Anyone can get into financial troubles at any point in their lives. It could be due to a job loss, an illness, a disability or any other emergency. This is when you start giving up on your luxuries that you were enjoying till now. Your living expenses will have to be cut to the bone. Those affordable monthly VA loan payments might start seeming very much non-affordable now.
If you have missed out on a couple of monthly VA loan payments the first thing you need to do is get in touch with a VA regional loan center for some financial counseling. The purpose of such centers is to assist veterans who happen to be in serious financial troubles. Apart from such centers, there are also quite a few expert VA loan counselors. In fact a few such counselors might even contact you by purchasing your details through VA leads.
VA loan counseling will let you know what you need to do, in order to avoid a foreclosure. Although such a service might not provide you any legal assistance, it does help you explore a few options and stay away from dangerous practices.Your options are as follows:
Repayment plan might work for you if you had been facing a financial hardship for a short time and have missed out on a couple of payments. This option will resolve your delinquency and help you get current with your mortgage.
In a typical repayment plan your past dues would be spread out over a period (three months to nine months) and then added to your existing monthly mortgage payments. In case this doesn’t work out for you, you can extend your loan repayment period by a couple of months.
This option will work if you are unable to make your monthly mortgage payments until your financial situation improves. In such a case your lender will either reduce or suspend your payments for a certain period of time, provided you agree to make a full payment at the end of such forbearance period. Meanwhile you get some breathing time to regroup your finances so that you can get back on track.
This is the most frequently chosen option when it comes to avoiding a foreclosure. This will work for you if your monthly income has reduced because of a job loss or an injury. Through a loan modification you can ask for a lower interest rate, an extended term, a shift from an ARM to an FRM or even a re-amortization plan where in your missed payments get added at the end of your term.
All these options help you avoid foreclosure successfully, without damaging your credit score in a big way. Not every option might work. But you can choose the best one depending upon your financial situation.
If you feel none of these options are good enough for you, you may think of selling your home at your own free will. Thankfully VA loans are assumable. You don’t have to pay back your mortgage from the sale proceeds. The buyer takes over your mortgage and starts making the payments every month. However, the condition is that the buyer has to qualify for a VA loan and the current mortgage provider should agree for such an assumption.
This assumption might work for your buyer if the interest rate on it is much lower than what is available to him in the current market situation. So instead of taking a second mortgage at a higher interest, the buyer might as well pay the difference between the sale price and current mortgage value.
The fact about VA loan assumption is that the VA mortgage entitlement remains tied to you, even after the buyer has assumed the mortgage. So, if in future, the buyer happens to miss out on his payments and goes into bankruptcy, short-sale or foreclosure, your eligibility could get greatly impacted. Therefore, it is very important that you do your research thoroughly and choose your buyer carefully.
Before saying “Yes” to any of the VA loan counselors who might call you via VA leads, make sure you gather as much information as possible. Finally, it is only an informed decision that will help you deal with the situation in the best way.