Foreclosure is obviously a difficult financial blow for many military homeowners.
However, it is important to understand that defaulting on a home loan, even if it was a VA-backed loan, does not mean that another VA loan is an impossibility.
In fact, it is entirely possible to secure another VA loan after going through a foreclosure, short sale, or even a deed-in-lieu of foreclosure.
To effectively navigate these murky waters, you simply need to know how to proceed as well as what your responsibilities and benefits are.
In most cases, you’ll need to wait a period of 2 years prior to pursuing a new mortgage.
In that time, you can typically work on repairing and strengthening your credit so that you are a more viable candidate once you are ready.
As long as it is apparent that a borrower was not trying to take advantage of the market, most lenders do not have a waiting period or a time requirement following a short sale.
However, FHA homeowners who do undergo a short sale may be required to wait additional time before proceeding.
A default on federal debt often forces potential buyers to wait 3 years prior to being eligible for a VA-backed loan.
You’ll need to take several factors into consideration before proceeding with another VA-loan. Two of the primary considerations that need to be made:
Loan entitlement Post-foreclosure purchasing
#1
LOAN ENTITLEMENT
Eligible veterans are extended what is called an entitlement.
Essentially, this entitlement is a financial promise from the VA to repay a portion of your loan if you default on it. In most areas, the amount the VA will cover is $104,250.
The agency promises to repay an amount up to one quarter of the total loan amount so the most veterans can typically borrow without putting any cash down is typically $417,000 (which is $104,250x4).
After you’ve purchased a home, part or all of the entitlement is used depending on the amount of the loan.
If you lose the home due to foreclosure, the loan entitlement remains with the foreclosed property until the debt is paid in full, which is not typically likely in a foreclosure.
So, in many cases, a segment of the entitlement is lost forever. Thankfully, though, that isn’t the only consideration.
#2
POST-FORECLOSURE PURCHASING
Depending on the amount of your previous loan as well as your location in the country, you may have enough entitlement remaining to successfully qualify for another loan.
To determine if you have any left, you’ll want to look at your Certificate of Eligibility.
You can typically do this yourself or ask a lender for additional help.
In addition to having an adequate amount of entitlement remaining, you’ll also need to meet the “standard” credit, debt-and-income and any additional requirements of a VA-backed loan.
It is important to understand that just because you are still eligible and have entitlement remaining does not mean that you are definitely going to be able to secure a loan.
In this case you would be using what is known as secondary or second-tier entitlement that carries a minimum loan amount of $144,001.
You can apply financing of the VA Funding Fee toward this amount, but if you don’t have enough entitlement or a down payment large enough to reach that amount, a VA loan is not a viable option.
Financing after a foreclosure is tricky, but it’s not impossible. A certified loan specialist with experience in the industry can help you get the most with your entitlement even after a foreclosure.
In any case, though, don’t think foreclosure is the end of the story.
Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage.
Be a proud homeowner today. For more details call 480-351-5904 or visit the site https://www.valoansforvets.com/va-loan-eligibility/
VA Loans for Vets 7702 E. Doubletree Ranch Road, Suite 220 Scottsdale, AZ 85258 Phone: (480) 351-5904 Email: jimmyv@fcbmtg.com