If you have a loan guaranteed by the Veteran’s Administration and you are in default or imminent danger of default then you can short sell your VA loan. A successful VA short sale results in the mortgage tradeline reported to the credit bureau’s as ‘settled for lesser than amount’.
There are two things that are unique for a VA short sale. First, your entitlement will be tied up at the VA on a short sale. This is also the case on a foreclosure, so whether you short sell or let the property go to foreclosure auction, then your entitlement is tied up either way. Second, the relocation check is only $1,500. On other programs it is typically $3,000. It used to be that the VA paid MORE on their short sales than FHA because FHA was only $1,000 relocation check. FHA has since moved to $3,000 as the relocation and VA has stayed at $1,500.
The bright light when your entitlement has been tied up on a completed VA short sale is that you can originate your next home purchase with an FHA loan just two years later. Instead of zero down then it would be 3.5% down as long as your credit score is above a 580. Settling the old VA loan through a short sale is a path to buying a home again in two years. If you have a VA loan and are having difficulty with making the mortgage payments then consider allowing me to help you on VA short sale.