Deeding your house to someone else is one way to avoid foreclosure. However, there are some things you need to know about how this works before you make a decision to deed your house to someone else in order to stop foreclosure on your home.

The process itself is fairly simple. Someone, usually a real estate investor, agrees to catch up your payments and take over making the payments on your home. In exchange, you sign over the deed to the person and they take over ownership of the home. The real estate investor will then try to find a buyer or renter for the home as quickly as possible in order to get some income coming in so that he can make some money on the property. Time is of the essence in these types of deals, because the real estate investor will not want to start making payments on your house while you are still living in it, and if you wait too long, the foreclosure process will be too far along to stop.

In order to qualify for a deal like this, the bank must still be willing to accept the back payments. Once the bank has begun legal proceedings, it is usually too late to work a deal like this because the bank will want the entire loan balance paid off and will not agree to reinstate the loan if the back payments are paid.

It is important to understand that your bank will not approve of this deal. It is very likely that there is a clause in your mortgage agreement that says the bank can call the loan due if you sell the home without paying off the mortgage. However, if you are behind on your payments you have already violated the terms of your mortgage. The truth of the matter is that most banks would prefer to receive the money due them than foreclose on your home, so it is unlikely that they would call the loan due.

Before you decide to deed your home to someone else to avoid foreclosure, you need to make sure that the person you are dealing with is able to make the payments. Don't hesitate to ask to see bank statements or other proof that the real estate investor will be able to pay. You should require proof that the investor has enough capital to cover the payments for at least six months in case it takes a long time to locate a tenant or buyer for the home.

If the real estate investor does not have enough easily-accessible funds to make you feel safe, do not accept the deal. Look for an investor who has the means to fund the deal. Real estate investors who have been around awhile generally have no trouble funding a deal. Watch out for new investors with little experience who insert clauses in their contracts stating that they will make up your payments only if they find a tenant or buyer. These inexperienced investors generally mean well, but that will do you little good when your home goes into foreclosure because the investor can't find someone to buy your home.

Remember that you are already in a bad position, and it is possible that you may lose your home to foreclosure anyhow if you wait too long to take action. Although accepting a deal like this may leave you living with relatives for a time until you can find another place to stay, it could very well save your credit rating, leaving you in a better position to buy another home when your financial situation improves.