Unforeseen circumstances, such as financial difficulties or unexpected life events, can sometimes lead to challenges in meeting mortgage obligations, potentially putting you at risk of foreclosure. In this comprehensive guide, we provide strategies and resources to empower you to avoid foreclosure if you have a VA loan and protect your most valuable asset — your home.
Ten Strategies to Avoid Foreclosure
Before you read our actionable tips, it’s essential to address the prevalence of foreclosure rescue scams. These scams often target vulnerable homeowners with false promises of immediate solutions. Legitimate assistance programs and counseling services never charge upfront fees. For further insights on recognizing foreclosure relief scams, we recommend reading the consumer advisory published by the Consumer Financial Protection Bureau (CFPB).
We had the opportunity to sit down with Dana Hendrix, a mortgage specialist from DSLD Mortgage, to discuss seven proactive measures that homeowners can take to avoid foreclosure and ensure long-term financial security.
- Contact Your Lender: If faced with financial challenges that impact your ability to make mortgage payments, it’s essential to communicate promptly and openly with your lender. Many lenders are willing to work with borrowers facing temporary hardships by offering alternative payment arrangements or loan modification options.
- Explore VA Loan Assistance Programs: If you have a VA loan, the VA offers several assistance programs designed to help struggling borrowers avoid foreclosure. These programs may include repayment plans, loan forbearance, or loan modification to make mortgage payments more manageable.
- Loan Re-Amortization: Re-amortization is when any missed payments are added to your loan balance to bring your payments up to date. This increases the total loan amount and your monthly payments. If your loan term is extended, the increase in monthly payments won’t be as large. While VA regulations allow loan holders to extend or re-amortize loans, they’re not required to do so.
- Refinancing Options: In some cases, refinancing your VA loan may offer a viable solution to lower monthly payments or secure more favorable loan terms. Explore refinancing options with your lender or other financial institutions to assess whether it’s a feasible strategy for your situation.
- Extended Timeframe for Private Sale: If you need to sell your home, this strategy allows you to postpone foreclosure proceedings, granting you additional time to arrange a private sale.
- Short Sale Option: Where the outstanding balance on your mortgage exceeds the current market value of your home, your loan servicer may consent to a short sale. Essentially, this means they will accept the proceeds from the sale of your home, even if it’s short of the entire mortgage debt, as a full settlement of the amount owed.
- Deed in Lieu of Foreclosure: This alternative enables you to bypass the foreclosure process by transferring the deed of your property to your loan servicer. Subsequently, ownership of the home will be transferred to the servicer. It’s important to understand that opting for this route might result in a loss or reduction of your future home loan benefits.
Does Foreclosure Impact Future Home Loan Benefits?
It’s essential to carefully consider all options and seek assistance from reputable financial advisors or housing counselors to navigate the complexities of foreclosure and its aftermath. If your loan concludes with foreclosure, a short sale, or a deed in lieu of foreclosure, you will be required to reimburse the amount lost on your loan to reinstate your future benefit. This procedure is referred to as “restoration of entitlement.”
When a home loan ends in foreclosure, a short sale, or a deed in lieu of foreclosure, it can have long-term implications for future home loan benefits. In such scenarios, the homeowner is obligated to reimburse the lender for the amount lost on the loan, which is known as the “restoration of entitlement.”
By reimbursing the lost amount, the homeowner can regain eligibility for future home loan benefits provided by programs like the VA loan program. However, the impact of foreclosure on future home loan benefits will also impact credit scores, making it more challenging to secure favorable terms on future mortgages.
Debt Resources and Financial Support
Below are organizations that can provide valuable assistance and advocacy in navigating financial challenges, debt, and foreclosure prevention.
Call 0800 138 1111 (Monday to Friday, 8 am to 8 pm and Sat 9 am to 2 pm)
Call 0808 808 4000 (Monday to Friday, 9 am to 8 pm and Sat 9:30 am to 1 pm)
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