Facing a foreclosure can be a distressing experience for any Minnesota homeowner. After all, those facing foreclosure are often dealing with other financial difficulties in their lives. With foreclosure looming, not only may they lose their home, but their credit score may also take a serious hit. This could make it more difficult for them to find housing once the foreclosure process is completed, which will only exacerbate their financial problems.
However, there is one alternative to foreclosure that one might consider, especially if it is highly unlikely that they’ll ever be able to catch up on their past due mortgage payments. That alternative is a deed in lieu of foreclosure. A deed in lieu of foreclosure is a legal document that essentially transfers title of the home from the homeowner back to the lender.
While this means that the homeowner will not retain the home, the lender will release the homeowner from any remaining mortgage obligations, so the homeowner can start on a clean financial slate. Moreover, a deed in lieu of foreclosure doesn’t hit a person’s credit quite as hard as a foreclosure would. If a person forecloses on their home, it may take seven years before they can pursue another mortgage. With a deed in lieu of foreclosure, this waiting period is only four years. Lenders also benefit from a deed in lieu of foreclosure, as it avoids having to go through the expensive foreclosure process.
If you are facing foreclosure of your home, it may be helpful to contact a real estate attorney who can help you decide which option is best.