VA Loan Articles
VA Home Loans and Short SalesWhen a VA borrower starts having trouble making VA mortgage loan payments, sometimes the only alternative to foreclosure is a short sale-a transaction where the borrower agrees to sell for less than the property is worth (or was worth when the housing market was more favorable), or less than is what is actually owed on the property.
The short sale is a last resort in many cases, but if foreclosure seems unavoidable it may be the best option. After all, a borrower has the right to sell the home at any point during the foreclosure process. This option is available as long as the borrower still legally owns the home.
Short sales sometimes involve something called the VA compromise claim. According to the VA official site, "If your property cannot be sold for an amount which is greater than or equal to what you owe on the loan, VA may pay a "compromise claim" for the difference to help you complete the sale. You must contact VA to discuss the situation and get prior approval for a sale with a compromise claim payment. Some mortgage companies are authorized by VA to approve a sale with a compromise claim."
Avoiding foreclosure by using a short sale does affect a credit rating; unfortunately short sales lower credit scores in many cases, and there is usually a "seasoning period" borrowers must wait out before they are allowed to apply for another home loan.
The good news is that a seasoning or waiting period for VA loan borrowers may not be as long as for conventional borrowers in similar circumstances. Some lenders--but not all--require a three-year waiting period between the time of a short sale and a new loan application.
Most lenders require only a two year waiting period cases-if the borrower has a history of good credit since the short sale and a qualifying credit score, a 24 month wait may be all that's required. Credit and payment behavior post short sale are very important factors in deciding if a borrower can apply again after only a two-year wait.
If you had a VA insured loan in the past, experienced financial trouble, and needed to resort to a short sale, you are not locked out of the housing market. Contact a lender today to learn your options for another VA mortgage.