This Article Is About Qualifying For VA Mortgage After Prior VA Loan Foreclosure

For many veterans, a VA loan is a valuable tool that facilitates homeownership by offering favorable terms and no requirement for a down payment. However, financial setbacks can lead to foreclosure even on a VA loan. Fortunately, experiencing a foreclosure does not permanently bar veterans from accessing VA loan benefits in the future. This article will explore how veterans can qualify for a new VA mortgage after having a previous one foreclosed.

Understanding VA Loan Foreclosure

A foreclosure happens when a borrower fails to make mortgage payments, prompting the lender to take possession of and sell the property to recoup the loan balance. The Department of Veterans Affairs offers partial guarantees on VA loans, providing lenders with a safety net. However, a foreclosure can still affect veterans’ entitlement and future borrowing capability.

Entitlement On VA Mortgage After Prior VA Loan Foreclosure

Every veteran gets a base entitlement of $36,000 once they have served the required time frame parameters.

• Once veterans receive their entitlement they have what is considered full entitlement or $36,000
• If veteran borrowers do foreclose on any home, their credit scores will suffer
• The amount of drop of credit scores is usually at least 80 points and up to 165 points depending on the veterans credit profile
• Of course, that credit score hit hurts but more importantly than a VA loan foreclosure, veteran homebuyers can lose entitlement
• Entitlement dictates the amount the VA will guaranty for a new VA home loan
• The number of entitlement veterans will lose after defaulting on a VA loan depends on how much money the U.S. Department Of Veteran Affairs lost during the VA foreclosure process
• Veteran Home Buyers can always check their current certificate of eligibility (COE) to see exactly how much entitlement they have remaining

Restoring VA Loan Entitlement

One of the first hurdles a veteran faces after a VA loan foreclosure is the partial or total loss of their VA loan entitlement. This entitlement is the amount the VA guarantees on the loan. If not restored, it can limit the size of a future loan a veteran can secure without a down payment. Veterans can apply to restore their entitlement once they repay the VA any loss incurred from the foreclosure. However, this repayment does not guarantee restoration, as each case is evaluated on individual circumstances.

Waiting Period After Foreclosure

The VA generally requires two years from the foreclosure date before a veteran can apply for another VA loan. This period allows the veteran time to improve their financial situation and credit standing, enhancing their eligibility for future borrowing.

Credit Considerations

Post-foreclosure, veterans need to focus on rebuilding their credit. The minimum credit score typically required by VA-approved lenders is around 620. To improve their credit scores, veterans should pay all bills on time, reduce outstanding debt, and avoid taking on new high-interest credit obligations.

VA Maximum Guarantee On VA Mortgage After Prior VA Loan Foreclosure

As of 2024, the VA has no maximum loan limits on VA loans. We will go over how the VA loan guarantee used to work prior to the new law where VA eliminated the maximum loan limit. VA entitlement can be VERY confusing. In most counties. The VA max guaranty used to be $510,400.  VA used to guaranty 25% of that amount. With full entitlement of $36,000, the VA will repay up to $113,275 to the VA Mortgage Lender in the event of foreclosure. However, there is no longer a maximum VA loan limit on VA loans.

So let’s go over those case examples prior to the new law where there is no maximum VA loan limit on VA loans:

NOTE: Before veteran, borrowers are eligible to restore any amount of entitlement a two-year waiting period must elapse. Therefore, the VA does have a two-year waiting period after foreclosure and/or another housing event before veteran borrowers are eligible to enter into a VA loan.

• In a county when the VA limit was $453,100 and you foreclosed on the VA loan
• The VA loses $70,000
• Now you have lost $70,000 of the total entitlement
• In this example, the veteran homeowner has not repaid the VA any portion of their last entitlement

Veteran Borrower can still obtain another VA loan and here is how:

• $113,275 (full entitlement) – $70,000 (entitlement lost) = $ 43,275 (remaining entitlement)

Since the VA guarantees 25% of borrowers can still qualify for a VA loan:

• $43,275 * 4 = $173,100. Homebuyers now can buy a home with a max loan amount of $173,100 without a down payment

In this next example, we are still going to be in a county where the VA limit is $453,100.

