Tuesday, June 19, 2012

Can You Use Your VA Certificate If You Foreclosed

By Ann Johnson

When applying for a VA loan, you need a certificate of eligibility to show lenders you're qualified to apply. If you've already had a VA loan and your lender foreclosed on the property, the only way you can use that portion again is after restoring the loss, even in a foreclosure. This means you must repay the loss in full.

The U.S. Department of Veterans Affairs doesn't fund VA loans. A VA loan is one issued through a lender approved by the agency. The Department of Veterans Affairs insures VA loans, making it easier for qualified veterans and their spouses to obtain home loans with little or no down payment. Although the VA approves the borrower, by way of a certificate of eligibility, this doesn't guarantee that the borrower will get the loan. The qualified veteran or spouse still must submit to the lender's loan approval process, which reviews the applicant's credit scores and job history.

When a buyer purchases a home with a loan, the lender typically wants the borrower to put down a 20 percent down payment, or 20 percent of the purchase price. Therefore, the buyer is investing 20 percent in the property at the close of escrow, making a loan less risky for a lender. Certain loan packages allow the consumer to purchase private mortgage insurance. With private mortgage insurance, or PMI, the borrower might put down 10 percent of the purchase price and then purchase PMI to insure the unpaid portion of the desired 20 percent down, making the loan less risky for the lender. A VA loan is similar, yet the borrower doesn't pay for the PMI: It's part of the VA benefits.

Although the VA doesn't limit what the buyer can borrow, it does limit what they insures. The lender limits what the buyer can borrow, based on the buyer's credit history. The insurable limits for a VA loan are subject to change, based on current housing prices; certain regions, with higher property values, have higher limits. It's often possible to get a second VA loan after repaying the benefits in full. If the borrower loses the home in foreclosure, the government suffers a loss, unless the borrower repays the loss in full.

One of the steps in applying for a VA loan is to request a certificate of eligibility. An applicant can apply online, with a lender or by mail. The certificate of eligibility confirms the applicant's eligibility for a VA loan and the benefit amount.


http://www.lenderva.com

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