If you’re late on your mortgage payments and can’t afford to catch up, you are likely worried, confused, and unsure how to proceed. One option that’s not commonly explored by homeowners in hot water is the deed in lieu of foreclosure. Read on to learn the ins and outs of this program and how it might apply to your specific situation.

With a deed in lieu of foreclosure, the bank holding your mortgage agrees to forgive the terms of the loan in exchange for the deed to the property. While this means you no longer own your home, it also means that you no longer owe the balance of the mortgage.

This could be a beneficial solution for those who are under financial hardship and have been unable to refinance or otherwise modify the mortgage, causing you to either fall behind on payments or come close to falling behind. It’s also an option for those who owe more on the mortgage than the home is worth or can no longer afford the home and are ready to leave it behind but have been unable to sell the property.

In many cases, deed in lieu of foreclosure allows homeowners in financial distress to avoid the negative credit impact of a foreclosure and have flexible options in transitioning into a new home. In addition, those in some states may be eligible for up to $3,000 in relocation assistance in exchange for leaving the home in excellent condition before moving out.

If you’re interested in learning more about deed in lieu of foreclosure, the first step is to contact your mortgage holder to find out whether this option is available and complete application materials for this program. You’ll need to provide information to support your financial picture, including monthly income and debts. In most cases, this process takes about 90 days to complete for those who are eligible.

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