December 19, 2024; Toye Piccirilli; VA Loan Guaranty Service, Veterans Benefits Administration
While the path to homeownership can be filled with unique challenges, Veterans should know that it’s also paved with opportunities and support from VA. Throughout this news post, we explore the various options designed to keep you in your home, offering hope and possible solutions for when/if you experience financial hardships. Remember, you’re not alone in this journey—support is just a call away.
How do you get help if financial hardships arise?
If you are having trouble making payments, the first step is to contact your mortgage servicer to discuss your options. You can find your mortgage servicer’s phone number on your monthly bill. For Veterans facing foreclosure, VA understands these challenges and remains committed to assisting Veterans through one-on-one support from a VA Loan Technician and specific VA home retention options.
What are the options to keep your home?
VA’s Home Retention Waterfall provides mortgage servicers with steps to help you keep your home and avoid foreclosure. If you’re going through a tough time financially, there are some options that might provide relief.
A special forbearance could give you a temporary break from making mortgage payments, giving you some extra time to sort out your finances. However, after the forbearance period ends, your servicer will need to approve the loan for another option, as in a repayment plan or loan modification. Otherwise, you’ll need to pay the past due amount in a lump sum and continue paying your normal monthly loan payments. This is because your servicer won’t automatically add the outstanding loan payments to the end of your loan.
Another option is a repayment plan. If you’ve missed a few payments due to a temporary financial hardship, this plan spreads out your current monthly mortgage payment plus the amount past due over a short period without changing your interest rate. This could save you thousands in interest over time compared to a loan modification. After the repayment period, your mortgage payments return to the original amount.
If your hardship is expected to last six months or longer, your mortgage servicer may consider a loan modification. A loan modification permanently changes one or more of your mortgage loan terms to help you get caught up. The modified terms can include the interest rate, length of loan, the type of loan and principal balance. Missed mortgage payments and associated fees are added to the total loan balance. A loan modification with a high interest rate may increase your modified monthly payment for the remainder of the loan. If your mortgage servicer offers to extend the loan to a 40-year mortgage to lower your monthly payment, bear in mind that a longer loan term may lead to paying thousands of dollars in additional interest over the life of the loan.
If these options won’t work for your situation, your mortgage servicer will evaluate whether you qualify for the new Veterans Affairs Servicing Purchase (VASP) program, which is a last resort option. VASP isn’t a program that you can apply for yourself. If your servicer determines that VASP is the only option for keeping your home and you want to participate, they will submit your information to VA. Through VASP, VA will purchase the modified loan from your mortgage servicer and place it in the VA-owned portfolio as a direct loan, making it more affordable.
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