Can You Do a Short Sale Without Missing Payments?
When most people think of short sales, they picture homeowners who are months behind on mortgage payments and already deep into foreclosure. While that’s often true, it’s not the only scenario. One of the most common questions I get is: “Do I have to miss payments before the bank will even consider a short sale?”
The short answer: No, not always. The longer answer: It depends on your lender, your loan type, and how you approach the process.
Let’s break it down.
Why Lenders Typically Expect Delinquency
Banks usually want proof of financial hardship before approving a short sale. From their perspective, if you’re making payments on time every month, they may assume you can keep doing so. Missing payments becomes a clear signal to the lender that you can’t afford the mortgage.
That said, there are plenty of homeowners who are technically “current” on their payments but know the situation is unsustainable. Maybe you’ve burned through savings to stay afloat, or maybe you’re about to relocate for work and can’t afford two homes. Just because you’ve stayed current doesn’t mean you’re not in hardship.
Situations Where Short Sales Can Happen Without Missed Payments
Here are a few real-world scenarios where lenders approve short sales even if the borrower hasn’t gone delinquent:
1. Job Relocation or Divorce – If you’re moving out of state for work or separating households, you may not be able to carry the payment any longer. A relocation letter or divorce decree can serve as documented hardship.
2. Impending Rate Resets or Rising Expenses – Some adjustable-rate mortgages are set to climb. Insurance and HOA dues in states like Florida have also skyrocketed. If you can show that your upcoming payments will be unaffordable, lenders will sometimes consider this “imminent default.”
3. Death or Serious Illness in the Household – Loss of income or new medical expenses can make it impossible to sustain a mortgage, even if you’ve kept up until now. These cases often carry strong weight in the review process.
4. Underwater with No Way Out – Even if you’ve never missed a payment, if the home is worth $100,000 less than the mortgage and you need to sell (say, for a job transfer or downsizing), lenders know you can’t cover the difference out of pocket. A properly documented hardship package may convince them.
What Lenders Look for Besides Delinquency
If you want to pursue a short sale while current, here’s what you’ll need to strengthen your case:
- Hardship Letter: A clear, honest explanation of why you can’t continue. Be specific — “insurance tripled” or “relocation out of state” is more effective than “financial stress.”
- Financial Package: Pay stubs, bank statements, tax returns — lenders want proof you don’t have hidden cash to cover the loss.
- Listing Agreement & Offer: A signed listing agreement with an agent and a real buyer’s offer makes your case more compelling.
- Supporting Documents: Divorce papers, relocation letters from employers, medical bills, or HOA statements all add credibility.
Why Some Lenders Still Require Missed Payments
Despite all this, some banks and loan investors (like FHA or VA) still won’t move forward without at least one missed payment. It’s not written in stone everywhere, but in practice, many negotiators fall back on that “box‑checking” approach.
It’s frustrating, because from the homeowner’s point of view, you’re trying to do the right thing — avoid foreclosure, minimize losses, and keep your credit intact. But from the bank’s point of view, they may see no urgency until you’re delinquent.
Risks of Staying Current During a Short Sale
If you do manage to get a short sale approved while current, here are some things to keep in mind:
- Credit Impact: Even if you’ve never missed a mortgage payment, the short sale itself will still be reported and lower your score (though typically less than a foreclosure).
- Out-of-Pocket Costs: Lenders may be less generous with relocation assistance or deficiency waivers if you’re current. They sometimes reserve those perks for delinquent borrowers.
- Longer Review: Files from “current” borrowers often face more scrutiny, dragging out the process.
Pros of Trying While Current
- Less Credit Damage: You may avoid late payment notations on your credit report.
- More Dignified Exit: You sell on your own terms without going through default notices.
- Smoother Transition: You can line up your next housing move without the chaos of foreclosure looming.
Bottom Line
You can sometimes do a short sale without missing payments — but it’s not guaranteed. If you’re facing hardship, the key is documentation and persistence.
At Crisp Short Sales, I’ve helped homeowners close short sales both ways: after months of delinquency and while still current. Every lender is different, but with the right strategy, you don’t always need to tank your credit before getting relief.
If you’re in this situation and unsure what the next step should be, don’t guess. Get the right advice, get the process started early, and protect your options before the bank makes the decision for you.
Explore more resources on:
- How We Help
- Who We Serve