Deed In Lieu - Immediate Mortgage

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LoanSafe Member
Dec 20, 2011
Central Ohio
I lost my job a few years ago and have not been able to work. I am seeking SSDI but it is a long process.

We can no longer afford our home and tried everything to hold onto it. As a result we are upside down on our mortgage (we have a first; a 2nd that came as a result of mortgage help in 2012; and a 3rd that is reduced over a 5 yr. period down to zero, we are in year 2). I didn't know about the 2nd mortgage. While seeking help from our mortgage company (Ditech) to reduce our payments, I learned about the 2nd. We are now ineligible for help. Realizing our kids are grown and gone there is no sense to hold onto this house. We have been house poor for many years but were able to raise 5 kids.

We'd like to immediately purchase another house at half the value putting 10% down via a portion of our deferred comp. I researched and found that there are conventional loans available with 10% down that take poor credit scores (obviously, our credit rating is poor as a result of our current economic situation). My husband earns about $90K a year and realistically we should not be in this situation but we are (partially due to circumstances outside of our control).

Is it possible to perform a deed in lieu then immediately get a conforming loan to move into another home. Note: Calculators show this is well below what we can afford and from there we can begin piecing our financial life back together.

Are there lenders and how do I find them? I live in Ohio. Thanks in advance.

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
San Diego, California
Hi Deekar,
Welcome to the forum, you found a very valuable resource to help with what you're experiencing. I am LoanSafe's writer, real estate expert as well multi-state licensed loan officer who offers niche programs available to people in your situation.

First and foremost you mentioned that you heard conventional has a program available for people like you. Unfortunately that is not correct, with you being delinquent on the mortgage it will show as a mortgage late and there are requirements that you must meet (0 x 30 day lates or 1 x 30 day late in the past 12 months) in order to be eligible. Also completing a DIL would have a seasoning period of 4 years for conventional and 3 years for FHA unless you qualify under extenuating circumstances which would still be at least a year for FHA and 2 years for conventional.

If you are to DIL your property there is a program available starting at 20% down, which it sounds like isn't a viable direction in your case. If you are looking to finance a property immediately after an economic event like what you're explaining there are a few things that you need to be prepared for. The interest rates are higher than market (due to the risk level of the loan) and you have to show that you have enough reserves in your account to qualify for the loan. Those are some of the biggest issues that I run into.

Here's another thought. If you are to short sell your property instead of foreclose or DIL, we have a product available immediately at 10% down.

Again, please understand that there are no conventional or FHA loan options available for a person in your situation, what you need to determine is how long it would take for you to refinance into a traditional (FHA or conventional) type product and also what the terms that may be available to you now.

Our 10% down program is only available to 680 FICO borrowers, 15% for 660 FICO and 20% for 620-660. If you have any questions please feel free to reach out to myself and we can talk in more detail.