In many ways, VA loan foreclosures are very similar to any other type of foreclosure, and facing one is often overwhelming. But avoiding a foreclosure is possible if you know what your options are and how to deal with them.
What Makes VA Loan Foreclosures Different?
A VA loan is different from a traditional one because the VA (U.S. Department of Veterans Affairs) guarantees it for eligible veterans, providing them with such benefits as low down payments and lower interest rates. However, the VA does not handle the mortgage itself and you still need to deal with a traditional mortgage lender. That means, if you do default on the loan, the VA pays the lender for you, but you may still be responsible to the VA for that amount.
Tips to Avoiding a VA Loan Foreclosure
If you find you can no longer make your monthly mortgage payments, the first thing you should do is talk to your lender. Foreclosure is costly for everyone involved, including the lender, so they will be willing to work with you in trying to avoid it. Here are some possible solutions you can discuss with them.
Short Term Solutions
If you have not been behind on your payments for too long, and you foresee being able to pick them up again in the near future, you have a couple options.
- Forbearance allows you to suspend monthly payments for a period of time under the assumption that, sometime in the near future, you will be able to pay that amount back in a lump sum.
- With a Repayment Plan, you may be able to take the past due amount and roll it into future mortgage payments until that amount is paid off.
Long Term Solutions
If your situation isn't temporary and you simply can't make your current payments, you still have options available to you.
- Talk to your lender about changing the terms your loan. They may be open to making the life of the loan longer and rolling the missed payments in to the new balance.
- You may also be able to refinance your mortgage and get a lower rate.
VA Foreclosure Help
If you're feeling overwhelmed by the prospect of a foreclosure, the VA has financial counselors that can help. Contact your VA Regional Loan Center and a counselor will walk you through your options.
When Foreclosure Seems Unavoidable
When foreclosure on your mortgage seems impossible to avoid, then selling the home can at least save your credit, if not the home. With VA-guaranteed loans, you must get approval from the VA before anyone else can take over the loan. If it turns out you must do a short sale, and the amount of the sale will not cover the entire amount of the loan, make sure you get a release of liability from the VA, or you may be responsible for the amount not covered.