A lender uses foreclosure, a legal action, to take back your home if you're no longer paying your mortgage. If you can't afford your loan payments and couldn't sell your home, you may avoid going through a foreclosure if the lender will accept a deed in lieu. You transfer ownership of the home back to the lender on the deed, and the lender releases you from the loan obligation. A lender doesn't have to take a deed in lieu of foreclosure, so you'll need to get approval.
Contact a real estate agent to list your home for sale if you haven't already done so. Some lenders require you try to sell the home through a licensed agent for at least 90 days before you request a deed in lieu. Ask the agent for proof of the listing.
Gather proof of the need for a deed in lieu. Document the hardship that prevents you from paying your loan. For example, if you've got medial expenses because of an illness, get copies of your medical bills for the last year.
Make an accurate budget that covers at least the next three months. You may need to show you can't afford to pay the loan even if the lender reduces the monthly payment amount. Make copies of your current monthly bills and proofs of income to support the figures you're giving on your budget.
Contact the lender to ask for a deed in lieu. You may have to apply for other assistance programs through the lender before you can request a deed in lieu. Fulfill all requests from the lender regarding paperwork, forms and documentation.
Be prepared to explain your current circumstances to the lender when requesting a deed in lieu. The lender will want to know what is preventing you from meeting your obligation, so provide an accurate picture.
If you have multiple mortgages on your home, you may face difficulty getting your primary lender to accept a deed in lieu. You must reach an agreement with the other lenders regarding releases for the other mortgages.