VA Loan Reader Question: Foreclosure
A reader recently asked,
“Our home is supposed to go into foreclosure due to the fact the mortgage was too high with the 1st and 2nd mortgage and my daughter losing her job, and husband medical history, we had to help out with the grand-kids. Can we buy another home using a VA loan with a lower rate and downsizing?”
The reader also adds, “…The only thing on our credit report is we are behind on our mortgage due to these problems and we know with our income of over 100,000 we are more than able to afford a home, we had a mild set back. Can you help?”
While it’s not clear what kind of help the reader is asking for, there are two basic issues that should be addressed here. The first is foreclosure avoidance. Any borrower in trouble on a VA home loan should contact the Department of Veterans Affairs right away for loan counseling and advice.
You can find the nearest VA Regional Loan center at http://www.benefits.va.gov/homeloans/rlcweb.asp.
The reader also asks about getting a new VA home loan after foreclosure. Borrowers should know that it’s not possible to have a home foreclosed upon and successfully apply for a new purchase VA home loan within the same year. The Department of Veterans Affairs requires the borrower to wait at least two years before applying again.
Many lenders may require a three-year wait. Even after the waiting period, if a borrower’s foreclosure results in the VA taking a loss on the home–because it had to pay a claim to the lender due to loan default–the borrower must pay back the government for its loss before a new VA loan can be processed.
Foreclosure is a very serious thing and shouldn’t be entered into lightly. Borrowers should exhaust ever means possible to avoid foreclosure on a VA home loan when possible. Possible options include loan modification, loan forbearance, and VA home loan refinancing.