If you are struggling to pay your VA loan, you shouldn’t keep it to yourself. Instead, you should be in contact with your loan servicer right away. While it can be embarrassing, the sooner you talk to your loan servicer about your difficulties, the more options you may have at your disposal.
Keep reading to learn which options you may have.
Your loan servicer may be able to work on a repayment plan with you. If you’ve already fallen behind on a payment or two, the lender can add a portion of the missed amount to your future payments, increasing your payments until you are current on your loan.
This is on a lender-by-lender basis, so don’t assume your lender will do this. You need to ask if this is an option. Usually, this is a good option when you call the lender shortly after you fall behind. If you get too far behind and don’t call, it could be too expensive to try to catch back up on your payments.
If you can’t make your payments now and won’t be able to for a while, the lender would naturally start foreclosure proceedings. If you go into a forbearance agreement, though, the lender can put a stop on foreclosure proceedings for a temporary period.
During that time, it’s your responsibility to get caught up on your payments. If you bring the loan current before the agreement expires, you can be back on good terms with your lender and out of the risk of foreclosure.
Refinance With the VA IRRRL
A simple solution that some borrowers don’t even think about is the VA IRRRL program. This streamline refinance program makes it easy for borrowers to get a reduced interest rate or better term on their loan.
The beauty of the IRRRL program is that you don’t need to verify your credit, income, debts, or debt ratio. You don’t even have to verify the value of your property. This means you can be upside down (owe more than the home is worth) and still refinance.
The trick is that you must refinance before you get behind on your payments. The only factor the lender must check to approve you for a VA streamline refinance loan is that you’ve made your mortgage payments on time for the last 12 months. You may be able to get by with one 30-day late payment in the last 12 months, but you must be current on your loan now.
If you don’t think you’ll be able to catch up on your payments, you can agree to a short sale with your lender. In a short sale, the lender agrees to take a lesser amount for the property than you owe but still consider the loan fully satisfied.
You can’t just decide to do this on your own, though. The lender has to approve it along with any offers that you get. It can make selling your home a bit tedious and time-consuming, but it’s a great way to get out of your mortgage without going through the foreclosure process.
While a short sale will likely still damage your credit score, the hit you take shouldn’t be as severe as it would be if you lose your home in a foreclosure. You may also have to wait less time to get a new mortgage when you get back on your feet.
The most important thing you can do is be honest with your lender. The moment you know you are in trouble, talk to them. Let them know what is going on and when you think the problem will resolve itself. If you have a solution or you have many details regarding the current situation, your lender will likely work with you. The last thing lenders want is to take possession of your home. They would rather you pay your mortgage and they earn interest than take possession of your home.