Can You Short Sell an FHA Loan?
Yes! If you have an FHA loan and can’t afford your mortgage, you may qualify for an FHA Pre-Foreclosure Sale (PFS). This program allows homeowners to sell their property for less than they owe, avoiding foreclosure. However, strict requirements apply.

FHA Short Sale (Pre-Foreclosure Sale) Requirements
To qualify for an FHA short sale, homeowners must meet these criteria:

  • Financial Hardship – You must prove a legitimate hardship, such as job loss, medical expenses, or divorce.
  • Owner-Occupancy Requirement – The home must generally be your primary residence, but there are exceptions.
  • Delinquent Mortgage Payments – In most cases, you must be behind on payments (at least 31 days delinquent).
  • Fair Market Listing – The property must be listed for sale at fair market value as determined by an FHA appraisal.
  • Buyer’s Arm’s-Length Transaction – The buyer cannot be a friend, family member, or business associate.

    How the FHA Pre-Foreclosure Sale Works

  • Request Approval – Contact your lender and apply for the FHA Pre-Foreclosure Sale (PFS) program.
  • Get an Appraisal – The FHA will order an appraisal to determine a fair sale price.
  • List the Home for Sale – You must list the property at or near the appraised value.
  • Find a Buyer & Submit an Offer – Once you receive an offer, your lender must approve it.
  • Complete the Sale – If approved, the home is sold, and FHA pays the lender the remaining balance.

    Benefits of an FHA Short Sale

  • Avoids Foreclosure – Prevents the negative consequences of foreclosure.
  • Relocation Assistance – Some homeowners may qualify for up to $3,000 in relocation assistance.
  • Less Credit Damage – While it still impacts your credit, a short sale is less damaging than foreclosure.

    Potential Downsides

  • Lender Approval Required – The lender must approve both the sale price and buyer.
  • Time-Consuming Process – Short sales can take several months to complete.
  • Credit Score Impact – A short sale will lower your credit score, though not as much as a foreclosure.

    Next Steps for FHA Homeowners

    If you have an FHA loan and are considering a short sale, reach out to a short sale specialist to explore your options. Understanding the process can help you make the best financial decision for your situation.