VA Guidelines In Qualifying For VA Loan After Foreclosure

This Article On VA Loan After Foreclosure Was Written By Gustan Cho

Veterans who have lost their home due a prior foreclosure can qualify for VA Loan After Foreclosure after 2 years from the recorded date of the foreclosure and/or sheriff’s sale. The U.S. Department of Veteran Administration, or VA, is not a mortgage lender and does not lend nor service VA Loans. Here is how the Veterans Administration and the VA Loan Program Works:

  • VA Loans offers 100% financing and no down payment is required by the Veteran home buyer to purchase a home
  • The Veteran Borrower needs to have served in a branch of the U.S. Military and have a honorable discharge and have a Certificate of Eligibility. The Certificate of Eligibility is also referred to as the COE
  • VA allows up to a 4% sellers concession by the home seller to contribute to the Veteran home buyer so a Veteran home buyer can purchase a home with zero money out of pocket. Zero down payment and all closing costs covered by the sellers concessions
  • If the home seller does not give a sellers concession or the home buyer is short with closing costs, the lender can cover the buyers closing costs with a lender credit in lieu of a slightly higher mortgage interest rate
  • The role of the Veterans Administration or VA is to insure and guarantee VA Loans that is originated and funded by private mortgage lenders
  • Private mortgage lenders who are VA approved will fund VA Loans
  • If the VA Loans funded by private lenders were to default and go into foreclosure, VA will guarantee the losses
  • Mortgage interest rates on VA Loans are among the lowest of any other mortgage loan program even though the borrower does not put any money down because of the VA Loan Guaranty Program
  • There is a one time VA Funding Fee but that VA Funding Fee can be rolled into the VA Loan balance
  • There is no mortgage insurance premium with VA Loans
  • VA Loans is one of the easiest mortgage loan programs to qualify for
  • ONLY VETERANS with a COE are eligible for VA Loans
  • VA Loans are only for owner occupant primary properties
  • Veteran borrowers can qualify for a one unit to four unit owner occupied property with a VA Loan
  • VA does not have a debt to income ratio requirement
  • VA does not have a minimum credit score requirement. The Gustan Cho Team has no lender overlays on VA Loans

Waiting Period For VA Loan After Foreclosure Versus Other Loan Programs

All mortgage loan programs have mandatory waiting period after foreclosure, deed in lieu of foreclosure, short sale, and bankruptcy. However, VA has more lenient waiting period after foreclosure, short sale, and deed in lieu of foreclosure to qualify for VA Loans.

Here is the waiting period after foreclosure, deed in lieu of foreclosure, short sale, and bankruptcy to qualify for VA Loans :

  • VA requires a two year waiting period to qualify for┬áVA Loan After Foreclosure
  • VA requires a two year waiting period to qualify for VA Loan After Deed in Lieu of Foreclosure
  • VA requires a two year waiting period to qualify for VA Loan After Short Sale
  • VA requires a two year waiting period to qualify for VA Loan After Bankruptcy

Here is the mandatory waiting period to qualify for FHA Loans after foreclosure, deed in lieu, short sale, and bankruptcy:

  • FHA requires a three year waiting period to qualify for FHA Loan After Foreclosure
  • FHA requires a three year waiting period to qualify for FHA Loan After Deed in Lieu of Foreclosure
  • FHA requires a three year waiting period to qualify for FHA Loan After Short Sale
  • FHA requires a two year waiting period to qualify for FHA Loan After Bankruptcy

Here is the waiting period to qualify for USDA Loans after foreclosure, deed in lieu of foreclosure, and bankruptcy:

  • USDA requires a two year waiting period to qualify for USDA Loan After Foreclosure
  • USDA requires a two year waiting period to qualify for USDA Loan After Deed in Lieu of Foreclosure
  • USDA requires a two year waiting period to qualify for USDA Loan After Short Sale
  • USDA requires a two year waiting period to qualify for USDA Loan After Bankruptcy

Here is the waiting period to qualify for Conventional Loans after foreclosure, deed in lieu of foreclosure, and bankruptcy:

  • Fannie Mae and Freddie Mac requires a seven year waiting period to qualify for Conventional Loan After Foreclosure
  • Fannie Mae and Freddie Mac requires a four year waiting period to qualify for Conventional Loan After Deed in Lieu of Foreclosure
  • Fannie Mae and Freddie Mac requires a four year waiting period to qualify for Conventional Loan After Short Sale
  • Fannie Mae and Freddie Mac requires a four year waiting period to qualify for Conventional Loan After Bankruptcy

As you can see if you compare the waiting periods after foreclosure, deed in lieu of foreclosure, short sale of qualifying for VA Loans versus other loan programs, VA Loans has the most relaxed and least waiting period requirements. Just meeting the mandatory waiting period after foreclosure, deed in lieu of foreclosure, short sale, and bankruptcy does not guarantee VA Loan Approval. The Veteran Borrower needs to meet other VA Guidelines and be able to pay the new VA home loan. Remember that private lenders are the ones that are funding the VA Loans and each lender has their own lending requirements and do not want to extend credit to borrowers who are not credit qualified.

What Do Underwriters Look At Qualifying Borrowers For VA Loan After Foreclosure?

Here are key factors lenders will be looking it when underwriting a VA Loan:

 

  • The two waiting period start clock begins from the record date of the foreclosure or deed in lieu of foreclosure and/or date of the sheriff’s sale that is reflected on the county records and not the day that the keys were surrendered
  • Lenders will pay special attention on late payments after the foreclosure, deed in lieu, short sale, bankruptcy
  • Lenders will look at payment shock. By Payment Shock, the underwriter will evaluate what your current rent payment is compared to your new proposed mortgage payment
  • Is the borrower employment stable and is it likely to continue for the next three years and is the borrower able to afford the new mortgage payment plus all other debts.
  • Residual Income is required and taken into strong consideration with VA Loans
  • What was the extenuating circumstances that led to the foreclosure and has those circumstances changed where it will not happen again?
  • Has the borrower re-established credit after the foreclosure?

Lender Overlays

VA Loans are one of the most lenient mortgage loan programs to qualify for. However, not everyone can qualify for VA Loans. You need to be a Veteran of the U.S. Armed Forces with a honorable discharge and valid Certificate of Eligibility. Many VA Lenders have overlays on VA Loans. Lender Overlays are higher lending standards than the minimum VA Guidelines. Examples of overlays on VA Loans are the following:

  • Lenders may require a 620 FICO Credit Score when VA Guidelines does not require a minimum credit score requirement
  • Lenders may require a maximum debt to income ratio of 41% to 45% DTI requirement when VA Guidelines do not have a debt to income ratio requirement
  • Lenders may want borrowers to pay off outstanding collection and charge off accounts when VA Guidelines do not require it

If you are a Veteran interested in qualifying for a VA Loan and need a VA lender with no lender overlays, contact The Gustan Cho Team at 262-878-1965 or text Gustan Cho at 262-716-8151 for faster response. You can also email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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