For Veterans and active-duty service members facing financial hardship, a VA short sale can provide a way to avoid foreclosure and protect your future home loan eligibility. Instead of walking away from your mortgage, you can sell your home for less than what you owe—with your lender’s approval. This process can help reduce financial damage while allowing you to rebuild sooner.

A VA short sale typically occurs when a borrower owes more than their home’s market value. For example, if you owe $320,000 but can only sell the home for $300,000, your lender may agree to accept the lower amount and forgive the difference. Although it can impact your credit, it’s often far less damaging than foreclosure.

VA Short Sale vs. Foreclosure

Feature	VA Short Sale	Foreclosure
Home Sold By	Homeowner (with lender approval)	Lender
Credit Impact	Moderate, typically 100–150 point drop	Severe, up to 200+ point drop
Future VA Loan Eligibility	Possible after 2 years	Possible after 3+ years
Control Over Sale	Yes	No
VA Benefit Impact	Partial entitlement may remain tied up	Full entitlement often lost until repaid

How Long You Must Wait to Get Another VA Loan

The VA does not impose an official waiting period after a short sale, but most VA-approved lenders require at least two years before approving a new loan. This waiting period is shorter than other loan programs:

Loan Type	Typical Waiting Period After Short Sale
VA Loan	2 years
FHA Loan	3 years
USDA Loan	3 years
Conventional Loan	4 years

During this two-year gap, rebuild your credit and demonstrate financial stability. Consistent on-time payments, reduced debt, and avoiding new credit inquiries can significantly improve your chances of approval for your next VA mortgage.

Restoring VA Entitlement After a Short Sale

After a VA loan short sale, part of your entitlement may remain tied to the previous property. To fully restore it, you’ll need to repay any losses the VA covered for your lender. However, even if full entitlement isn’t restored, you might still qualify for a new loan using remaining or second-tier entitlement.

Your available entitlement will depend on:

• The amount of entitlement still tied to the previous loan
• Current VA loan limits in your area
• Your overall financial and credit profile

This flexibility allows many Veterans to purchase a new home even before repaying the full amount from the prior VA-backed mortgage.

VA Compromise Sales and Hardship Assistance

If you’re facing genuine financial hardship, the VA may offer additional relief through a VA compromise sale. In this case, the VA covers part of the balance your lender didn’t recover through the short sale.
Qualifying situations often include:

• Permanent Change of Station (PCS) orders
• Loss of income or employment
• Death of a spouse or primary earner

To start the process, contact your VA loan servicer or a VA loan technician if your mortgage is more than 61 days past due. They can help you explore alternatives like loan modifications, repayment plans, or a compromise sale before foreclosure becomes unavoidable.

Is a VA Short Sale Right for You?

A VA short sale can be a smart alternative to foreclosure for homeowners in distress. It allows you to exit your mortgage responsibly, preserve future VA loan eligibility, and avoid severe credit damage. Although it takes time to rebuild, most Veterans can requalify for a new VA loan in just two years—much faster than with other mortgage types.

If you’re struggling with your VA-backed mortgage, contact your lender early. Understanding your options can help protect both your VA benefits and your long-term financial stability.

 

 

Get My Custom Rate Quote

No SSN required. Zero impact to credit. Your Information is never sold.