VA limits VA loans

VA Loan Reader Question: Eligibility After Foreclosure

September 18, 2012

VA Loan Reader Question: Eligibility After Foreclosure

A reader asks, “I am a vet who walked away from my home in 2009 (a BAC-mortgaged property). The foreclosure went down on April 1st, 2011. I have been renting since October 2009”

“For VA purposes, my 24-month waiting period will be up April 1st of this coming year. I’d like to get back into an affordable and simple home as soon as possible. Not sure if I have to wait until April 1st, or if I have to, is there anything I can do now to look more attractive in the eyes of the lender?”

Let’s take a look at what the Department of Veterans Affairs says about foreclosures and how they can affect the borrower’s chances for a new VA mortgage. The following is from Chapter Four of the VA Lender’s Handbook and are instructions to the lender:

“The fact that a home loan foreclosure (or deed-in-lieu of foreclosure) exists in an applicant’s (or spouse’s) credit history does not in itself disqualify the loan.

  • Develop complete information on the facts and circumstances of the foreclosure.
  • Apply the guidelines provided for bankruptcies filed under the straight liquidation and discharge provisions of the bankruptcy law.  See the preceding heading entitled “Bankruptcy.”

Looking under the Bankruptcy section (as directed in the last line above) for information on how to proceed, you’ll find the following instructions to the lender. Remember to insert the word “foreclosure” in place of the word “bankruptcy” to get the official VA position on this issue:

“You may disregard a bankruptcy discharged more than 2 years ago.

If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that the applicant or spouse is a satisfactory credit risk unless both of the following requirements are met:

  • The applicant or spouse has obtained consumer items on credit subsequent to the bankruptcy and has satisfactorily made the payments over a continued period, and
  • The bankruptcy was caused by circumstances beyond the control of the applicant or spouse such as unemployment, prolonged strikes, medical bills not covered by insurance, and so on, and the circumstances are verified. Divorce is not generally viewed as beyond the control of the borrower and/or spouse.”

One very important thing to remember–the VA minimum waiting periods are often exceeded by the individual lender. Just because the VA loan rules say after two years a borrower is free to apply for a VA mortgage loan once again does not mean a lender might not require additional wait times. It’s common for lenders to require a three year wait rather than two.

Do you have questions about VA home loans? Ask us in the comments section.

13 Comments
  1. Shari Litherland

    Hi, i"m trying to find out what my credit score needs to be in order to get a va loan.Can you tell me the required credit score? Some say you need a score of 625? some say 650? Is their a certain score to meet the requirements on a va loan?

    • Joe Wallace

      www.valoans.com requires a 620 minimum score. We ask that all of our applicants go to our website at www.valoans.com and apply online. We speak with many Veterans on a daily basis and prefer to give each one of them the attention and respect they deserve. Once we have all of the information in front of us, we can make a well informed decision. We will then contact you shortly. As a reminder, our site is secure.

  2. Mark Fisher

    I need to find a local lender for questions regarding VA Loans. I live in Manheim PA. Can I get a referal or can you help me? Thank you for your time Mark Fisher

    • Joe Wallace

      Hi Mark--go to VALoans.com--Emery Federal (associated with VALoans.com) is an approved Nationwide VA lender.

  3. Richard Messerschmidt

    I am 77 years old. I am a veteran with a Honorable discharge and have recently applied for a COE which should be forth-coming. I wish to obtain a VA Loan guarantee for the purchase of a lot and new construction of a residence in Knoxville, Tn for a total amount of no more than $150k. I do not have any disability from the service and have an income of $700 through Soc Sec. I had been a widower until just three years ago when I re-married. My wife makes approximately $36k annually. and has just had a job transfer to Knoxville. She was previously working for 5 years for another company (industry related)with excellent references. We have fair credit rating. Is there lenders in Knoxville who would accept an application from me for this home home? Our net Income before expenses is approx $3000 per month.

    • Joe Wallace

      Have you tried pre-qualifying for a loan at VALoans.com? Getting prequalified is a very good way to start the process...

  4. ammie drummonds

    I would like to know if i can get another va loan.the house we got in the 90's have been forcloused i am looking for a place to go since my husband left me.what can i do being on my own.have found a lot of places for under 60 thousand.need help it me and my son,and grandkids.

    • Joe Wallace

      Are you a veteran with GI Bill benefits? How long since the foreclosure?

  5. George Satrk

    In September 2008 my business closed due to the drop in the economy. I lost my house to foreclosure and it was backed by VA. I also had to file bankruptcy. The house sold at auction in April 2009 for $30,000.00 more than what was owed. Who in the VA do I contact to get my eligibility back? A phone number is preferable. I do have the court documents stating the excess funds received from the sale. I would like to buy a house again now that I have a good job. Thanks for your help! George Stark

    • Joe Wallace

      Call the VA aat 1-800 827-1000 for assistance with getting your VA loan eligibility restored.

  6. George Satrk

    Thanks, I will do that. George Stark

  7. vicki

    We have been preapproved for a VA loan after approval from the bank of our short sale of our current home. All information regarding the listing of our home has been disclosed to the potential lender regarding the short sale. Today we learned, after an inspection, that our home may be next to impossible to sell, even offered as a short sale (major structure damage). We may have no option but to foreclose. What impact will this have on our current VA approval? What are our options?

    • Joe Wallace

      In situations like this you should contact the VA directly for assistance by calling 1-800 827-1000.

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