FHA, VA & Conventional Related / VA Loans

VA Loans: What if Veteran had a previous foreclosure ?

May 23, 2011 at 12:20 am By

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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