Short answer
A short sale is a sale for less than the mortgage balance, with the lender agreeing to take the proceeds. On a Fannie Mae loan, the servicer reviews your hardship and finances, gets a property value, and must approve the sales contract. If the home is your main residence, Fannie Mae can pay a $7,500 relocation incentive at closing in many cases, and some loans get a written release from any remaining balance.
Who can do a short sale?
The servicer decides based on your situation. On Fannie Mae loans, it reviews a complete application package from you, and if your payments are current or less than 60 days late, it must find that you're at risk of falling behind. A short sale doesn't automatically stop a foreclosure that's already moving, so keep talking with your servicer. See options if you can't pay your mortgage.
What are the steps?
- Call your servicer and ask about a short sale and other options.
- Send the application package, including your hardship and income details.
- List the home with a real estate agent; the contract must say the sale depends on the lender's approval.
- Let the servicer's appraiser or broker see the home, and keep it maintained until closing.
- Close once the servicer approves the offer and the closing statement.
Will I owe the difference?
It depends. The lender may ask you to contribute some cash if you can afford to. On Fannie Mae loans without mortgage insurance, and some with it, the servicer must release you from the remaining balance at closing. Get any release in writing. Forgiven debt can have tax effects; Fannie Mae points borrowers to IRS Publication 544, so talk with a tax professional.
Can I buy again later?
Yes, after a waiting period that depends on the loan type. See a mortgage after bankruptcy, foreclosure or a short sale. A HUD-approved housing counselor can also help you compare a short sale with other choices.
Sources
Checked November 2, 2026. Rules and dates change, so confirm current details before you rely on them.
General information only, not tax or legal advice. Program availability, eligibility and terms vary by lender and are subject to change and to underwriting approval. Not a commitment to lend.