A short sale of a property while the borrower is current is acceptable provided:
The mortgage payment history reflects 0 X 30 in the last 12 months, up to the date of the short sale, and
There is no deficiency balance remaining, and
Appropriate documentation is obtained from the current servicer of the loan with a short sale to document the above, and
The borrower has sufficient entitlement remaining
If a short sale of a property occurs when the borrower is in default then the transaction must meet VA’s requirement for a borrower with a prior foreclosure. Please refer to the VA Lender’s Handbook for additional information.