Posts Tagged “VA foreclosure”

The answer is yes, with some restrictions.
The Veteran homebuyer has to live in/occupy one of the units as his/her principal residence.
The Veteran homebuyer cannot use the rental income he/she will acquire from the other units, to qualify for the VA loan.

The good news is that the VA Loan will finance 100% of the purchase price, even on 2, 3, or 4-unit property.

For more information on VA loans, check out the VA Homebuyer Webinar recording here . . .VA Homebuyer Webinar

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Client called today with a not-so-unusual scenario. They had been declined by a Bank on this . .
They lost their home in foreclosure 5/29/2008, filed Bankruptcy in 10/2008 and the BK was discharged 6/4/2009.
In their Bankruptcy filing their attorney had listed the balance of the foreclosed-on mortgage. The bank denied their loan stating that the filing of the BK to include the mortgage made it to where 3 yrs had to expire from the BK discharge date.
Can they qualify for FHA financing now ?
The answer is:
The bank is wrong.
The three year time-clock to satisfy the ‘seasoning since foreclosure’ requirement of FHA, begins from the date of the Trustee sale (or in Judicial Foreclosure states such as Oklahoma, from the Court ordered sale date) -Well this client is past that 3 yr period (5/29/08).
The fact that the BK included the deficiency balance of the foreclosure (which would have prevented the Lender from trying to collect on it) doesn’t negate the 3 yr seasoning.
The BK is 2 yrs old (from Discharge date) and therefore they are eligible for FHA financing. :)

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If the mortgage the Veteran was foreclosed on was a non-VA loan (e.g. FHA, CONV etc) then he/she is eligible for VA financing after 2 yrs. However if the loan that was foreclosed on was a VA loan, some restrictions come into play.
The Dept of VA is going to assess how much their $ loss was through that foreclosure. If the loss from the previous VA loan foreclosure has not been repaid, then there may not be enough entitlement remaining to allow the Veteran to borrow 100% of the purchase price on the new home being purchased. Here’s an example of how the figures may look: The following example shows how a foreclosure on a VA loan and failure by the Veteran who experienced foreclosure to repay the losses to the VA, can detrimentally affect his/her ability to fully enjoy the VA benefit:

A veteran has used $36,000 of his basic entitlement on a VA loan that was foreclosed. The loss was not repaid. It’s been two years since foreclosure and the borrower would like to purchase another home using the Program. The loan amount will be $300,000 where the county limit is $417,000.

$417,000 x 25% = $104,250 maximum guaranty with full entitlement
$104,250 – $36,000 (not restored) = $68,250 entitlement available
$68,250/ $300,000 = 22.75% is the max allowed VA Guaranty on this loan

In other words, the typical 25% VA Guaranty is not in play in this scenario, forcing the Veteran to come in with cash downpayment.($27,000)

For complete VA homebuyer information visit the Youtube Channel at www.youtube.com/user/thezerodownloan

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There are different rules that apply to the “seasoning” period since a foreclosure event, amongst different types of loans (CONV, FHA, USDA, VA).
VA Loans offer the lowest such period of time required since the foreclosure . . .i.e just 2 yrs!
FHA is presently at 3 yrs and so is USDA.
Deeds in lieu of foreclosure (where the Veteran homeowner handed the deed back to the lender , walking away from the home) as well as Short Sale are considered no different than a foreclosure for seasoning periods.

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