Compare Short Sale, Deed in Lieu of Foreclosure, and Trustees Sale, what are the timelines, what is the impact on your credit, and can you ever buy a home again

Here’s a direct comparison of Short Sale, Deed in Lieu of Foreclosure, and Trustee’s Sale (Foreclosure), focusing on timelines, credit impact, and your ability to buy a home again. This information is based on the latest mortgage underwriting guidelines for Conventional, FHA, VA, and USDA loans:

1. Short Sale (Pre-Foreclosure Sale)

Definition:A short sale is when a lender allows the property to be sold for less than the outstanding mortgage balance, usually to avoid foreclosure.

Timeline/Waiting Periods to Buy Again:

• Conventional: 4 years (2 years if extenuating circumstances)

• FHA: 3 years (no wait if you were current on the mortgage and all other debts at the time of sale)

• VA: 2 years

• USDA: 3 years

Credit Impact:

• Generally results in a significant negative impact, but less severe than foreclosure.

• May drop FICO scores 85–160 points.

• The impact lessens over time, especially if all other debts are kept current.

2. Deed in Lieu of Foreclosure

Definition:The borrower voluntarily transfers ownership of the property to the lender to avoid foreclosure.

Timeline/Waiting Periods to Buy Again:

• Conventional: 7 years (can be 3 years with extenuating circumstances and a max 90% LTV)

• FHA: 3 years from completion

• VA: 2 years (some lenders require 3)

• USDA: 3 years

Credit Impact:

• Similar negative impact as a foreclosure.

• FICO score drop may be 100–160 points.

• Can be viewed more favorably than a foreclosure by some lenders, especially if done proactively.

3. Trustee’s Sale (Foreclosure)

Definition:A legal process where the lender repossesses and sells the property, typically at public auction, due to default.

Timeline/Waiting Periods to Buy Again:

• Conventional: 7 years (3 years if extenuating circumstances and max 90% LTV)

• FHA: 3 years from completion/date of sheriff’s deed

• VA: 2 years (some lenders require 3)

• USDA: 3 years

Credit Impact:

• Most severe credit impact of the three.

• FICO score drop can be 120–160 points or more.

• Remains as a major derogatory event for 7 years on your credit report.

Can You Buy Again? (Summary Table)

Event Type	Conventional	FHA	VA	USDA
Short Sale	4 years	3 years	2 years	3 years
Deed in Lieu	7 years	3 years	2 years	3 years
Foreclosure	7 years	3 years	2 years	3 years

• Extenuating circumstances (serious illness, death of wage earner, etc.) may shorten some waiting periods, especially for conventional loans.

• After any of these events, you must re-establish good credit, have no late payments in the interim, and meet other loan requirements to qualify.

In summary:

• Short Sale is generally the least damaging and fastest path back to homeownership (with shorter waits for VA and FHA).

• Deed in Lieu and Foreclosure have longer waits for conventional loans but are similar to short sale for FHA/VA/USDA.

• All three significantly impact your credit, but homeownership is possible again after the specific waiting periods—often sooner if you have strong extenuating circumstances and rebuild your credit.