It is no coincidence VA loans have the lowest foreclosure rate in the country. Free mortgage counseling and the VA guarantee help make veterans’ mortgages less vulnerable in tough financial climates.
A foreclosure can happen when a borrower defaults or cannot repay a mortgage debt, and the lender chooses to take possession of the property to recover some of the loss. This quick Q&A can help you understand your options and the consequences of foreclosures.
Q: What should I do if I am having trouble making my VA loan payments?
A: VA borrowers facing financial hardship should use the free VA mortgage counselor assigned to their loan. Mortgage counselors are employed by the VA to help you. They are trained to provide sound advice that can assist financially-stressed veterans get back on track and often keep their homes.
VA counselors can work directly with your loan servicer to negotiate repayment plans, forbearance, and even loan modifications – all great home-saving alternatives to foreclosure.
Q: What happens if I just can’t avoid VA loan foreclosure?
A: If foreclosure unavoidable, it may directly affect your VA loan entitlement. If the government suffers any loss as a result of your delinquency, the amount of entitlement that was used for the VA loan cannot be restored until the loss is paid back.
Q: Can I get another VA home loan after foreclosure, and how long will it take?
A: Having a foreclosure in your history doesn’t necessarily disqualify you for a future VA loan. Like bankruptcy, a foreclosure may be disregarded in VA loan qualifying if it happened more than two years ago. Many VA borrowers who have a foreclosure in the past have been able to repair their credit and get another VA home loan. Lenders review applications of potential borrowers with foreclosures in their past on a case-by-case basis. You’ll have to be able to explain the circumstances that led to the hardship. And, as long as you have repaid the loss back to the VA and kept your credit in good standing since the incident, you may be able to qualify again for a VA home loan in the future. Repaying the loss to the VA is important for restoring entitlement needed to get another government- backed loan. How long it takes to qualify again may depend on how soon you recover financially.
For more about VA loans and foreclosure, contact an experienced VA mortgage professional.
Veterans First is a trade name of Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank. I NMLS# 449042 I Equal Housing Lender