How to Modify a VA Loan

By Bill Herrfeldt

Sometimes, a person needs help with his mortgage. Perhaps he is out-of-work or has sustained a debilitating illness or injury and has difficulty paying his bills, let alone his hefty mortgage. If you are in one of those conditions, and you obtained your mortgage through the auspices of the Veterans Administration (VA), there might be ways for your lender to modify that loan to make it more palatable. It's one way to ease the pain during those troubling times.

Qualify to reduce your payments on your VA loan. First, you must miss payments on your loan and be subjected to a credit check by the lender. Further, you must have made at least 12 payments on your loan and that the reason for your request has, or is soon to be resolved. Finally, if you have had your loan modified within three years, or it has been modified three times since it was arranged, you will not qualify again for a modification of your VA loan.

Meet those qualifications and you will not have to get the approval of the VA. However, if you don't meet them, contact the VA for guidance. All conditions are different so the circumstances surrounding your needs should be reviewed and approved by the VA before the modification is made.

Request your VA mortgage lender to reduce the monthly payments on your loan. Your VA lender can accomplish that task by reducing the interest rate or the principal of your mortgage loan, or both. You can also suggest he eliminate the penalties because of your failure to make timely payments, or make the maturity longer thus reducing your monthly payments. Finally, unlike other lenders, your VA loan specialist can adjust your monthly payments based on your anticipated income. If that is the case, you must share with him the details of your finances.

Petition the VA to buy back your loan from an outside lender if that lender refuses to modify your VA home loan. Unlike that lender, the VA is more sympathetic to your need to modify your loan and will do more to make it a reality. However, you must be prepared to add your short-fall to the mortgage balance even though the VA will do what's necessary to potentially lower your monthly payments.

A VA loan that's modified will have an interest rate based on when it is rewritten. However, that interest rate will not exceed the rate Ginnie Mae charges, plus one-half of one percent.

Finally, free credit counseling is available to veterans at one of nine regional loan centers.

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