My Va Loan Was Foreclosed On Can I Get Another Va Loan
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In a Nutshell
One of the most common questions veterans have is whether they can still get a VA home loan after foreclosure. The answer is often yes, but the size of the loan will be affected by the previous foreclosure and what your remaining entitlement benefits are. It’s much better for the service member, and the VA, to avoid the foreclosure in the first place. Read on to learn what options you have for avoiding foreclosure, and what you can do to get a new VA loan if foreclosure was unavoidable.
Written byNatasha Wiebusch, J.D..
Military service members receive many benefits through the Department of Veterans Affairs , a federal government agency charged with assisting service members and their families. One of these benefits is assistance with buying a home through the VA Home Loans program.
Unfortunately, every year some service members experience serious financial hardship causing their VA loans to be foreclosed on. Many of these service members wonder if theyâll ever be eligible for another VA loan. The short answer is probably, but it depends on the circumstances.
How To Take Out A Second Va Loan
If your entitlement is reduced, its possible to have your full entitlement restored in certain circumstances. If this isnt possible, youll be limited by the amount of entitlement you have left.
Keep in mind, when we say limited, we dont mean you cant take out a larger loan than what your entitlement will guarantee, but that you wont be able to take out that loan without making a down payment. This is because lenders will typically require that 25% of your loan amount is covered either by your entitlement, a down payment or a combination of the two.
Eligibility Requirements For Va Home Loan Programs
Learn about VA home loan eligibility requirements for a VA direct or VA-backed loan. Find out how to apply for a Certificate of Eligibility to show your lender that you qualify based on your service history and duty status. Keep in mind that for a VA-backed home loan, youll also need to meet your lenders credit and income loan requirements to receive financing.
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Va Bonus Entitlement Down Payment
Lets assume our VA buyer is over the $144,000, the lender must now calculate if a down payment is required. If any down payment is required, it depends on the amount of entitlement available, purchase price, and the county VA loan size limit. Basically, the higher the purchase price, the greater the chance of some down payment. Although it is common for homes in the $144,000 into the 200s often qualify for no money down. The best course of action, like always, is to contact an OVM Financial loan officer.
Q: Is The Surviving Spouse Of A Deceased Veteran Eligible For The Home Loan Benefit
A: The unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability is eligible for the home loan benefit. If you wish to make application for the home loan benefit as a surviving spouse, contact our Atlanta Eligibility Center. In addition, a surviving spouse who obtained a VA home loan with the veteran prior to his or her death , may obtain a VA guaranteed interest rate reduction refinance loan. For more information, contact our Atlanta Eligibility Center.
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Restoration When You Sell Your Current Home
If youve paid off the previous mortgage and you no longer own that property, you can have your entitlement restored as many times as you want. In other words, you can keep changing homes, as long as you are selling and paying of the former VA loans in full each time.
Again, getting your entitlement restored doesnt happen automatically. Youll need to complete VA Form 261880. Check with the nearest VA office to obtain this form and to learn when, how and what you can buy using any remaining entitlement.
How To Get A Va Loan And Rent Out Current Home
Whether it is by choice or out of necessity, it is possible to count rent on a current residence for qualifying on a new purchase. Yes, VA loans allow that! Sometimes the homeowner desires to become a landlord for long term investment purposes. Others find it hard to sell their home, so decide to rent it out. Whichever the reason, VA qualification guidelines allow for the buyer to use new rental income on the prior residence. VA rental guidelines include
- Use up to 100% of the new 12 month lease or market rent
- Maximum rent allowed cannot exceed the monthly principal, interest, taxes, & insurance payment
- Calculated rent is used to offset the current PITI payment
- No equity is required in the departing residence
Lets explain the 2 ways to count rent on a departing residence.
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A Word About The Funding Fee
When you reuse your entitlement, you might pay a higher funding fee. It depends on the size of your down payment.
For example, if you put nothing down, your first VA loan has a funding fee of 2.3 percent. You can usually wrap this fee into your VA mortgage if you dont wish to pay it outofpocket.
Your second VA mortgage, if you put nothing down, will have a 3.6 percent funding fee. However, you can save money by putting at least five percent down, especially on subsequent use loans.
