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Different Types of Foreclosures

Here’s the scenario: you have a home and cannot make the monthly payments on your mortgage. You get late payment notices at 30, 60, 90, and 120 days, at which point your payment is four months past due.

At this moment, the bank sends a notice with the words: “Foreclosure procedure starting.” A foreclosure is initiated, but you still have different options for how to proceed next: foreclosure, deed in lieu of foreclosure, or short sale.

Watch the video above to hear Sam Parker from My Credit Guy, a top credit repair agency, explain these three concepts and put them into context with your credit score.


When you have a foreclosure, the bank essentially kicks you out of your home and takes back the property. Most likely, it will be sold during a “sheriff sale,” where the bank sells the property for as much as they can.

If there’s a discrepancy between what you owe on the house (say, $100,000) and what the bank could sell the house for (say, $80,000), then you would be responsible for the remaining $20,000.

Note that if you pay the amount you owe, you will incur late fees instead of a whole foreclosure. While this still affects your credit, it isn’t the same headache as losing a home.

Deed in Lieu of Foreclosure

The scenario changes if you have equity in the house, or, in other words, if the house is worth more than you owe on it. You can opt for a deed in lieu of foreclosure where you agree to give up your home and all of the equity in it. The benefit? You get to walk away from the scenario without a foreclosure.

Short Sale

If you can get a bank to agree to it, short sales are another option you might have. In this scenario, you have a buyer who is willing to buy your house for $150,000, for example. This is less than what you owed on the house, but at least it’s a sale. If the bank agrees to it, you can go through with the short sale.

Need for Credit Recovery

No matter what type of scenario you go through with, what matters more for your credit is how many late fees you incurred on your house. These late pays affect your credit. If they are legitimate, there isn’t much that anyone can do. After all, credit repair agencies help to improve your credit — but they can’t serve as a magical white-out for legitimate late pays.

The good news is that most late fees don’t affect your credit as much after about two years. Additionally, most banks won’t refinance you for about three years. This is plenty of time to contact a credit repair agency to get your poor credit in order.

My Credit Guy

If you have any questions about home mortgages, your personal credit history, or want to fix your bad credit, contact the team at My Credit Guy today. We offer free credit reviews, so we can get started with a plan to fix your credit from day one.

Call us today for credit restoration services.

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