How to Get A VA Loan After A Short Sale Foreclosure or Bankruptcy

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Contents
About a VA Loan ....................................................................................................................................................................... 3 Veterans Experiencing A Short Sale/Foreclosure/Bankruptcy ........................................................................... 4 Bankruptcy ................................................................................................................................................................................. 4 Short Sale .................................................................................................................................................................................... 4 Foreclosure ................................................................................................................................................................................ 5 First About Credit Bureaus .................................................................................................................................................. 6 Building Good Credit after Bankruptcy .......................................................................................................................... 6

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About a VA Loan A VA loan is a mortgage loan that is guaranteed by Veterans Affairs. VA loans are not made by the government, nor are they funded from the government, rather they are made by private qualified lenders such as banks, savings & loans, or mortgage companies. They are available to eligible veterans for the purchase of a home which must be for their own personal primary residence. An eligible veteran is one who one who is currently or who has served in the US Military for at least 181 days. These branches of military include but are not limited to the Marines, Navy, Army, Air Force, and National Guard. Surviving spouses of veterans may also be eligible.

Veterans Experiencing A Short Sale/Foreclosure/Bankruptcy

The United States experienced a housing bubble in the late 2000s. With the cost in house prices reaching a peak around 2006, many homeowners were faced with upside down mortgages in the following years. This, coupled with job loss in a struggling economy, have forced millions of Americans to default on their loans whether it be from a credit card, mortgage, bank loan, or other. Many people declared bankruptcy. If they had a mortgage, many either sold their home through a short sale of their home, or walked away completely.

Bankruptcy
American veterans were not sheltered from this trouble. As the California economy continues to go through some tough times, some veterans are forced to go through bankruptcy protection. Bankruptcy is when a person cannot pay his or her debt to their creditors. By declaring bankruptcy, relief is received through restructuring or cancellation of debt. Some debts are not released from responsibility such as spousal and/ or child support, student loans, and some taxes. Out of the six Chapters of Bankruptcy one can declare, most individuals declare Chapter 7 which is a basic liquidation of property. This property can include any valuable collectibles, vacation homes, family heirloom, or a second vehicle. Any proceeds from the sale of this property would be used to pay off unsecured creditors. By declaring bankruptcy, many veterans can get back on their feet and re-establish their credit.

Short Sale
There are also thousands and thousands of VA eligible homeowners in California that have gone through a short sale in the past few years in California. Many property sellers experienced a short sale to sell their home because the sales price was lower than the mortgage loan balance they had on the property. This is called a short sale. The lender agrees to accept the new buyers price even though more is owed from when it was originally purchased. When a borrower completes a short sale, the mortgage that was involved is most often reported on their credit as a derogatory item stating settled for less than full balance. The way this former mortgage is reported to the credit bureaus alerts the VA underwriter to the fact the borrower applying for the VA loan had a previous short sale. The benefit to the seller is that they do not have a foreclosure on their record. In some cases, this obligation to repay any deficiencies of the loan is released, but they will still have
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a negative credit on their report. The benefit to the lender is avoiding foreclosure fees and costs. Lenders also avoid having a house sit empty on street. Lenders are not in the business of owning a house, and for the right customer, the lesser of the two evils is a short sale over a foreclosure.

Foreclosure
There are many veterans across the state of California who also lost their home to foreclosure in the past few years. A foreclosure is where the lender completely takes back (repossess) the house for payments not made. When the homeowner defaults on their loan, the lender takes possession to the property. The impact of a foreclosure is felt across the board. Beside it affecting a neighborhood with lowering property values, high foreclosure rates in cities experience higher crime and thefts. Empty houses invite being broken into and also influence the visual esthetics of a neighborhood when there is no one to take care of the house. If you are one of the millions of Veterans experiencing or have experienced a short sale, foreclosure, or bankruptcy, the dream of owning your own home is still possible. Many may want to take advantage of todays low home prices in California and get a VA loan to buy a new residence. You may already be eligible to use a VA home loan to buy once again with 100% financing. Getting your credit back on track is the key, but how does one go about doing so?

First About Credit Bureaus

There are three National credit agencies: Experian, Equifax, and TransUnion. Each is independent of each other. They gather their information on consumers from credit card companies, banks, lenders, and others. In turn, these companies obtain information on consumers to make decisions on whether to approve loans, or to even adjust current consumer accounts. Each of the three credit bureaus gives a score to each consumer. The most common score is the FICO score (named because it was developed by Fair Issac and Company), it is calculated based on type of accounts that you have opened. Also taken into consideration is how long accounts have been open, their balance, available credit, length of credit history and payment history. Closed accounts are taken into consideration by how long they were open and how many there are. Closing an account may NOT lower your score. They will still show on your credit report. Also, having a longer history of managing a credit card can be a good thing. Each credit bureau may have a different name for their score but each is based on the principals of FICO. Lenders use a score from the credit bureaus but each score may be different based on what data was reported to what agency. Lenders may include other information about you. Scores change over time, so your score might change month to month as you rebuild your credit. Consumers are allowed to receive a free copy of their credit report from all credit bureaus once every 12 months. Call all three to request your copy. Pull your credit and correct any errors. One example of a mistake is that people with common names will find other peoples information in their own file. Some studies show that one in four people have a mistake or error on their credit report. By receiving your own copy, youll be able to catch or correct these mistakes.

Building Good Credit after Bankruptcy

If you are one of the millions of Americans who have declared bankruptcy and think you have bad credit, it may not be as bad as you think. Though your credit score may fall as much as 200 or more points after a bankruptcy, it is possible to qualify for 100% financing with a VA loan just two year after filing Chapter 7 Bankruptcy. VA loans only require two years compared to FHA of 3 years and conventional of 4 years. .
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Resources
1. 2. 3. 4. 5. 6. 7. www.socalvaloans.com www.socalvaloans.com/get-a-va-loan-after-a-short-sale/
www.socalvaloans.com/va-loan-after-foreclosure/

www.socalvaloans.com/va-loan-after-bankruptcy/ www.facebook.com/valoanaftershortsale www.benefits.va.gov/homeloans/ www.va.gov/

About the authors: Amanda White is licensed real estate professional. She worked many years with adults with developmental disabilities in assisting them to get their credit restored. She has been in the real estate business since 2006 investing in buying and selling single family residences including short sales. She also draws her experience from living and working in San Diego which is home to 16 significant naval and military locations including Marine Corps base, Camp Pendleton and Naval Base San Diego. Amanda enjoys reading, travel, and entertaining. She is married with 3 special needs dogs. Rob Chomentowski is a Sr. Loan Officer with Affinity Financial, a highly respected customer focused San Diego CA based Mortgage Company run by 20+ year veterans of the mortgage industry and made up by only highly experienced loan officers. Rob has been assisting Californians obtain mortgages to purchase homes and refinance for the last 10 years. Prior to working in the mortgage industry, Rob spent many years as a market research analyst and product manager in the high technology industry in Silicon Valley. Rob specializes only in 1-4 unit residential financing and prides himself on an especially deep knowledge of the ever changing mortgage lending guidelines, and a broad expertise spanning VA loans, FHA loans, conventional loans, jumbo loans and investment property loans. Rob is licensed with the California Department of Real Estate and the Nationwide Mortgage Licensing System. In his spare time Rob enjoys traveling, hiking, golfing, attending sporting events, reading and investing in real estate.

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