Your credit report
The missed payments hurt first. A foreclosure can then stay on your credit report for up to seven years under the Fair Credit Reporting Act, and bureaus often count the seven years from the first missed payment that led to it, though some official sources count from the foreclosure date. The first-delinquency date on your own report tells you.
The damage to your score is largest at the start and fades as the years pass and you add on-time payments. A short sale or deed in lieu also hurts, usually less than a foreclosure.
Getting another mortgage later
Lenders usually make you wait. Commonly cited waits after a foreclosure are about seven years for a conventional loan backed by Fannie Mae, three for FHA and two for VA, while USDA treats a foreclosure in the last three years as a red flag that needs an exception, and they can be shorter with documented extenuating circumstances. A short sale or deed in lieu usually carries a shorter wait. These rules change, so ask a lender or a HUD-approved counselor for the current numbers.
The deficiency question
If the home sold for less than you owed, the lender may be able to sue for the difference in some states, and it is barred or limited in others. Your state page lists the rule. If the lender gives up the balance, ask for that in writing.
Taxes on forgiven debt
When a lender forgives part of a debt, it can send you a Form 1099-C, and the IRS can treat the forgiven amount as income. There are exclusions. One is insolvency, claimed on IRS Form 982. A special exclusion for forgiven debt on a main home applied to debt forgiven before January 1, 2026, or forgiven later under a written agreement made before that date. As of this writing Congress has not extended it, so debt forgiven in 2026 under a new agreement is generally taxable unless another exclusion, such as insolvency, applies. Congress has revived it before, so check the IRS page on canceled debt for your year.
A foreclosure can also count as a sale of the home for tax purposes, which can produce a gain or a loss. A tax preparer who has handled foreclosures can tell you what applies to you.
Rebuilding
Get your free credit reports at AnnualCreditReport.com and dispute errors, such as an account still showing as open. Pay everything else on time, keep balances low, and consider a secured card if you need one. A HUD-approved counselor can build a plan with you for free.