The following shows the VA funding fees according to down payment.
Regular military, National Guard, Reserves
- Five percent down: 1.65 percent funding fee for firsttime and subsequent use
- Ten percent down: 1.4 percent funding fee for firsttime and subsequent use
Considering the 3.6 percent funding fee for zero down, making a small down payment can pay off.
What Types Of Homes Can I Buy With A Second Va Loan
The number one rule when it comes to VA-acceptable properties is that the home must be your primary residence, not a vacation home.
As we refer to a second home in this article, we mean additional primary residence not vacation home.
If youre in the market for a second VA loan, you must plan to live in your new home full-time, meaning at least six months out of the year.
As long as you meet that criteria, you can use a second VA home loan to purchase several different types of properties:
- Single-family houses
- Manufactured homes
- Multifamily properties with up to four units
You cant buy an investment property with a VA loan, either. But you can purchase a multifamily property as long as youll live in one of the units. You can rent out the other units for extra income.
If you keep your first home after you move to the new house, you can turn the first into a rental property as well.
There are any number of reasons you might need a new house: new orders, a divorce, even relocating during retirement.
A VA loan can help you get into the new house with little to no down payment and no monthly mortgage insurance if you meet the VA loan requirements and have enough remaining entitlement to qualify.
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How The Va Bonus Entitlement Works
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs exclusively for active-duty military service members, veterans and eligible surviving spouses to buy or refinance a home with no down payment or mortgage insurance. The VA does not lend money but guarantees up to 25% of the loan this guarantee is called an entitlement.
The VA bonus entitlement can help you finance a home with a purchase price of above $144,000 possibly without a down payment or to purchase a second primary residence. The VA loan entitlement refers to the maximum dollar amount that the VA will pay to your mortgage lender if you go into mortgage default, or fail to repay your loan.
With VA loans, there are two forms of entitlement: basic entitlement and bonus entitlement. The basic entitlement is $36,000, or 25% of $144,000. For homes with a sticker price above $144,000, the VA provides a bonus entitlement worth 25% of the home loan amount. Lenders will let you borrow up to four times the entitlement with no down payment.
Full vs. remaining entitlement:
How To Prepare For The Va Coe Application
The VA has a comprehensive COE application page that will list out exactly which documents you will need to have present depending on your status within the military. If you are a veteran or surviving spouse, youll need a copy of you or your veteran spouses discharge or separation papers . If you are currently serving on active duty, you will need a statement of service signed by your commander or a personnel officer.
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How To Get A Va Loan When You Have Already Have A Va Loan
Contrary to popular belief, VA eligible borrowers may use a VA loan multiple times throughout their life. Additionally, it is even possible to have two VA loans at once! Actually, many in the mortgage industry do not even know that. Fortunately, there are many ways for active service, Veterans, and surviving spouses to use a VA loan. So, lets discuss how to get a VA loan after the first time use.
Example Of When Youd Have More Than One Loan At A Time
Lets consider a hypothetical: Alex received PCS orders and now has to move herself and her family across the county.
She has a VA loan on her current home and plans to buy a second home using a VA loan as well. In the process of moving, Alex has a hard time selling her home. Or maybe she just doesnt want to sell her home and would prefer to hold onto it and rent it out.
In this situation, as long as her credit and finances qualify her for a loan, shed be able to get a VA loan for her new primary residence while retaining her current home. If shes earning rental income on that home, she may also be able to use that income to offset the cost of the mortgage for her current home when she applies for a new, second VA loan.
However, Alex might be limited in how much she can borrow without having to make a down payment on that second VA loan, depending on how much of her entitlement is left.
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How To Restore Your Eligibility After You Sell Your Home
Its important to know how to restore your entitlement benefit if you want to use a VA loan for a second home. The restoration process is not automatic and must be initiated by the veteran. To be eligible for restoring your entitlement, you must have either sold the home you bought with a VA loan and paid off the mortgage, repaid your loan in full and still own the home or another qualified veteran assumes your loan and replaces their entitlement with yours. If one of these scenarios applies to you, you can request restoration by submitting Form 26-1880 Request for Certificate of Eligibility to a regional VA processing center
In the example above, your remaining entitlement was enough to cover the second home purchase with no down payment. However, if you wanted to purchase a home with a higher value than $310,400 without a down payment, you would need to restore full entitlement.
