiate an agreement with your lender to accept less than the balance of the note to pay off the mortgage.
Selling a home for less than the balance owed on the mortgage is often called a "short sale." Such transfers must be approved by the lender prior to the sale. Lenders that agree to short sales will frequently forgive any balance remaining on the note after the sale proceeds are applied, though they usually require borrowers to provide documentation of financial hardship, such as job loss or unexpected illness, before they will approve a short sale.
Surrendering your home to your mortgage lender through a deed in lieu of foreclosure agreement will likely have a strongly negative impact on your credit rating and your ability to obtain a new mortgage. While I understand that your credit score is already quite low, it is possible that a voluntary surrender may drive your score even lower. In addition, this derogatory mark on your credit will likely appear on your credit reports for seven years, meaning that this "foreclosure" could damage you credit rating for much longer than your dismissed bankruptcy.
Recommendation
Explore all options available to you to avoid voluntary surrender or foreclosure of your home, as losing your home will likely hurt you financially and negatively impact your credit rating for many years. These credit problems could prevent you from qualifying for a mortgage for a new home, cause you problems leasing an apartment, and force you to pay significantly higher interest rates for any credit you are able to obtain, which could cost you thousands of dollars in interest charges.
To learn more about the foreclosure process, and possible ways to prevent foreclosure, I encourage you to visit the Bills.com Foreclosure page. See also Deed In Lieu Of Foreclosure vs. Short Sale and Home Affordable Foreclosure Alternatives Program.
I hope this information helps you Find. Learn & Save.
Best,
Bill
Upland, CA | February 05, 2012
February 06, 2012
Rolesville, NC | February 02, 2012
St. Clair Shores, MI | February 01, 2012
February 04, 2012
Canton, OH | January 31, 2012
January 31, 2012
Consult with your bankruptcy lawyer to discuss the specifics of your circumstances and your options. You may have additional relevant facts you did not share that would lead you to a different conclusion than the one I shared here.
Canton, OH | February 01, 2012
February 01, 2012
In your case, I would be leery of any contract I signed with the lender because it may have language that reinstates the loan or otherwise obligates you to any deficiency balance. Consult with a lawyer before you sign any contract the lender places before you, and ask him or her to review the contract before you sign it.
Adelphi, MD | December 13, 2011
December 14, 2011
December 09, 2011
December 03, 2011
December 04, 2011
I am concerned that you did not get an upfront explanation from your bankruptcy lawyer about the effects of filing BK. The homestead exemption in MO is only $8,000, so when your assets were liquidated to satisfy your creditors, only $8,000 is protected. Check with your bankruptcy lawyer, so you have a clear understanding of the exact sums that were owed to the bank and how the funds from the sale of any of your assets that were liquidated were distributed.
Santa Clarita, CA | November 14, 2011
November 14, 2011
If you cannot afford your monthly payments or otherwise wish to quit the property, then talk to your bankruptcy lawyer about the timeline for foreclosure in your state. Some are brief, and some are not.
Santa Clarita, CA | November 14, 2011
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