At this point, you should definitely consult an attorney, preferably one who specializes in tax matters or a CPA or enrolled agent.
WHAT'S A SHORT SALE?
Dear Edith: Can you explain what a short sale is? -- K.
Answer: A short sale may solve problems for homeowners who can no longer meet their mortgage payments or who need to sell, but who owe more on the mortgage than the house is now worth. Sometimes the lender will agree to take whatever they can get selling on the open market and mark the debt settled. That allows the sale to go through. It hurts the seller's credit record, but not as much as a foreclosure would.
A short sale is possible only if the lender agrees ahead of time. Usually, the homeowners have to prove they have no other assets that could be tapped to solve the problem. The lender reserves the right to approve or turn down a proposed sale. And -- rarely -- the seller is later hit with a judgment for the remaining unpaid debt.
WHY NO MORTGAGE?
Dear Ms. Lank: We are trying to purchase a home with a VA or FHA loan. Because we have been renting two houses in different states, we are having problems proving residency in one. We are planning to reside there permanently and will no longer be renting, but our mortgage broker said this will not work for either of these two loans. What are other loan options that do not require a huge down payment? We are about ready to just give up. -- e-mail
Answer: I don't see the problem. There must be something more involved. Past residency shouldn't affect your ability to borrow for your own home. Try discussing the situation directly with a lending institution or with a different mortgage broker.