Short Sales, Deed in Lieu of Foreclosures, Foreclosures, what are the differences, and how soon on average can you buy a home again

1. Short Sale

What it is:You sell the home for less than what is owed, with the lender’s approval, to avoid foreclosure.

Key points:

• Homeowner is involved and cooperative

• Lender agrees to accept less than the balance

• Less damaging to credit than foreclosure

• Often requires documented hardship (medical, job loss, etc.)

Credit impact (average):

• ~100–150 point drop (varies)

Typical waiting period to buy again:

• FHA: 3 years (can be reduced to 1 year with strong extenuating circumstances)

• Conventional (Fannie/Freddie): 4 years (2 years with extenuating circumstances)

• VA: 2 years (sometimes 1 year with strong compensating factors)

2. Deed in Lieu of Foreclosure

What it is:You voluntarily transfer ownership of the home to the lender instead of going through foreclosure.

Key points:

• Faster and quieter than foreclosure

• Lender must agree

• Home must usually be listed and unsold first

• Credit impact similar to foreclosure but slightly less severe

Credit impact (average):

• ~150–200 point drop

Typical waiting period to buy again:

• FHA: 3 years

• Conventional: 4 years

• VA: 2 years

3. Foreclosure

What it is:The lender takes the property back after missed payments and legal action.

Key points:

• Most damaging financially and emotionally

• Public record

• Loss of control over timing and outcome

Credit impact (average):

• ~200–300+ point drop

Typical waiting period to buy again:

• FHA: 3 years

• Conventional: 7 years (can be 3 years with documented extenuating circumstances)

• VA: 2 years

Quick Comparison Table

Option	Control	Credit Damage	Public Record	Buy Again (Fastest)
Short Sale	High	Moderate	No	1–2 yrs possible
Deed in Lieu	Medium	Moderate–High	Yes	~2 yrs
Foreclosure	None	Highest	Yes	2–7 yrs

Important Real-World Factors

Regardless of the option, lenders will also look at:

• Why it happened (medical hardship is viewed favorably)

• Post-event credit behavior

• Down payment strength

• Stable income

• Documentation (this is critical)

💡 Medical hardship is considered a strong “extenuating circumstance” by many lenders and can significantly shorten waiting periods.

Bottom Line

If hardship is unavoidable:

• Short Sale is usually the least damaging path

• Deed in Lieu is second best

• Foreclosure should be a last resort