Deed in lieu of foreclosure

A deed in lieu gives up the home, like a foreclosure, but through an agreement rather than a forced sale. It's reported on the mortgage account itself, usually after months of late payments, and that negative information can stay on your report up to seven years. HUD's housing counselor study guide covers it alongside short sales as disposition options when keeping the home isn't possible.

The bigger difference shows up later. Fannie Mae's Selling Guide sets a 4-year wait after a deed in lieu, or 2 with extenuating circumstances, compared with 7 years after a foreclosure. Freddie Mac's manual rules use 48 months, or 24 with extenuating circumstances. If the lender forgives a shortfall, ask whether you'll receive a tax form, because the IRS can treat canceled debt as income.