What is a VA Refund?
When a buyer applies and is approved for a VA home loan, they’re counting on a variety of things in life to remain the same or improve. Nobody makes a financial investment thinking that their job could be eliminated, a family member could develop serious health issues or any other situation that affects someone’s ability to stay committed to their investment in a home.
Sometimes, life gets in the way and due to circumstances beyond a VA mortgage holder’s control; they aren’t able to make payments. In many cases these circumstances are like natural disasters—they blow in, they blow over, and things start to improve.
But what happens when a VA borrower experiences a situation like this but the lender refuses to hold off on foreclosure proceedings? In such cases there’s something called VA refunding. This is where the VA buys the loan from the private lender, and only happens in cases where the circumstances which caused the loan to go into default and foreclosure were beyond the borrower’s control (the VA makes the final determination) and the situation has improved to the point where the VA mortgage holder can resume payments now or in the near future.
As the VA reminds people researching VA Refunding, the refunding program isn’t commonly used because most lenders would prefer to work something out instead of losing any future income on the VA home loan, but there are still circumstances where VA refunding may be a viable option for a VA borrower in trouble, but climbing out of that trouble and in need of just a bit more time to make things right.
In any situation where a VA loan could go into default or foreclosure, it’s best to contact the VA and the lender the moment you know a payment is about to be missed—even the first time. Don’t try to weather a financial storm without keeping your loan officer in the loop—you may not need to resort to a VA Refunding request or other foreclosure avoidance plans at all if the right steps are taken in the earliest days of the financial difficulty.