As a result of the financial decisions that you have made over your lifetime, there is a single number that, above all, comes to define how potential lenders will evaluate you. In the background of the joys of life, the triumphs along with the hard lessons, credit scores can be harsh judges of your financial past, often lacking context, which makes your approach to loans even more important. While your income and assets are important in helping guide your economic decisions, lenders, above all, rely upon your credit score to establish a baseline understanding of your finances.
Just as a complex series of interactions comes to determine that piece of data, you should also consider making important financial decisions with credit implications in mind. If you're facing potential difficulties with your current home mortgage, one of the options potentially available to you is a deed in lieu of foreclosure which allows you to, essentially, transfer ownership of your home to satisfy a loan contract. While modern finance may seem harsh in light of the challenges of everyday life, you can use its instruments to regain control over your own financial freedom.
If you're in a position of not being able to afford your current home loan, there are a wide variety of possible solutions available to you - make sure to explore the entire set of options. In the case that your financial difficulties are more than temporary, you may want to evaluate potential ways to exit from your existing mortgage while maintaining the integrity of your financial history. For some, bankruptcy may seem like the only option, but working with your lender may establish that a deed is strictly preferable for both parties when compared to the alternative.
Firstly, consider the opportunity costs of such a deed negotiation: filing for personal bankruptcy, however it is structured, can have nearly permanent implications for your credit score. In the worst case, the lender would be left with a default mortgage, while you would be impaired from rebuilding your financial history for years. Instead of facing such a situation, you can actively propose to work with your lender to find a solution, which may range from refinancing to temporary relief to an "assisted" exit plan such as a deed.
By working with your bank to reach an amicable deed in lieu of a foreclosure process, your mortgage contract is considered legally complete, including a full title transfer to the lender. While your credit may suffer slightly from such a transaction, the harm is much more ephemeral than it otherwise would have been. No matter what decision you make, you should always be looking forward to improving your financial position in the future. By addressing the issue pro-actively, rather than continuing to have late payments, you can more quickly exit a harmful solution and begin to rebuild your credit history sooner.
As noted in a recent USA article (see:
Some struggling homeowners find way to dodge foreclosure - USATODAY.com), while walking away from a home can be painful, it may be the best solution in the long run to rid yourself of a debt burden that you cannot afford. While the emotional implications of these decisions are certainly real, it's important to stay rational and keep a perspective of putting yourself in a position of financial freedom down the road. No matter what decision you make on re-negotiating your mortgage, establishing a goal of regaining control of your finances should be at the forefront of all decisions.
From DeedMyHome.com 
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Credit Implications of a Deed in Lieu of Foreclosure 
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