VA Loan After Completing A Short Sale?

My husband & I were able to sucessfully complete a short sale in April!  We listed the home in February had an offer in March and closed April 28.  This was no small task!  My husband, I and our Real Estate Agent were on the phone with WAMU no less than 5x a day!  Our situation was different in the fact that I was diagnosed with a brain tumor and needed to move closer to Standford University for my treatments (Genuine Hardship). 

My question is:  We made every mortage payment on time and the only reason we sold was so we could relocate for my medical treatment.  I know the previous advice given was there is a 24 month seasoning period before we can purchase another home; however, what about VA loans?  Do they fall under the same set of rules?  My husband has VA benefits and we would like to take advantage of something he worked so hard to achieve. 

To all those out there in the process of a short sale.  BE DILLIGENT & KEEP YOUR HEAD UP!  Don’t sit back and wait for the bank to call you; you have to take control and get anwsers.  Push past the entry level customer service reps and get to someone in charge.  Worked for me.  Warm Regards

Jessica

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Hi Jessica,

First, I’ve updated an article that was written in July 2008 with a Fannie Mae update published later on August 18, 2008.  It relates to the situation you’ve described and it verifies that it is possible to obtain another mortgage after a completed short sale given the scenario you’ve posed. 

Read: Rachel’s Short Sale and Successful Short Sale

With regards to the Veteran’s Administration loan program, the VA lender handbook does not provide a hard and fast rule on the subject.  Instead, the handbook states: “The fact that a home loan foreclosure (or deed-in-lieu of foreclosure) exists in an applicant’s (or spouse’s) credit history does not in itself disqualify the loan” (emphasis original) and instructs lenders to “Develop complete information on the facts and circumstances of the foreclosure”.  The lender handbook does not specifically reference a “short sale”.

I believe you have a solid case for obtaining a VA loan now.  Bear in mind that there are three ways to obtain approval for a VA loan.

1. VA Automated Underwriting through the lender’s computer
2. VA Delegated Underwriting through a VA Automatic Underwriter (a human being)
3. VA Prior Approval through the Dept of VA directly

You will not be approved for automated underwriting (option #1) and you will have a tough sell with VA delegated underwriting (option #2) and so option #3 is best in my opinion.  If you work with a mortgage broker or lender that will put together your file to send for prior approval through the VA then a lender can take that prior approval and fund your VA loan.

One footnote is that if your prior short sale loan was a VA, then your eligibility for a new VA loan will be limited or restricted by the amount of the Government’s loss.  You’d still be able to qualify for a VA loan, but for a lesser amount.

Thanks for the questions and congratulations on a successful short sale.

Paul

(source=warms.vba.va.gov/admin26/pamphlet/pam26_7/ch04.doc)

(source= homeloans.va.gov/faqelig.htm)