Mortgage After Deed In Lieu In California

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Mortgage After Deed In Lieu In California
Gustan Cho Associates

Can I Qualify For Mortgage After Deed In Lieu In California?

Home buyers can now qualify for mortgage after deed in lieu in California after the mandatory waiting period depending on the mortgage loan program. California is one of the states in the nation with the highest foreclosure rates.  Calfornians were hurt hard by the 2008 Real Estate and Financial meltdown.  Many Californians who had a lot of equity in their homes and who counted on that equity as part of their retirement have lost most or all of their equity in their homes due to the California Real Estate Market Crash of 2008.  A large percentage of California homeowners not just lost the equity in their homes but were left with homes where their mortgage balance was higher than the market value of their California homes.  These California homeowners had mortgages that were underwater.  Many California residents who were retired and counted on the equity of their homes were forced to go back to work after retirement.  Many California homeowners could no longer afford the mortgages on their homes and were forced to foreclose their California homes or do a deed in lieu of foreclosure.

What Is Deed In Lieu Of Foreclosure?

A deed in lieu of foreclosure is an alternative to foreclosure.  If  a California homeowner can no longer afford the mortgage payments of their California home mortgage, they can avoid foreclosure by doing a deed in lieu of foreclosure.  A deed in lieu of foreclosure is when you give the deed to the bank or mortgage lender and the bank or mortgage lender will not pursue you for a deficit judgment on the foreclosure.  Most homeowners foreclose on their homes because they have no equity in their homes and a mortgage lender who forecloses will definitely suffer a loss from the sale of the home.  Once foreclosed, the mortgage lender can go after the homeowner for the deficit of their mortgage loan.  With a deed in lieu of foreclosure, the deficit is forgiven in lieu of the homeowner voluntarily signing off on the deed of their homes. Deed in lieu of foreclosure is a great benefit for both the bank and/or mortgage lender as well as the homeowner.

Impact On Deed In Lieu Of Foreclosure On Credit

A deed in lieu of foreclosure will definitely have a negative impact on a consumer’s credit scores.  The deed in lieu of foreclosure will be reported on a consumer’s credit report and most likely have a 100 plus drop on the consumer’s credit scores.  This three digit drop is a big hit, but on the positive side, the over 100 point FICO drop is a temporary drop on the consumer’s credit scores.  As time passes and the deed in lieu of foreclosure ages, the deed in lieu of foreclosure will have less and less impact on a consumer’s credit scores.  If the consumer re-establishes their credit scores by adding positive credit by getting 3 to 5 secured credit cards, the consumer can get a 700 FICO credit score one year after the deed in lieu of foreclosure has been reported on their credit report.

Qualifying For Mortgage After Deed In Lieu In California

A California homeowner who had a prior deed in lieu of foreclosure can qualify for a mortgage after deed in lieu in California after completing a mandatory waiting period.  The waiting period is three years from the recorded date of the deed in lieu of foreclosure for FHA loans and four year waiting period after deed in lieu of foreclosure for a conventional loan in California.  Minimum down payment required for FHA loans in California is 3.5% down payment and minimum credit scores required to qualify for a 3.5% down payment FHA loan in California is 580 FICO credit scores.  To qualify for a conventional mortgage after deed in lieu in California you need a minimum credit score of 620 FICO and a minimum down payment of 3% down payment on a California home purchase loan.

If you had a prior deed in lieu of foreclosure in California and are looking to qualify for a mortgage after deed in lieu in California, contact me at 262-716-8151 or email me your questions at gcho@gustancho.com.

Related> Foreclosure versus deed in lieu of foreclosure

Related> Conventional loan after deed in lieu

Related> Fannie Mae guidelines on waiting period after deed in lieu

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