How You Can Buy a Home After a Deed-in-Lieu (Dil)!
Though a DIL negatively impacts your credit history it still is possible to buy another home in the immediate future.
Obtaining a Mortgage
The minimum waiting time to apply for a federally backed mortgage after a DIL is generally two years. There is no mandated waiting time after a DIL for a private lender, non-federally backed mortgage. A DIL won’t prevent lenders from approving mortgage loans for certain borrowers. Being able to supply a large down payment and the closing costs funds might enable you to obtain a new mortgage immediately after a DIL.
You may be able to obtain a non-federally backed mortgage after a DIL if you’re able to come up with a large enough down payment. Generally, mortgage lenders want to see 10 percent to 20 percent down from applicants for those with recent DILs. It might make the most sense to apply for a federally backed mortgage if you’ve passed the mandated two-year wait time after a DILbecause down payments on federally backed mortgages can be as low as 3.5 percent.
It’s very important that you try to rebuild your credit immediately after a DIL because a DIL can lower your credit score by 85 to 160 points. Making all your installment payments on time will help to rebuild your credit score. Mortgage lenders usually require steady payment histories from applicants with a past DIL. Most lenders will offer you a lower interest rate on the loan as you build your credit score back up.
Steady payments on utilities and rent can often be considered on mortgage applications. Also, extenuating circumstances, including prolonged reductions in income or catastrophic increases in financial obligations, may shorten waiting periods for mortgage applicants who have had DILs. Applicants could be approved in as little as 12 months for Federal Housing Administration (FHA)-insured mortgages.