Warning: Illegal string offset 'setting' in /home/timswi1/minneapolis-st-paul-purchase-and-rehab-loan-guide.com/wp-content/plugins/premium-list-magnet/plm.php on line 275

Can I Get A VA Loan If I’ve Had A Recent Foreclosure?

by Tim Swierczek on April 20, 2011

Warning: Illegal string offset 'enable_postoptin_override' in /home/timswi1/minneapolis-st-paul-purchase-and-rehab-loan-guide.com/wp-content/plugins/premium-list-magnet/plm.php on line 968

As Min­nesota has been hit with fore­clo­sures, its com­mon to know a vet­eran that is won­der­ing whether or not they can get a VA mort­gage if they have recently been through a foreclosure.

For­tu­nately, the VA qual­i­fy­ing guide­lines do allow for vet­er­ans and mil­i­tary per­son­nel to qual­ify for a VA mort­gage after a fore­clo­sure, but with some restric­tions from the VA and the pur­chas­ing lender.

For starters, vet­er­ans are not eli­gi­ble for a VA mort­gage for two full years after their fore­clo­sure, but this is a full year shorter than FHA bor­row­ers, and 5 years less than cur­rent con­ven­tional guide­lines. After two years vet­er­ans are allowed to apply for a mort­gage again, but will face increased scrutiny and will likely have to respond to more ques­tions dur­ing the appli­ca­tion process and pro­vide more doc­u­men­ta­tion show­ing they will be good credit risks. 

TIP:  One of the key’s to secur­ing approval is to have an explina­ton of the events that caused the fore­clo­sure and what has changed in the vet­er­ans life that will pre­vent it from hap­pen­ing again.  If you can show that the cause of your finan­cial trou­ble and fore­clo­sure were largely out of your con­trol, you may be able to increase your chances for approval.

Remem­ber, while you are eli­gi­ble to apply for a VA mort­gage after 2 years, there are addi­tional require­ments that must be met which may vary by lender. Sim­ply wait­ing out the recov­ery period does not guar­an­tee you loan approval.

TIP:  Another key to approval is re-establishing pos­i­tive credit, which means credit that has con­sis­tantly been paid on time since the fore­clo­sure­and elim­i­nat­ing late payments.

This rule does not only apply to vet­er­ans who pre­vi­ously had a VA mort­gage. Even vet­er­ans who have had con­ven­tional or FHA mort­gage fore­clo­sures are sub­ject to the same restrictions.

For vet­er­ans who do have a recent fore­clo­sure that involved a VA mort­gage, there are addi­tional restrictions.

First, to restore full enti­tle­ment after a VA mort­gage fore­clo­sure, the bor­rower has to com­pletely pay back the VA the loss of the pre­vi­ously guar­an­teed amount.  This process should be started as soon as pos­si­ble, and proper doc­u­men­ta­tion of this repay­ment can be used as a restab­lished credit trade line.  You should con­sult with your loan offi­cer from the start of this process.

It’s worth not­ing that it is pos­si­ble to use partial-entitlement to get a VA mort­gage, but with­out full enti­tle­ment a down pay­ment will prob­a­bly be required.

Some exam­ples of exten­u­at­ing cir­cum­stances include:

  • Unfore­seen med­ical bills.
  • Job loss.
  • Cer­tain lawsuits.

Exam­ples of cir­cum­stances which prob­a­bly won’t be con­sid­ered to be exten­u­at­ing are:

  • Bank­ruptcy because of an entre­pre­neur­ial busi­ness venture.
  • Get­ting divorced.
  • Cer­tain lawsuits.

Regard­less of the sce­nario, there is no guar­an­tee of approval or denial as deci­sions are made on a case-by-case basis, so its impor­tant to seek out a lender who will credit under­write your loan before you shop for a house.

Lastly, even though the VA does not dis­qual­ify vet­er­ans from VA mort­gages after a fore­clo­sure, it can def­i­nitely make the appli­ca­tion process take longer than it nor­mally would.  For help, craft­ing an explina­tion let­ter, re-establishing your credit, or get­ting a credit approval before you shop.  Please con­tact Joe or I at info@UofHome.org.

Tim Swier­czek, MMSCRMS

Comments on this entry are closed.

Previous post:

Next post: