The housing market that is falling is bad for sellers but great for buyers. Let's see how you can go about buying house after deed in lieu.

Deed in lieu of foreclosure involves your giving your house back to your lender without going through the whole foreclosure process. Rather than go to a foreclosure auction and lose your house that way, you voluntarily sign a grant deed or warranty deed and give your house back to the lender.

What people do not realize is most deed in lieus are reported like foreclosures. They are from a practical standpoint the same as a foreclosure, minus some of the costs. The bank still has to fix up your house, market it and sell it. They still have a problem on their hands. They may have your house back, but they really want the cash. But in some states and in some situations, deed in lieu is a good arrangement because it is cheaper and faster than foreclosure.

You should try to negotiate how the bank reports the transaction to the credit bureaus. Normally a deed in lieu is reported like a foreclosure. So it will not help you improve your credit situation. You can sometimes get the bank to report as Paid Settlement or better yet Unrated, but sometimes this isn't practical. I have written about   Short sale credit score - how you can raise yours and the same credit reporting facts apply to deed in lieu of foreclosure credit also.

So let's assume you do a deed in lieu of foreclosure credit score notwithstanding. It shows up as a foreclosure. What can you do?

Realize that because you buy a house, that doesn't mean you have to get a new loan. If the house you buy already has an existing loan, there is no reason why you can't simply buy a house and take over the payments. No assumption of the loan, no qualifying, no bank credit checks. That is called taking a property subject to an existing loan and it is a fundamental secret of How to buy a house with little or no money down, no qualifying, and bad credit.

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