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VA Loan After Foreclosure - Less Than 2 Years

Most lenders have a policy to wait a full 2 years after foreclosure before they will underwrite a VA Loan. According to the VA Underwriting guidelines, an applicant can be approved between 1-2 years after foreclosure if they meet two different criteria: 1) Acceptable credit history after bankruptcy/foreclosure and 2) The bankruptcy/foreclosure event was beyond the applicants control (i.e. unemployment).
I meet that criteria, and have been employed now for 2 years after losing my previous job, earn $100k per year, have 20%+ down payment, have an excellent ITD, and have a good credit history since foreclosure and I now have a score of close to 700. The challenge is finding a lender willing to underwrite a loan as per the VA guidelines and that do not have more stringent policies. Can anyone recommend a lender that may work within the current VA guidelines?

  • February 10 2014 - Coeur d'Alene
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Answers (8)

Best Answer

You are correct in your interpretation of VA's guides.  I know we have gotten them done before after the 1 year timeline due to the co-borrower going through a tramatic medical event, we did have to document just about everything about the situation including medical records etc. but it did get funded. Keep looking around and you should find a lender willing to take on your file, just be prepared they are going to dig pretty far into the ''event that was out of your control'' and be willing to provide extensive documentation.


  • February 10 2014
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Thanks for all the advice everyone. I did find a lender to work with and the loan officer believes that I have a good shot at approval, especially with my large down payment. The underwriter should get my file today, and hopefully will hear back the middle of next week. He also had me write a letter to the underwriter, giving a story behind what led up to the foreclosure (unemployment), and how I was able to get myself back on my feet so quickly. Hope it helps.
  • February 14 2014
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You are correct with the VA guidelines. Have you had any trouble so far with getting approved with a lender? Although, the VA guidelines may allow you to obtain a loan after 1-2 years, there are some lenders out there that may still deny you, so don't give up yet if you've been denied. If you truly qualify for that criteria then you should be able to obtain a loan with that income and down payment. Although, other factors such as your debt, employment, assets, expenses, and liabilities will need to be looked at as well. The best thing for you to do is to speak with a lender such as myself to see if you can get started on financing a new home. If you have any further questions or if you would like a loan, feel free to contact me.

Good Luck!
  • February 11 2014
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Our guidelines are listed below-contact through Zillow and I am happy to help you explore your eligibility.

• Loans for borrowers having foreclosures within the most recent two years are rarely acceptable 
unless both of the following requirements are met:
o Borrower has obtained consumer credit with a satisfactory payment history over a continued 
period (at least one year)
o Foreclosure was due to documented extreme extenuating circumstances such as 
unemployment, prolonged strikes, medical bills not covered by insurance, etc.  Divorce is 
not generally viewed as beyond the control of the borrower. • Loans for borrowers having foreclosures within the most recent 12 months cannot be approved lendingBorrowers having a foreclosure within the most recent three years and credit scores between 620-639 are ineligible -
  • February 10 2014
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Great question OP.  I see a lot of positive responses on this board.  In my experience job loss has never been used as an acceptable extenuating circumstance to offset a recent BK or foreclosure on a VA loan.  

It is an interesting time to pose this question.  Since FHA has just come out with their 'back to work' program, the definition of extenuating circumstance may be changing in underwriting culture as a whole. 

I personally will be surprised if you can get this done despite the positive responses received.

Good luck on your hunt, be sure to ask your loan officer if they have ever closed this exact scenario on a VA loan.  

 
  • February 10 2014
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Great question and great job getting your score back up to near 700 again already!!!

Typically, the problem is different lenders interpret the "guidelines" as "gospel".  Even if you can get past the initial underwriting process, that lender might broker the loan to an outside investor that puts on additional requirements (overlays) that might now end up working out.  That is typically why things are progressing great until the very end and then the bank decides they are going to bundle your loan in with hundreds of others and sell that bundle to "xyz" who many not buy it if there was a foreclosure in the past 5 - 7 years, etc.

I have emailed your scenerio to three different lenders that I team up with to get their responses.  Just like in choosing the right doctor, attorney, Realtor, etc., it pays to get second opinions and pick the solution that is best for "you".

I suggest expanding your options beyond VA as well since one of the main advantages of VA is the option to put $0 down.  With 20% down, you can go conventional or even use FHA's new "Back to Work program" which is there specifically to help people that were impacted by our economy through no direct fault of their own!

Since you asked for names of lenders, I will let you know which ones respond favorably when they do!

Best of luck!
Jim

  • February 10 2014
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Hi, I am a Loan Officer in Coeur d"alene and what you described above matches almost word for word when I am viewing our underwriting guidelines for VA/foreclosure situations. Please contact me through my profile if you would like to discuss in more detail. Thanks,
  • February 10 2014
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Way to bounce back! Nic is spot on. You have a situation that is very doable per your research and my experience. We can lend in all 50 states if you are unable to find a local lender. You have the compensating factors needed to make this an easy breezy loan.
  • February 10 2014
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