It happens to the best of us. You take out a mortgage that you can afford at the time of application. But then life happens. You end up struggling to make ends meet. What are you to do? Your obvious option is to let the mortgage go into default. You probably do not want that, though. Instead, you have other options to make your VA loan payments more affordable. We discuss them below.
Communication is the Key
One thing we cannot stress enough is you must talk to your loan servicer. Ignoring the problem does not make it go away. Instead, it makes things so much worse. At the onset of any financial difficulty, contact your loan servicer. Let them know what is going on. They can then work with you to devise a plan. Some of the options they may provide include the options below.
If you are behind on your payments, your loan servicer may provide you with a repayment plan. This plan helps you get back on track. Your loan servicer will determine the type of repayment plan that works for you. If you can’t afford your current mortgage payment, though, this may not be an option. The repayment plan usually includes your regular mortgage payment plus a portion of the defaulted amount. For example, if you are $2,000 behind in payments, the servicer will divide that amount up equally over a certain period. Let’s say they give you 12 months; you would have $166.67 added to your regular mortgage payment. Of course, each borrower’s situation will differ.
Some loan servicers offer veterans a loan modification to increase the mortgage payment’s affordability. This varies by servicer, but the qualifications are the same:
- The home must be your primary home.
- You originated your loan before January 1, 2009.
- Your total housing payment exceeds 31% of your gross monthly income.
- You suffered some type of financial hardship.
The key factor here is that you prove some type of financial hardship. It could be anything from an illness to an injury or a job loss. Whatever it is, you must be able to prove it. For example, if you lost your job, you can easily prove it with your last paystub and your W-2s showing you do not have that income any longer. Your loan servicer can help you determine what type of paperwork is necessary for your situation.
Some lenders allow you to stop making payments if you can’t afford them. But, there is a catch. You must be able to prove that you can afford the payments moving forward. Let’s say, for example, you will be starting a new job in 3 months. If you have proof of the new job and its potential income, you can provide it to your loan servicer. They can use that information to see that you will be able to afford the loan. Because your situation is temporary, they may allow you to stop making payments temporarily. They will dictate the date you must start again, though. Make sure you can afford the payments at the time specified before taking this option.
The last option is not the best, but it does help avoid excessive damage to your credit score. A short sale means you sell your home for less than you owe. You work closely with your lender in this situation as they tell you how much you may accept. Once you get an offer for that amount, the lender accepts it as payment in full. You give up your home in this case, but the damage to your credit score is less than the damage that would occur if you went through foreclosure. We recommend you only go through this step if you have exhausted the options above.
Not being able to afford your VA payment is nothing to be embarrassed about. It happens to people when they least expect it. Payments might seem affordable at first, but quickly get out of hand. The VA is there for you every step of the way, though. Just do not ignore the problem. Instead, figure out a solution. Working together with your servicer will give you the best results in the end.