If you are having trouble paying the mortgage on a property that you own in Texas, it may be worth asking about a deed in lieu of foreclosure. This is a document that transfers ownership of the home back to the lender without the need for a foreclosure to occur. Sometimes, asking for a deed in lieu of foreclosure is the best way to resolve a home loan problem.
What is a deed in lieu of foreclosure? Keep reading to find out.
How a deed in lieu of foreclosure works
Generally speaking, a deed in lieu of foreclosure doesn’t eliminate any other liens or encumbrances. This means that the lender could become responsible for paying off a second mortgage or otherwise satisfying any other debts obtained using the home as collateral. Therefore, a lender is typically more open to this option if you only have the original mortgage to worry about.
Other options may be available
If you have equity in your home, it may be best to sell it and use the proceeds to pay off the remaining mortgage balance. You can also inquire about a loan modification, which may allow you to pay a lower interest rate or defer payments to a later date. Finally, a short sale may allow you to move on from a property while minimizing the damage done to your credit score and history.
The consequences of following through with a deed in lieu of foreclosure
There is a chance that you will be required to pay the difference between what the home is worth and the balance on your mortgage. Furthermore, you may be required to satisfy any other liens after giving up your property. Finally, you may have to wait up to four years before buying another home.
If you are thinking about walking away from your home, it may be a good idea to consult with a real estate attorney. A real estate law professional may help you negotiate with your lender or help you learn more about the potential consequences of your actions.