VA requirements

What Happens to a VA Home Loan in Case of a Natural Disaster

November 19, 2010

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What Happens to a VA Home Loan in Case of a Natural Disaster

Those with VA home loans who are affected by a natural disaster often find themselves on the phone with the Department of Veterans Affairs in the wake of the event trying to learn what their rights and obligations are. Knowing in advance can spare a home owner many headaches. Do you know what to do in case your home is affected by a forest fire, flood, mudslide or other issues?

There are two basic situations to VA loan applicants may contend with–“before and after”. Those who have closed on their home, regardless of how long they’ve lived there have different issues than VA borrowers who are waiting for loan approval or otherwise haven’t closed the deal before the disaster struck but have committed to buying.

For those who have already closed on their homes, the VA encourages immediate contact with the Department of Veterans Affairs, the mortgage company and the insurance company.

VA advice to borrowers includes a warning not to be hasty when signing a settlement agreement from the insurance agent–even if the offer looks attractive.

Advice from the Department of Veterans Affairs official site includes, “When the property is damaged but repairable, attempt to get the engineer’s office of your local government to make an inspection for structural damage. If possible, get at least two estimates from licensed contractors for cost of repairs or rebuilding. Insurance checks for personal property and living expenses should be made payable to you only.”

It’s important to know the VA requires mortgage payments to continue even if the home isn’t livable after the disaster. The borrower is still responsible for all payments as usual even while the insurance is being worked out. If the natural disaster has affected a borrower’s employment situation, the VA encourages you to arrange forbearance or other alternatives with the lender in the meantime. The VA has plenty of advice for VA borrowers in these situations and may be able to make a request on the homeowner’s behalf in certain instances.

For VA borrowers who have not closed on the home prior to the natural disaster, there is a whole different set of issues to content with–we’ll cover those in our next blog post.

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