Can I Do a Short Sale If I'm Current on My Mortgage?

Sometimes, and it depends on who owns your loan. Fannie Mae can approve a short sale for a borrower who is current or less than 60 days late when the servicer finds the payment is in “imminent default,” meaning a hardship is expected to cause a missed payment within the next 90 days. FHA’s permanent rules, by contrast, require the loan to be 61 days or more delinquent when the servicer approves the sale. Loans kept by the bank follow the lender’s own policy.

None of these sources tells a homeowner to stop paying. Missing payments on purpose damages your credit, and Fannie Mae’s imminent-default test is written for borrowers who have not fallen behind.

First, find out who owns your loan

The investor that owns your loan sets the eligibility rule, not the company that sends your statement. Federal law requires your servicer, when you ask in writing, to give you the name, address, and telephone number of the owner of the loan or its master servicer (15 U.S.C. 1641(f)(2)).

Fannie Mae: current borrowers can qualify through imminent default

Fannie Mae’s Servicing Guide allows a short sale evaluation on a complete application when the loan is current, but the servicer must first find that your payment is in imminent default (D2-3.3-01). Section D2-1-01 defines that as events or factors expected to cause a payment default within the next 90 days.

For a short sale, D2-1-01 requires all of these:

• the loan is current or less than 60 days delinquent on the evaluation date;
• at least one borrower occupies the house as a principal residence (with an exception for servicemembers with PCS orders);
• you submit a complete application package;
• your non-retirement cash reserves are under $25,000, as stated on Fannie Mae’s Mortgage Assistance Application; and
• you have a documented hardship.

You must also meet one of two further tests. The hardship test lists the death of a borrower or of the primary or secondary wage earner; long-term or permanent disability or serious illness of a borrower, co-borrower, or dependent family member; divorce or legal separation; separation of unmarried co-borrowers; and a distant job transfer or relocation, including PCS orders, more than 50 miles one way. The credit test is a FICO score of 620 or lower plus either two or more 30-day late payments in the last six months or housing costs above 40 percent of income.

If your reason is rising insurance or taxes and your score is above 620, the published tests may not fit. The same section bars servicers from soliciting borrowers who are current or less than 30 days late for a workout option, so the request usually starts with you. A clear hardship letter is part of that package.

Freddie Mac loans follow Freddie Mac’s own Seller/Servicer Guide; ask the servicer to state its requirements for a current borrower in writing.

FHA: the permanent rules require a delinquency

Since October 1, 2025, a Standard FHA pre-foreclosure sale requires the borrower to be 61 days or more delinquent on the date the servicer approves it (HUD Mortgagee Letter 2025-12). The federal regulation says the same in general terms: to be considered, the borrower “must have an account in default,” for a period HUD sets, resulting from an adverse and unavoidable financial situation (24 CFR 203.370(c)(2)).

FHA does define imminent default, but its permanent pre-foreclosure sale standard does not use it. The COVID-19 pre-foreclosure sale, which servicers could consider for current borrowers facing imminent default, expired September 30, 2025. The pre-foreclosure sale for servicemembers with PCS orders requires the loan to be at least 31 days delinquent on the closing date.

This describes FHA’s rule; it is not a plan. If you have an FHA loan and are still current, a free HUD-approved housing counselor can walk through every option, and FHA loss mitigation options lays out the full menu.

Bank-held loans: no fixed rule

A loan kept in a lender’s own portfolio usually has no published short sale eligibility rule; the lender decides case by case. Ask for its requirements in writing before you make any decision about your payments.

Why some owners choose it while still current

The usual reasons are owing more than the house is worth and facing a change you did not choose: a job transfer, a divorce, a death or illness in the family, or housing costs that have outgrown the income. On a Fannie Mae loan, a borrower whose principal residence is sold in a short sale is entitled to a $7,500 relocation incentive unless required to contribute cash (D2-3.3-01); the conditions are on our relocation assistance page.

What it costs

A short sale has costs even when you are current: credit, possibly cash, and possibly taxes.

• Credit. Fannie Mae’s Selling Guide sets a four-year waiting period after a preforeclosure sale, or two years with documented extenuating circumstances (B3-5.3-07). HUD requires servicers to tell FHA borrowers in writing that these sales are reported to consumer reporting agencies. See how a short sale affects your credit.
• Cash. A Fannie Mae servicer must evaluate you for a cash contribution if your non-retirement cash reserves exceed $10,000 or your housing costs are 40 percent of income or less. When the loan is current, the contribution is at least 20 percent of those reserves, and a required contribution removes the $7,500 relocation payment (D2-3.3-01).
• Taxes. Forgiven mortgage debt is generally taxable. The qualified principal residence exclusion applies only to discharges before January 1, 2026, or under a written arrangement entered into before that date (IRS Publication 4681), so ask a tax professional whether another exclusion, such as insolvency, applies. Read short sale taxes and Form 1099-C.

Your next step

To see which documents your loan program would ask for, run the free file checker; nothing you type is saved. Short Sale Guide connects homeowners with licensed agents; for the real-estate side, call 855-725-3898.

This page is general information for Florida homeowners and is not legal or tax advice.