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Lesson 9.5

What to Do if Financial Hardship Occurs

Chris Birk | Author of "The Book on VA Loans"

Hardships Happen

No one expects to lose a job, go through a divorce or face a medical problem. But financial difficulties can find all of us at some time or another.

For whatever the reason, failing to stay current on your mortgage payments can take a significant toll on your credit and finances. Foreclosure can crush your credit score and have a serious long-term impact on your financial profile. Research from credit scoring firm FICO shows a foreclosure could knock anywhere from 85 to 160 points from your credit score.

The actions you take at this stage of the game can have a dramatic impact on your credit and your mortgage.

If you find yourself struggling to keep up with the payments on your VA loan:

Immediately Contact Your Lender/Servicer

This is who’s ultimately going to determine what happens to your home. Contrary to common belief, most lenders don’t want to foreclosure on homeowners. It’s a costly and time-consuming process. Lenders and servicers may be willing to set up a repayment plan, or give you extra time to make the payment or even modify the terms of your loan, typically by adding what you owe to the balance and basically starting fresh.

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Contact Your VA Regional Loan Center

While the VA doesn’t make home loans, they have the authority to intervene on your behalf with your lender or servicer. In fact, the VA gets notified anytime a borrower gets more than 60 days past due on their loan. But you don’t have to wait that long to ask the VA for help. The VA’s foreclosure avoidance specialists can advocate on your behalf and encourage your lender or servicer to offer an alternative to foreclosure. Their efforts have helped more than 460,000 homeowners avoid foreclosure in the last six years alone.

You can contact the VA’s foreclosure avoidance team at 877-827-3702.

Protections for Active Duty Military

The Servicemembers Civil Relief Act (SCRA) protects active duty service members from a host of civil and financial penalties. There are protections that govern how and when lenders can initiate foreclosure proceedings, interest rate caps and more. Check with a military legal assistance office for more information.

So, to sum up, if you’re having a hard time making your mortgage payment, speak up as soon as possible. Talk with your lender or servicer, talk with the VA and work toward a solution that makes the most sense given your unique financial situation.

Foreclosure doesn’t automatically mean you’ll never have another VA loan. But it can certainly make it more challenging.