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Waiting Period on VA Loan Short Sales

By: Grant Moon 09/03/12 09:48 am

Waiting Period on VA Loan Short Sales

 

Owning a home is a dream, and can be one of the most rewarding things you’ll ever do. But sometimes “stuff” happens, and it’s quite possible that you may find the need to complete a short sale and get out from under a loan that you’re struggling to pay. The short sale will save you from defaulting on your loan and having a foreclosure go on your record. There are a number of reasons that we find ourselves in some of these situations. Some may have lost a job or had a spouse that lost their job which was needed to continue making their payments. Compounding this is the real estate market in the area where you owned a home could have declined therefore your home is worth less than what you bought it for. Nobody goes into purchasing a home thinking that they will have to short sale but sometimes life happens.

A short sale simply put is a type of sale whereby the institution that holds your loan allows you to sell your home for less than what you owe on the home. It is a proactive alternative to foreclosure between the homeowner and the bank. The short sale benefits the homeowner and the bank. For the homeowner, you do not go into foreclosure. For the bank, foreclosures are costly and they are more likely to lose less money than if the property went into foreclosure.

But just because a short sale can help you avoid serious issues with your credit, you’ll still face a penalty. Those who do a short sale won’t be able to apply for a new VA loan for two years after the date of the short sale. There are certain exceptions although they can be difficult to get.  In general, an application won’t be considered if you have a short sale in your history within two years. This is a better option than conventional loans, which normally require a three year waiting period instead of two years with VA Home Loans.

In addition to the wait period you still need to meet the qualifications in getting a loan such as satisfactory credit score, debt-to-income ratio, income stability, and more. If you have done a short sale it would be wise to establish a plan and get your finances in order. You can get free financial education and counseling here.

So while life sometimes throws us a curve ball you can still have the opportunity to own a home again. Thousands of fellow Americans have done a short sale so you are not alone. The two year waiting period gives borrowers a period to get your finances in order and to improve their credit score so that when the time is right you can apply again.

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