If you’re a veteran who has gone through foreclosure, the good news is that you can purchase a new home again. However, there are important guidelines and rules to consider during this process. The following information will help you navigate the VA home loan system and understand what you need to do after a foreclosure.
Take the 30 second mortgage quiz to see if you qualify
One of the first things to know when considering a VA home loan after foreclosure is that there is a mandatory waiting period. The waiting period begins from the date the deed transfer was filed with the county, which is when the property officially leaves your name and is recorded in the lender’s name. This date is crucial because there can be delays between the sheriff sale and when the deed is actually recorded.
Typically, the waiting period for a foreclosure on a VA loan is two years. This is beneficial compared to other types of loans; for example, FHA loans usually have a longer waiting period of three years. However, if you encounter extenuating circumstances—such as job loss, medical issues, or an inability to sell the property at a fair price—this waiting period could potentially be reduced to just one year.
It’s also essential to be aware of lender overlays. These are additional rules that some lenders impose that go above and beyond the VA’s requirements. Because I work as a full-service mortgage broker, I can connect you with lenders who have lower or no overlays, giving you more options to secure financing after a foreclosure.
Another critical aspect to keep in mind is how a foreclosure affects your VA entitlement. If your foreclosure was based on a VA loan, it will remain on your entitlement record. This may influence your eligibility for 100% financing (or zero down payment) on a new home loan, depending on the amount involved in the foreclosure and the new loan amount you are considering.
In some scenarios, you might have the option to settle your foreclosure for a reduced amount, sometimes referred to as “pennies on the dollar.” If your entitlement is nearing its limit and a significant down payment is necessary for your next home, it may be worthwhile to contact the VA to discuss potential settlement amounts and weigh the benefits.
Take the 30 second mortgage quiz to see if you qualify
Navigating the world of VA loans after experiencing a foreclosure can seem daunting, but with the right information and resources, it’s entirely possible to move forward. By understanding the waiting period, the implications of lender overlays, and how a foreclosure can affect your entitlement, you can better prepare yourself for successfully purchasing a new home.
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I can originate VA mortgage loans anywhere that I’m licensed.
I’m licensed in Alabama, Arkansas, Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, and Wisconsin.
Additionally, our team can originate mortgages in several additional states through our corporate referral program.
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Take the 30 second mortgage quiz to see if you qualify