• This example the foreclosure lost the VA $25,000 and intern the veteran lost $25,000 of their entitlement
• That portion of entitlement must be paid back to the VA, the veteran must fill out VA form 26–1880 and send you the Winston Salem eligibility center
• They will then get back to you and explain how much you must repay to restore your full entitlement

Contact the experts at Gustan Cho Associates with further questions or to go over your exact situation. Remember every Veteran will have a unique and different scenario so leave it to an expert. The team at Gustan Cho Associates can be reached 7 days a week on 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com emailed at for further assistance.

Frequently Asked Questions (FAQs)

1. Can I qualify for a VA mortgage after a prior VA loan foreclosure?
   Yes, qualifying for a VA mortgage is possible after a VA loan foreclosure. Still, there are specific waiting periods and requirements you must meet.
2. What is the waiting period to qualify for a VA loan after a foreclosure?
   Typically, the waiting period for securing a VA loan after a foreclosure is two years from the date of foreclosure completion.
3. Will a previous VA loan foreclosure affect my VA loan entitlement?
   Yes, your previous loan was not repaid in full. In that case, the amount of entitlement used on the foreclosed loan may be lost, reducing the total entitlement available for a new loan.
4. Can I restore my full VA loan entitlement after a foreclosure?
   You can restore your entitlement if you repay the VA in full for the loss incurred due to the foreclosure. However, restoration of entitlement is not guaranteed and depends on specific circumstances.
5. What are the credit requirements for obtaining a VA loan after a foreclosure?
   After a foreclosure, you must rebuild your credit to meet the VA’s lending criteria, typically requiring a credit score of at least 620.
6. Can I get a VA loan after a foreclosure on a non-VA loan?
   Yes, you’re eligible for a VA loan even after a foreclosure on a non-VA loan, subject to the standard waiting period and credit qualification.
7. How can I increase my chances of qualifying for a VA loan after a foreclosure?
   Improving your credit score, reducing your debt-to-income ratio, and accumulating a stable employment history can increase your chances of approval.
8. Are there any special considerations for veterans with a foreclosure during active duty?
   Veterans who experienced foreclosure while on active duty may be eligible for certain leniencies regarding waiting periods and entitlement restoration, especially if the foreclosure was linked to decreased income due to military service.

More On VA Home Loans

Gustan Cho Associates has a national reputation on being an expert and helping veteran home buyers qualify for VA Loans when other loan officers can’t. The reason being is Gustan Cho Associates specializes in VA Mortgages With No VA Lender Overlays. VA does not have any minimum credit score requirements. VA also does not have any debt to income ratio caps.

Why is it that many veteran home buyers are told that minimum credit scores are 620 to 640 and maximum debt to income ratios required is not greater than 45%? VA borrowers can qualify for VA Home Loans during Chapter 13 Bankruptcy Repayment Period. VA does not have any waiting period requirements after Chapter 13 Bankruptcy discharged date. Why is it that most VA lenders tell their borrowers that there is a mandatory two-year waiting period to qualify for VA Loans after Chapter 13 Bankruptcy discharged date? These are not VA Guidelines but are lender overlays. Every lender can have additional mortgage requirements above and beyond those of VA called Lender Overlays.

Gustan Cho Associates has no lender overlays on VA Loans. Over 75% of Alex Carlucci’s borrowers are folks who either gotten a last-minute mortgage loan denial or are stressing over their current loan process by another lender. Michael is available 7 days a week, evenings, weekends, and holidays to answer any questions our veteran borrowers may have. All of our pre-approvals at Gustan Cho Associates are full loan commitments that have been underwritten and signed off by our mortgage underwriters.