Will I be able to use VA loan again after foreclosure?

Forclosure home - shutterstock_74401561

Q: I’m a for­mer USAF Active Duty Vet­eran and pur­chased a home with VA loan. I owned a busi­ness that we had to close dur­ing the finan­cial crises. I had out­stand­ing credit all of my work­ing life. Our home was fore­closed on in 2010. I’m now work­ing full-time again.  I started in 2013 and have had 3 pay increases. Please tell me that some­how, I may qual­ify for another VA loan. Any hope?

–Julie, Illi­nois

A: I’m glad to hear you are back on your finan­cial feet! There’s cer­tainly hope.  Typ­i­cally, you have to wait at least two years after a fore­clo­sure to get a VA loan. So, in your case, you’re well beyond that.  Obvi­ously, with a fore­clo­sure in your recent past, your lender will scru­ti­nize your appli­ca­tion so you’ll want to make sure that every­thing looks good (credit score, cur­rent debt-to-income, etc.).

Beyond the time and the appli­ca­tion process, you’ll also have to see how the fore­clo­sure impacted your VA loan enti­tle­ment.  Nor­mally, some or all of your VA loan enti­tle­ment is lost dur­ing a fore­clo­sure.  If this is the case, you may only be eli­gi­ble for a smaller VA loan than nor­mal or not eli­gi­ble to use the pro­gram at all (you could pay the VA back what they lost to restore the enti­tle­ment).  So, I rec­om­mend you con­tact the VA to see where you stand by request­ing your Cer­tifi­cate of Eli­gi­bil­ity. This will let you know how much of your enti­tle­ment remains. Full enti­tle­ment in most areas is $104,250.  With your full enti­tle­ment you can nor­mally bor­row $417,000 with no down pay­ment (4 * $104,250).

Even if a VA loan doesn’t make sense, if you’re finan­cially pre­pared, there are plenty of other options.  VA loan or not, your best course of action is to con­tinue to reha­bil­i­tate your credit score and improve your finan­cial posi­tion to get ready for your next ven­ture into home own­er­ship. Good luck!

JJ

One response to “Will I be able to use VA loan again after foreclosure?”

  1. I am a female Army vet­eran mar­ried to an Army vet­eran. We pur­chased a home using his Cer­tifi­cate. In 2009 he left the mar­riage and because he had the major­ity income, I was unable to con­tinue upkeep of the home alone and left the prop­erty. The bank took over the prop­erty in 2010, but for some rea­son did not fore­close until 11/2013. Now I am liv­ing with my daugh­ter, but would like to use my Cer­tifi­cate. I know about the two year wait, but under the cir­cum­stances, can there be an excep­tion made?

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Scott Halliwell and JJ Montanaro are CERTIFIED FINANCIAL PLANNER™ practitioners with USAA Financial Planning Services, one of the USAA family of companies. Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and Certified Financial Planner™ in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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