Avoiding VA FHA foreclosures, and other home loan foreclosures, may sound difficult, but you probably have more resources available to you than you think. These tips will help you avoid VA and FHA foreclosures on your home.
What are VA and FHA Foreclosures?
Before you learn the best ways to avoid foreclosure, you need to know what makes VA and FHA foreclosures different. These are loans that are backed by the federal government, either by the U.S Department of Veterans Affairs (VA) or by the Federal Housing Administration (FHA). That government guarantee gives eligible borrowers many benefits, such as lower interest rates and low down payment requirements. But it also means, if you default on the loan, that government agency is responsible for paying the claim to the lender.
Tips for FHA Foreclosures
If you're facing foreclosure on an FHA loan, you have a couple extra resources available to you to help you avoid it.
- FHA Partial Claim - This is an interest-free loan you can get if your are between 4 and 12 months delinquent, and you are able to start making monthly payments again on your FHA loan. The FHA will pay the amount due to make the loan current, and the FHA partial claim may not be due for several years.
- HUD National Servicing Center - This is a service to those with FHA loans who need help avoiding FHA foreclosures.
- HUD Approved Housing Counselors - These counselors provide financial advice for those facing foreclosures, whether you have an FHA loan or not. However, be sure you go to a HUD approved counselor as some counseling agencies are involved in scams.
Tips for VA Foreclosures
Like those with FHA loans, veterans have some additional resources available to them when it comes to foreclosures.
- VA Regional Loan Centers - These loan centers have counselors that will help you through your foreclosure and give you more tips on how to avoid one.
- Forms - Like the FHA, the VA will pay the lender for the amount of the loan that is in default. However, if you have this type of loan, you may be responsible for repaying the agency. Make sure you have the appropriate forms to release you from this liability when you do finally come to a foreclosure solution.
How Can I Avoid Foreclosure?
While the FHA and other agencies offer help in the face of foreclosures, the lender is, ultimately, the keeper of your home loan, and you are responsible to the lender. Get on the phone with your lender and start discussing some of the following options for avoiding foreclosures.
Forbearance and Repayment
Forbearance allows you to suspend the payments on your FHA loan in the short term if the lender is comfortable that you will soon be making your monthly payments again. Any past due amount will be rolled into those monthly payments.
Refinance
Believe it or not, your lender wants to avoid foreclosures too. If you need lower monthly payments in the long term, talk to them about refinancing your mortgage.
Sell
If you simply can't continue to make payments, any agency, like the FHA, will probably recommend that you try to sell your home to cover the amount of the loan.
Deed in Lieu of Foreclosure
A last ditch effort that will save your credit is deed in lieu of foreclosure. This requires that you return the deed of your house in order to be released from your mortgage. This prevents foreclosure, but any equity you had in the home will be lost.