VA loan myths about foreclosure do exist. Knowledge is power, and understanding what’s true and what isn’t about VA loan foreclosure can help veterans make the most of their benefits. Consider these VA loan myths about foreclosure against the facts:
- VA Loans Never Foreclose
- The VA Guarantee Protects the Borrower
- Borrowers Who Foreclose Can’t Get Another VA Loan
- Fewer VA Loans Foreclose than Any Other Type of Mortgage
- The VA Guarantee is Security for the Lender (which in turn benefits the borrower)
- Borrowers Who Foreclose Often Get Another VA Loan
The fact is, VA loans have the lowest foreclosure and serious delinquency rates of any other mortgage program. The program’s success has been chalked up to the character of the VA borrower and borrower support provided by the VA. It’s said that military members share a common responsible nature. And, the VA has nine Regional Loan Centers (RLCs) throughout the country. The RLCs employ qualified mortgage counselors to help veterans in financial trouble. The counselors can help provide VA loan foreclosure alternatives, like modification, to help borrowers get back on track.
In addition to borrower support, the VA provides a guarantee on every loan. This guarantee gives lenders the security they need to make loan qualifying easier for VA-eligible borrowers. For instance, most VA purchase loans are obtained with no down payment. And, the minimum qualifying credit score is in the low- to mid-600s. The average qualifying score for conventional loans is in the mid 700s. Perhaps the biggest money-saving feature of VA loans is that they never require a monthly mortgage insurance premium (MMIP). FHA and conventional borrowers know all too well that unless they have 20-22% to put down, they will have to pay MMIP for years.
Finally, it’s often thought that if you foreclose on a VA loan, you can forget about ever using the benefit again. VA loan foreclosure usually results in some government loss that the borrower will have to repay. If the borrower pays the debt back to the satisfaction of the court order, and he or she satisfies VA guidelines regarding foreclosure, VA eligibility can be restored. Many borrowers recover from VA loan foreclosure to use their home loan benefits again.
If you’re facing VA loan foreclosure, you may have some options. Contact the RLC associated with your loan. Your direct VA loan professional can help you with contact information. If you’ve been through a VA loan foreclosure or used an RLC to prevent on, please tell us about it with a blog comment.