After the financial crisis of 2008, many people lost jobs or suffered other mishaps that eventually resulted in 4.5 million foreclosures by 2012. Service Members and other borrowers with VA loans were among those affected. Today, the housing market recovery has finally taken hold. Although the unemployment rate is 7.7%, the job market has started to show a little life.
Like many people who lost their homes to foreclosure, veterans want to get back into home ownership. To qualify for a VA loan after a foreclosure, the person must wait at least two years in most states.
To qualify for another mortgage and access the full entitlement through the VA Home Loan Guarantee Program, you will also have to repay any government losses related to the VA-guaranteed loan. This provision will only have an effect on you if you used your full entitlement on the foreclosed home.
Entitlement refers to the full amount that you can borrow without making a down payment. In most counties, the maximum loan amount is $417,000. Therefore, you can receive a maximum entitlement of $104,250 in VA loan guarantees.
If you cannot access the 25%, you will have to come up with a down payment for the difference. Nonetheless, it will likely be lower than the down payment required for a conventional home loan or FHA mortgage.
The Certificate of Eligibility contains information on the amount of entitlement a person has remaining.
Preparing for mortgage process after foreclosure
Borrowers can expect to be able to qualify for a VA loan as soon as two years after foreclosure. However, they should expect investigation of their credit and income when they apply for the VA Home Loan Guarantee Program. Before you apply for the loan, make sure you take care of any derogatory items on your credit report. The VA mortgage lender wants to see that you did not have any other credit problems after the foreclosure.
Be prepared to discuss the circumstances surrounding the foreclosure as well as provide a written statement. Make sure to explain how your fiscal health has improved and strong enough to enable you to take on another VA loan.
Applying for a low-interest home mortgage post-foreclosure can be challenging. Find a loan specialist who understand the nuances of working with VA loans and financial setbacks and can help you move forward from a mortgage default.
For civilian home buyers and investors looking to buy VA properties, the same logic applies for obtaining a VA loan after foreclosing.
Take the time to heal your credit-- build a profile of timely payments and raise your credit score.
VA Foreclosure Review
Any veteran facing foreclosure or foreclosed on since 2006 should understand that they may have another remedy. Based on the $26 billion agreement reached between the state/federal government team and five major service lenders in February 2012, the solution lenders must provide service members include:
- Review of any foreclosure since 2006
- If improper foreclosure – compensation of an amount equal to lost home equity, plus interest, and $116,785
- Refund any money loss for wrongfully denied opportunities to refinance mortgage payments and get lower rates
Lenders must also provide monetary relief for veterans forced to sell their homes for less than the amount old on the loan due to a Permanent Change in Station.
If You Have Financial Difficulties
Any veteran who foresee an issue that could cause him to fall behind on their mortgage payments, or are behind, should contact the Veterans Administration for help. A VA Loan Technician can provide assistance and discussed options you may have to bring your loan current and prevent foreclosure.
Stricter guidelines require lenders to contact you when your VA loan goes into default. The loan servicer must determine the reason for the default and work with you to cure the mortgage delinquency.
The rules require the lender to notify VA that your loan is in default if you cannot resolve the matter by the time you reach two past due payments.
Some possible options to foreclosure include the following:
- Pay the delinquent mortgage payments.
- Enter a forbearance and repayment agreement
- Deed in lieu of foreclosure
- Payment assistance
- Re- amortization
Many banks are also choosing to approve more short sales to help borrowers avoid foreclosure.