Usually, homeowners do not just want to give up on their home when they begin missing payments. If there is any way to negotiate with the bank or refinance with a new lender, they often take it. But it is when they realize that there is little chance of recovering enough to save the home that borrowers will consider giving the bank a deed in lieu or just walking away.

A deed in lieu of foreclosure allows homeowners to give their property back to the bank in fulfillment of their loan obligation. The bank accepts the property back and the homeowners are off the hook for paying the mortgage any longer. As well, any foreclosure procedures that have been initiated in the court system or with a trustee are canceled.

For borrowers who have no other option to save the home and begin making monthly payments again, a deed in lieu of foreclosure is often their last resort before just abandoning the house. Of course, this option is not for every homeowner, but there are at least four reasons to consider a deed in lieu instead of just walking away.

First, if homeowners have tried to sell their property on the open market for a period of months but have just not found a buyer, it may be worth considering just giving the property back to the bank. Mortgage companies do not always want to own foreclosed homes, but if it realizes it will end up with the home anyway through a sheriff sale, it may be quicker and cheaper to accept the deed in lieu.

Second, if the owners have little or no ability to pay the mortgage, they can consider giving the property back to the bank. This is often the case when there is a permanent change in the borrowers' financial situation and a once affordable home is now too expensive. Instead of going through a lengthy foreclosure process, the bank may understand that they will not be paid back and it is better to take the property back.

Next, if homeowners have no equity in their home, their options are extremely limited for working out a solution to foreclosure. Refinancing is usually out of the question, even with hard money lenders, and negative equity will make selling the home very difficult. As well, the owners may just not even want to keep a home that is severely upside down, so offering a deed in lieu to the bank may be the best option.

Finally, many borrowers wish to preserve their credit scores as much as possible, and having a deed in lieu appear on their credit report instead of a full foreclosure will help with this. Also, they will be able to avoid some of the late payments by giving the property back to the bank quickly. While this is often a minor concern to many homeowners just trying to get out from under a house, it is another good reason to consider a deed in lieu.

While it is not always easy to convince a bank to accept a deed in lieu, it is not much more difficult than negotiating for a mortgage modification or other foreclosure help program the lender may offer. Homeowners should focus on working with a company or individual who can help explain the process and help them put together a proposal to the bank, and then be persistent in following up with the deed in lieu of foreclosure.