Underwater on Your Home? How to Avoid Foreclosure in Nevada, Including FHA & VA Loans

Lately our phones have been ringing with the same question: "I owe more than my house is worth and I'm falling behind. What can I do?" If that's you, take a breath. You have more options than you think, and the earlier you act, the more of them you keep.

We've been helping Southern Nevada homeowners through short sales since 2006. We've worked with dozens of banks and loan servicers, and right now we're helping several Henderson and Las Vegas homeowners avoid foreclosure. This guide walks through your options in plain English, with extra detail for FHA and VA borrowers, whose loans come with their own rules and programs.

First: you're not alone, and the market has shifted

Short sales and foreclosures were 1.1% of Las Vegas-area sales in September, double the 0.5% of a year earlier (see our fall 2026 market update). That's nowhere near the 2008–2012 crisis. But with prices about $20,000 below their spring peak and mortgage rates above 7%, some homeowners who bought or refinanced recently, especially with low down payments, now owe more than their homes would sell for.

Being "underwater" isn't a problem by itself if you can keep making payments. It becomes urgent when a job loss, divorce, medical bills, a death in the family or a required move means you can't.

Your options, from keeping the home to selling it

1. Talk to your servicer about keeping the home

If your hardship is temporary and you want to stay, ask your loan servicer's loss mitigation department about:

• Forbearance: a temporary pause or reduction in payments.
• Repayment plan: catching up the missed amount over several months.
• Loan modification: permanently changing your loan's terms to lower the payment.
• Partial claim (FHA and now VA loans): the past-due amount is moved into a separate no-interest lien, due when you sell or pay off the loan.

Get every answer in writing, and keep copies of everything you send.

2. Nevada's Foreclosure Mediation Program

Nevada's Home Means Nevada mediation program brings you, your lender and a neutral mediator to the table. It's for owner-occupied homes. In a nonjudicial foreclosure, the most common kind in Nevada, you generally must file your petition within 30 days after the Notice of Default is served. There are filing and mediation fees. The Legal Aid Center of Southern Nevada can help you with the paperwork.

3. Sell with a short sale

If keeping the home isn't realistic, a short sale lets you sell for what the market will pay, even if that's less than you owe, with the lender's approval. Compared with a foreclosure, a short sale usually means:

• You stay in control of the sale and the timing, and you can plan your move.
• Less damage to your credit than a foreclosure in many cases, and often a shorter wait before you can buy again. Waiting periods depend on the loan program and your circumstances.
• A chance to have the remaining balance (the "deficiency") waived. Always get that waiver in writing in the lender's approval letter.
• In most short sales, the lender approves and pays the real estate commissions and normal closing costs from the sale. You typically don't pay us out of pocket.

4. Deed in lieu of foreclosure

You voluntarily sign the home over to the lender. Lenders usually want to see a short sale attempt first, and the home generally has to be vacant and in good condition when you hand over the keys.

5. Foreclosure

If nothing is done, the lender can foreclose. In Nevada, most foreclosures are nonjudicial, handled by a trustee outside of court, and the process can move faster than people expect. A foreclosure is the outcome that usually costs you the most in credit, control and future options.

If you have an FHA loan

FHA loans are insured by HUD, which sets detailed rules your servicer must follow before foreclosing. Highlights:

• Loss mitigation first. Servicers must review FHA borrowers for options to keep the home, including partial claims and modifications, before moving to a sale.
• Pre-Foreclosure Sale (PFS). This is FHA's short sale program. You sell at fair market value with servicer approval, even if the proceeds don't cover the full balance. Borrowers who complete a PFS may be eligible for up to $3,000 in consideration that can go toward sale costs, paying off a second lien or relocation.
• An asset test may apply. If you have more than $5,000 in documentable financial assets, you may be asked to contribute part of the amount above that toward the shortfall.
• Deed in lieu is usually considered only after a PFS attempt doesn't sell, and may include up to $2,000 if you leave the home in good condition.
• New in 2026: HUD tightened its rules on repeated loss mitigation requests and trial payment plans (Mortgagee Letter 2026-08). If you're going to apply, apply once with a complete, accurate package.

If you have a VA loan

VA loans come with important protections for Veterans and some options many people haven't heard of:

• VA Partial Claim Program (new in 2026). Launched by VA on June 15, 2026, this program can bring your loan current. After you complete a three-month trial payment plan, VA covers the past-due amount, and it's repaid when you sell, refinance or pay off the loan. Your servicer reviews you for it. If you can't get an answer, VA's loan technicians can step in at (877) 827-3702, option 6.
• Modifications, including 30- and 40-year VA modifications, can lower your payment.
• Compromise sale. This is VA's version of a short sale. It requires approval from your servicer and VA, a sale at fair market value to an arm's-length buyer, and a documented hardship.
• Deed in lieu is also available in some cases.
• Your future VA benefit. A compromise sale or deed in lieu can reduce your available VA loan entitlement for a future purchase. Ask how your entitlement and any remaining balance will be handled before you sign.

Taxes: a change for 2026

For years, a federal tax exclusion protected many homeowners from paying income tax on mortgage debt forgiven in a short sale or foreclosure of their main home. That exclusion expired at the end of 2025 and, as of this writing, hasn't been extended. Forgiven debt may now be taxable unless another exception applies, such as insolvency. Nevada has no state income tax, but federal tax can still apply. Talk to a CPA or tax professional before you close.

How we help, step by step

1. Free, confidential consultation. We look at what you owe, what the home will sell for, your loan type and your timeline, and tell you honestly whether a short sale makes sense or another option fits better.
2. Hardship package. We help you put together exactly what your lender needs: financial statements, documents, and a clear hardship letter.
3. Pricing and marketing. Short sale buyers need patience, and lenders need proof of market value. We price the home to attract solid offers that hold up to the lender's appraisal or valuation.
4. Negotiating with the bank. We work directly with the servicer's loss mitigation team and keep pushing for approval, including the deficiency waiver language you need.
5. Closing and moving on. We coordinate escrow and the closing timeline so you can plan your next move.

Watch out for foreclosure "rescue" scams

Desperate homeowners are prime targets. Be careful with anyone who asks for upfront fees, guarantees they can stop a foreclosure, tells you to stop talking to your lender, or asks you to sign over your deed. Nevada licensed real estate professionals, attorneys and HUD-approved housing counselors are the right places to turn.

Free help and resources

• HUD-approved housing counselors (free): (800) 569-4287
• Legal Aid Center of Southern Nevada: lacsn.org
• VA loan help for Veterans: (877) 827-3702, option 6
• Nevada foreclosure mediation: through your local District Court; ask Legal Aid or a housing counselor for help filing.

This article is general information, not legal, tax or credit advice. Program rules change; confirm current requirements with your servicer, a HUD-approved housing counselor, an attorney or a tax professional. A short sale requires lender approval, and results depend on your loan, lender and circumstances.