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USDA Loan Short Sale Situation Question

Dear K & J,

Thanks for contacting me for your short sale questions.  I can definitely help you.  Below are my answers.  Please consider that I am not providing legal or accounting advice.

The financial situation affecting the property is very common.  Right now the employment situation is tough.  It is typical that the property is over mortgaged.  Most properties acquired with the tax credit and the USDA loan were bought new and at high retail.  That is why soon they became over mortgaged.

Here are the answers:

  • I have not shorted a USDA loan.  Most likely it is entirely possible.  I can find out
  • The more broke you are, the higher the chance Bank of America will approve your short sale
  • Normally the bank looks at your last three months bank statements, last two years taxes and other recent financial information
  • Banks usually don't negotiate until the borrower is a few months in default.  T
  • Your credit will definitely be affected by a short sale.  The damage is comparable to settlement of a credit card for less than owed.  Less than foreclosure

Let me know how else can I help you.  Are you in the Portland area?


At 01:41 PM 8/29/2011, you wrote:

Hi Oscar,

Here's the situation… 

Purchased a home 05/2009 for $229,500 with a 100% USDA loan through Bank of America – Received $8,000 first time home buyer tax credit. 

Home is now worth approx $190,000 – $200,000 (based on area comps)  I owe $221,700. 

Wife's business failed in early 2011.  My employer is telling me my position will be eliminated in the next few months….   Were barely making it now and won't be able to make the mortgage payment once my position is eliminated.

1. Can I short sale on a USDA Loan?  Is the process any different? 

2. Do I understand correctly that I essentially have to be broke in order for B of A to approve a short sale?  (I'm planning on hiding my savings cash to get approved for the short sale) and I owe more on my car than it's worth and have no other assets.  Do they only look at 2 months back bank statements or do they ask for 6 ?  
3. Do I have to be behind in the mortgage payments to get a short sale approved?  I'm hoping not to destroy my credit too much if possible I would like to stay current.

Any information you can give would be helpful. 


J & K

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