A short sale typically occurs when the owner of a home owes more on the mortgage than today's fair market value of that home and the bank or lender approves the sale of the home for less than what is owed on the mortgage. Short sales can often be a better value and hold more benefits to a home buyer than a HUD or bank-owned property (the seller must sell or lose the home to foreclosure, the condition of the home is usually very good to excellent, and you have access to historical information about the home since the present homeowner is part of the transaction).
The seller's loan servicer (the company that owns the first, second, and/or home equity line of credit (HELOC) mortgages) must approve the price and terms of the sale. Timeline to complete a short sale transaction is usually 30-60 days and in some cases longer. If you are obtaining financing to purchase a short sale home, you are not under any obligation to use the existing loan servicer (although in some cases, you may get some preferrential treatment through a slightly lower rate, discounted closing costs, etc.).
I recommend that you ask your buyer's agent, family & friends for referrals to trusted loan officers in your area. Make application and get yourself pre-approved for financing. If you are going to be shopping for a short sale, I would speak to your loan officer and find out if they have any limitations or restrictions related to them funding such properties. Best wishes - Ted
The best answer to your second question is simply to contact a reputable lender and get pre-approved. It will cost you nothing.
Best of Luck!!
Good luck with your search.
As far as lending on a short sale, banks treat it like a regular loan. They will look at your credit scores (FICO), credit balances, outstanding credit, loans, etc to determine your credit worthiness.
Bob & Richelle Ward, Realtors, ABR
Prudential Connecticut Realty