Learn how a deed in lieu of foreclosure works in Pennsylvania. Understand the requirements, credit impact, and whether it's right for you.
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A deed in lieu of foreclosure means you hand the property back to your lender instead of going through the full foreclosure process. Your lender agrees to cancel your mortgage debt in exchange for the deed to your home. It does less damage to your credit than a foreclosure, but your lender has strict requirements before they'll agree to it.
Homeowners who have already tried to sell or modify their loan, have no other liens on the property, and want to walk away without the public process of a foreclosure.
30-90 days
from start to finish
Call your servicer and tell them you want to discuss a deed in lieu of foreclosure. Most lenders require that you've already tried other options first, like a loan modification or selling the home. Be ready to explain what you've already tried.
Just like a modification, you'll need to submit financial documents: pay stubs, bank statements, tax returns, and a hardship letter. The lender needs to see that you truly can't keep the home.
Your lender will check for other liens on the property, like second mortgages, tax liens, or judgments. If there are other liens, the lender usually won't accept a deed in lieu because they'd inherit those debts. You may need to resolve them first.
If approved, you sign the deed over to the lender and agree to a move-out date. Get written confirmation that the mortgage debt is fully satisfied. Ask about any relocation assistance. Some lenders offer "cash for keys" to help with moving costs.
Not sure which option is right for you?
Compare all 5 homeowner optionsIn a foreclosure, the lender takes your home through a legal process that can take months and involves court. With a deed in lieu, you hand the home back voluntarily. It's faster, less public, and does less damage to your credit. But you need your lender's agreement to do it.
Yes. Pennsylvania lenders can accept a deed in lieu, but most require that you've already tried to sell the home or get a loan modification first. They also typically require that there are no other liens on the property. A housing counselor can help you figure out if you qualify. Call HUD at 800-569-4287.
It depends on your lender's agreement. Some lenders forgive the full remaining balance. Others may reserve the right to collect the difference between what you owe and what the home is worth. Get the terms in writing before you sign. Also, the IRS may count the forgiven debt as taxable income, so talk to a tax professional.
The process usually takes 30 to 90 days from start to finish. The biggest variable is the title search. If the title is clean with no other liens, it can go quickly. If there are issues to resolve, it takes longer.
These are common situations where homeowners explore this option.
No obligation. No fees. Just a fair offer from a local buyer.