The past year has been a stressful time for a lot of people. On everyone’s mind were concerns about the virus, possible job loss, and of course, income. If you were impacted by a change in salary, got sick, or were unemployed, falling behind on mortgage payments can easily happen. It can be an overwhelming feeling when you assume your only options are foreclosure or filing for bankruptcy. However, before you get too discouraged, there are some mortgage relief options available to you. Some of these options would include getting out of your mortgage, refinancing, or looking into a VA loan if you’re in the military. Below we’ll cover everything a homeowner should know about mortgage relief in Virginia, VA loans, and so much more.
→ Find out what 3 Things You Can Do If You Can’t Make Your Mortgage Payments in Norfolk, by clicking here.
How to Get Out of a Mortgage in Virginia
First and foremost, you can get out of your mortgage. If you’re struggling to make ends meet and can’t afford your mortgage payment, selling your Virginia home may be the solution. Instead of waiting for a pre-foreclosure letter or talking to an attorney about filing bankruptcy, selling would give you access to the equity in your home that you’ve built up over the years.
Once you sell, you can pay off your mortgage and find another property that would be more affordable. Ultimately, you want to avoid foreclosure or bankruptcy at all costs due to the impact it would have on your credit score, which can last for 7 to 10 years.
→ Can You Sell Your House Before You Pay Off The Mortgage In Virginia? Find out by clicking here.
Consider Selling Your Virginia Home
If selling your house is the path you’d prefer to take to get out of your mortgage, then you’ll want to start getting your place ready to list on the open market. To get your home ready, you’ll need to make repairs, declutter, clean, and stage. Once that’s done, you’ll need to decide how you’d like to sell either by hiring a listing agent, selling by owner, or by working with one of the companies that buy houses in Norfolk. Whichever option you choose, keep in mind the sooner you get your home sold, the better. Past due payments can negatively impact your credit score, so you’ll want to get your house sold ASAP. If you do end up listing for sale by owner (FSBO), it would be helpful to know some negotiating tips in selling your house beforehand so you can speed up the process.
To give you an idea of how long this process is, the average number of days it takes to receive an offer on a Norfolk, VA house is 24-days. The average closing (escrow) period is 50-days without buyer contingencies (like waiting for the buyer’s house to sell before closing on your’s). So you’re looking at two and a half months until you’ll officially sell if you’re lucky.
Sell to a Cash Home Buyer
Selling a house faster is possible if you were to sell to a “We buy houses Virginia” company. Avante Home Buyers is one such company that can make you a cash offer within 24-hours and close in as little as 7-days. Their proposal also doesn’t include realtor commissions or service fees. And all that prep work mentioned above, you won’t have to worry about any of that. They will buy your house in as-is condition, no repairs needed, cleaning, decluttering, or staging, even if it’s a hoarder house.
Don’t be misled by the common misconception that people have about professional home buyers in Norfolk. Avante Home Buyers has helped many families dealing with similar situations successfully sell their homes quickly, and they can help you too. If you’d like to learn more about how it works or about their company, feel free to visit their website.
Although selling your Virginia house to a cash home buyer is a great option, you can request mortgage relief or look into VA loans if you’re in the military or a veteran. Below we’ll explain more about these available alternatives.
What is Mortgage Relief?
Besides selling your house, there are mortgage relief options available too. But what exactly is mortgage relief? The term is used when the bank modifies the borrower’s mortgage obligation. An example of this would be if the bank approves a homeowner’s request for an extension of time to pay because of illness or job loss. Banks refer to this type of mortgage relief as forbearance. Forbearance is where you defer making mortgage payments for a specified period of time. But once that timeframe is up, the borrower has to resume making payments, which involves becoming current on the missed payments, including interest, principal, taxes, and insurance. So if you know that your loss of income is only temporary, this could be a helpful option, but if you’re unsure what your finances look like for the future, you may be better off selling your house instead.
If you are interested in learning more about mortgage relief, you just need to ask your loan provider. Your relief options depend on who services your mortgage, but you definitely want to ask for relief if you need it. Simply deciding not to pay isn’t a good idea. Your lender may still turn your account over to a collection agency and tack on penalties, even though foreclosures and evictions have temporarily halted. Just make sure when you talk to your lender about mortgage relief options that you ask these questions:
- What mortgage relief options are available, and for what lengths of time?
- Will the interest continue to calculate?
- Are there any fees?
- Do you still need to pay insurance, taxes, and mortgage insurance?
- Will this negatively affect my credit rating?
Keep in mind if you do utilize mortgage relief, there is a good chance you’ll still need to pay taxes and insurance to keep everything current. The last thing you want is a lapse in insurance coverage because of non-payment. And you really can’t get out of paying taxes because they’ll still be due at the same time every year.
If you have a VA loan, your mortgage relief options may look a bit different compared to a conventional loan.
What is a VA Loan?
A VA loan is a mortgage loan backed by the U.S Department of Veterans Affairs and is issued by private lenders. It helps active duty service members, U.S. veterans, military spouses, and widows buy a house. The VA loan was introduced back in 1944 as a part of the GI Bill and has become increasingly popular in recent years, so much so that in the first quarter of 2019, 8% of houses were purchased with a VA loan. What makes the VA loan so attractive is its easy qualifications and no down payment requirements.