What Is A Va Loan And Who Is Eligible
With the purpose of helping service members finance a home with favorable loan terms, a is a mortgage loan thats guaranteed by the U.S. Department of Veteran Affairs . The main perks of a VA loan is that zero down payment is required, and there is noprivate mortgage insurance).To qualify for a VA loan, you must have a valid Certificate of Eligibility , and you must meet certain income and credit requirements. Length of service, conduct, and duty status can also affect your eligibility.
You may be able to obtain a COE if you belong to any of the following categories: veteran, active duty service member, National Guard member, reserve member, or surviving spouse.
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Can I Use A Va Loan For An Investment Property
No. You cannot use a VA loan for an investment property, but you can turn your current home into a rental property while using a VA loan to purchase a new primary residence. You can also use your VA loan to purchase a multiple-unit property so long as you intend to make one of the units your primary residence. This scenario allows you to rent out the other units.
What Is A Va Loan
A VA loan is a low or zero-down payment mortgage option offered to eligible veterans and active duty service members and their families. VA loans are partially backed by the Department of Veterans Affairs and are issued by private lenders. Capital Bank Home Loans has been a VA lender since 2011, has closed thousands of VA loans and has some of the top ranking VA Mortgage Bankers in the business.
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What You Need To Know When Someone Assumes Your Va Loan
VA loans are assumable which means someone buying your home can take over a great interest rate in addition to buying your home. The important thing to remember is your entitlement wont be restored unless the buyer is an eligible veteran who agrees to substitute his or her eligibility for yours. However, the VA doesnt restrict who can buy your home or assume your current VA mortgage. If you decide to sell a house to a non-military buyer, even if they take over responsibility for the loan payment through an approved loan assumption, some of your VA entitlement will be tied up in the property until the loan is paid in full.
What Two Va Loans At Once Does To Va Entitlement
Here’s how the math works, assuming you’re buying in another county with the standard VA loan limit:
- $647,200 x 25% = $161,800 Maximum Guaranty
- $161,800 – $50,000 = $111,800 Entitlement Available
- $111,800 x 4 = $447,200 Maximum Loan Amount With No Down Payment
So, in this example, you could look to borrow up to $447,000 before needing to factor in a down payment. Anything above that amount would require a down payment of 25 percent of the excess.
VA loan entitlement can be a confusing topic, in part because the Certificate of Eligibility doesn’t clearly indicate how second-tier entitlement works. Talk with a Veterans United loan specialist about your specific situation and what might be possible.
One of the challenges with this situation is meeting the debt-to-income ratio and residual income requirements since you’re basically on the hook for two mortgage payments each month. It’s important to fully understand the VA loan requirements in order to determine if you can juggle two loans at once. Having a renter locked into a lease who will cover your old monthly mortgage payment can go a long way toward making this work.
» VA Loans: Get preapproved online
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How Long Does It Take To Close On A House With A Va Loan
Closing times vary and depend on each buyer’s situation. But according to mortgage software company Ellie Mae, closing on a house with a VA loan takes an average of 4550 days a pace in line with doing so with a conventional mortgage. To help ensure a speedy closing time, have the proper documentation at the ready to complete your loan application.
Can I Use A Va Home Loan To Finance A Condo
All veterans who have served in the Armed Forces, National Guard, or Reserves are eligible for the Veterans Administration Home Loan Program, including condominium financing.
A significant number of individuals consider the possibility of purchasing a traditional home as there are several advantages to owning a condominium. Depending on ones current circumstance, one may be able to take advantage of the VA Home Loan that they have been awarded to purchase the condominium of their choice.
Many condos are eligible for the VAs home loan programs, but not all. Given this information, you need to be aware of these programs.
If you are interested in using the VA Home Loan as a means of purchasing a townhouse or condo, here are the requirements:
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How To Restore A Va Loan
EXPECTED READ TIME: 4 MINUTES
Whether you are moving to a new home or looking to purchase a second one, you may be wondering if you can use your full VA loan entitlement more than once. While the loan entitlement is limited, there are ways to restore it and extend your ability to buy without paying a down payment.