Can You Do a Short Sale on a VA or FHA Loan? What You Must Know

Many North Jersey homeowners ask me: Can I do a short sale if I have a VA or FHA loan? The answer is YES—government-backed loans do allow for short sales, but with extra steps and requirements.
According to the Consumer Financial Protection Bureau, over 70% of U.S. home loans are government-backed (FHA, VA, or USDA loans), which means many sellers must follow special rules when doing a short sale. 

Understanding those rules is key to avoiding delays or denials. That’s why I help homeowners through this process—step by step.

Learn more about me and how I help North Jersey homeowners on my About page.

What Is a Short Sale with a VA or FHA Loan?
A short sale happens when you owe more on your mortgage than the home is worth, and the lender agrees to sell for less—and forgive the remaining debt.

When your loan is VA- or FHA-backed, the government has extra guidelines the bank must follow. Good news: the VA and FHA both allow short sales (called “Compromise Sales” under VA loans). But—you’ll need an experienced agent to help navigate the extra paperwork and approvals.

Best Practices: How to Handle a Short Sale with a VA or FHA Loan
1️⃣ Contact Your Loan Servicer Early
VA and FHA have strict timelines. The sooner you notify your lender about hardship, the better. I help clients prepare a full short sale package to start this process right.

2️⃣ Understand Appraisal + Net Requirements
Both VA and FHA loans require an appraisal. They also have net-to-lender requirements (meaning the sale must net a minimum % after costs). If not met—your sale could be denied.

3️⃣ Know Special Protections
Both programs offer some protection for sellers:

VA won’t pursue veterans for a deficiency balance after sale

FHA offers certain relocation assistance if approved

4️⃣ Expect Extra Processing Time
Government loan short sales take longer than conventional short sales. My role is to manage deadlines and keep communication flowing between attorneys, banks, and buyers—avoiding the common delays.

5️⃣ Work with a Short Sale Expert
Most agents don’t know the difference between a standard short sale and a VA short sale or FHA short sale. I do—and I make sure you don’t lose valuable time by submitting the wrong documents or missing key steps.

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Moving Forward: You Can Do a Short Sale on a VA or FHA Loan
If you have a VA or FHA loan and think you need a short sale—don’t wait. Starting early gives you the best shot at success.

As North Jersey’s First AI-Certified Realtor, I specialize in helping homeowners navigate government-backed short sales the smart way—avoiding common mistakes and delays.

👉 If you’re wondering if a short sale is the right move for your VA or FHA loan—DM me today. I’ll give you honest advice and help you plan your next steps.

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