VA Loan Rules
To get a VA loan, there are some rules, and the law requires that:
- The applicant must be an eligible veteran with available entitlement
- The loan must be for an eligible purpose, i.e., a primary residence mainly in move-in-ready condition.
- The veteran must be a satisfactory credit risk.
- The veteran and spouse’s income must be stable and sufficient to meet monthly mortgage payments, cover the cost of owning a house, take care of other financial obligations and expenses, with enough left over for family support.
If you currently have a VA loan, the VA does offer assistance for struggling borrowers facing a potential foreclosure. So if you’re having trouble making mortgage payments, the agency’s loan technicians can negotiate with lenders on your behalf.
Also, if you’re experiencing financial hardship due directly or indirectly to the COVID-19 emergency, you may request a loan forbearance. The loan forbearance applies regardless of delinquency status. So if you’re convinced that you are about to lose your house, you can contact your lender and request loan forbearance. VA borrowers are permitted to ask for a 180-day loan forbearance, regardless of their delinquency status.
VA loan rules regarding COVID-19 mortgage relief states that the servicer must grant the forbearance request without additional documentation when the borrower makes this request. But it will be up to you to reach out to the lender for mortgage relief. However, you will still be charged fees, penalties, and interest, but it wouldn’t be beyond the amounts scheduled or calculated as if you were making the agreed-upon payments.
If you’d prefer to sell your property instead of going through forbearance and drawing out the inevitable (making payments in the future), as long as you pay off the VA loan, you can use the benefit multiple times. So you can easily sell your home and apply for another VA loan for your next house. Another option besides selling would be to refinance your VA loan.
Refinancing a VA Loan
If you’d prefer to keep your house, you can always look into refinancing your VA loan to lower your rate or tap into your home’s equity. You can even bring your conventional loan into the VA loan program with a VA loan refinance.
To refinance your mortgage, you have two ways to go about it:
- With a VA cash-out refinance
- With a VA streamline-refinance, otherwise known as an Interest Rate Reduction Refinance Loan or IRRL.
VA Cash-Out Refinance
You can choose a VA cash-out to refinance if you:
- Want to utilize cash from your home equity.
- Have a VA loan or conventional loan.
- Can pay all the closing costs up front or with the cash you take out.
To be eligible for the VA cash-out refinance, the lender requires you to have a minimum credit score and a VA appraisal of the property, also, the home has to be your primary residence.
VA Streamline-Refinance (IRRL)
You can choose a VA streamline refinance if you:
- Want to refinance to lower your interest rate to save money or refinance to a fixed-rate mortgage from an adjustable-rate mortgage.
- Already have a VA mortgage.
- Don’t want to take out any cash from your home’s equity.
This option is a no-frills refinance that helps get veterans into a lower interest rate.
To refinance into an IRRL, you must
- Already have a VA mortgage.
- The rate must be lower on your new loan unless you’re refinancing out of an adjustable-rate VA loan.
Besides that, the home doesn’t have to be your primary residence, all that’s required is prior occupancy. So if you’re stationed in a new area and prefer to keep your first house, you can refinance that mortgage without living in the property. You’re also able to warp the closing costs into the new loan with the VA streamline loan.
However, you’ll want to keep in mind that some VA lenders may require a minimum credit score, minimum income, or an appraisal to approve a streamline refinance. They may also require that you not have any late mortgage payments within the past 12 months.
So that being said, if your income has been affected, you’re upside down on your mortgage, or you’ve had recent late payments, you may not qualify to refinance, but remember you can always sell instead.
What Borrowers Don’t Know About VA Loans
VA loans are among the last zero-down home loans available today, making them an attractive option for anyone eligible to apply. Below are some other facts about VA loans that most people don’t know about:
- There is no limit to the amount you can borrow on a VA loan, but there is a limit on the amount of liability the VA takes on.
- You won’t have to pay PMI (Private Mortgage Insurance)
- There isn’t a minimum credit score requirement, although it’s preferred if your score is 620 or higher.
- There isn’t a prepayment penalty.
- You don’t need to be a first-time homeowner in order to get a VA loan, and foreclosure or bankruptcy won’t permanently affect your chances. However, it will have to be after two years have passed from the foreclosure or bankruptcy date to qualify.
- You are required to pay a VA loan funding fee that costs between 1.25% and 3.3% of the loan amount.
- Interest rates for 30-year VA loans are usually equal to or slightly lower than 30-year conventional fixed-rate loans.
- A VA loan can only be used to purchase a primary residence or to refinance an existing loan.
- Only specific properties are eligible for a VA loan and are up to the lender’s approval.
If you’re feeling any anxiety or financial stress around being able to make payments, absolutely look for mortgage relief, refinance or consider selling your house. The sooner you figure out a solution, the better you’ll feel. Unfortunately, waiting to do something may only lead to poor credit scores, high late fees, and other costs, which can be easily avoided if you choose one of these options.