VA loan forbearance: A complete guide

Many homeowners worry about mortgage forbearance and foreclosures, even if they are unlikely to face these issues. Forbearance is when a mortgage servicer lets the borrower pay a reduced payment or pauses their payments temporarily.

If you’ve served in the military, even if you don’t have a Veterans Affairs loan, you have some options when it comes to forbearance. 1 We’ll go over what’s available to you, the pros and cons of forbearance, and what to look out for.

What is a VA loan forbearance?

If someone is falling behind on their mortgage payments, they should act quickly and reach out to their mortgage servicer. One option is forbearance. This is when the servicer will reduce or pause payments temporarily.

The VA offers forbearance, among other options, for borrowers struggling to afford their loans. If you have a VA loan and you’re having trouble making payments, you can like Speak with your mortgage servicer or contact a VA technician for advice.

Who is eligible for VA loan forbearance?

To be eligible for VA loan forbearance, you must be a veteran or the surviving spouse of one. VA loan forbearance applies to borrowers with VA-guaranteed mortgages. However, veterans with other types of loans should still contact their servicer because forbearance and other loss mitigation options may still be available to them.

Beyond that, whether you’re eligible or not depends on your situation. The only real way to find out if this is an option for you is to contact your servicer. They can determine your eligibility and explain your options.

Pros and cons of VA loan forbearance

Here are the pros and cons of a VA loan forbearance.

Pros

A VA loan forbearance can give you some financial relief and security. You’ll be able to pause payments or at least pay a lower bill for a time. You also may avoid foreclosure.

Cons

Unfortunately, loan forbearance doesn’t mean missed payments just disappear. You’ll have to pay them eventually, which might result in a large bill when the forbearance period ends. You also should keep in mind that forbearance affects your credit usually has a negative impact on the ability to refinance . 2

VA loan repayment and refinancing options

VA loan forbearance repayment options can help you get through financial difficulties without resorting to forbearance.

VA IRRRL

Those with a VA loan can get a VA Streamline loan, also known as a VA Interest Rate Reduction Refinance Loan , or IRRRL. 3 This kind of refinance is simpler and requires less paperwork. An IRRRL can help you:

• Reduce your monthly interest rate
• Reduce your monthly payment
• Change the term, or length, of your loan
• Change from an adjustable-rate mortgage to a fixed-rate loan

If you’re already facing financial stress, the less paperwork you face, the better. The VA IRRRL can offer relief here. They also give you the chance to roll closing costs and fees into monthly payments.

Loss mitigation options

If you don’t think a refinance is best for your situation or you need more drastic assistance, ask your lender or a VA loan technician about your options.

Here are some alternatives that might be suggested:

• Repayment plans. Your missed payments will be spread out alongside future payments. This way, you won’t have to pay a large sum at once.
• Loan modifications. When you modify a loan, the terms will change to add back in missed payments. There will probably be a change in the length of the loan and interest rates.
• Private sale. When you have a private sale, you can sell your house instead of foreclosing, paying off the loan and allowing you to keep any profit.
• Short sale. A short sale is when you sell a house for less than the amount owed on the mortgage. You must prove significant financial hardship for this option. Your servicer may offer relocation assistance in exchange for keeping up the property.
• Deed in lieu of foreclosure. A deed in lieu of foreclosure , or mortgage release, is where you sign the deed to the house over to the lender to avoid further delinquency or possible foreclosure. Depending on your situation, you might qualify for relocation assistance.

Beware of unscrupulous lenders

Unfortunately, there are many people out there looking to take advantage of veterans.

One common scam is called churning, which is when unscrupulous lenders encourage VA mortgage holders to repeatedly apply for refinancing. Because of this, the VA requires borrowers to make at least six consecutive payments before they can refinance.

Watch out for scams targeting veterans. Avoid anyone who guarantees they can stop foreclosure, asks you to send payments to them instead of your lender, or pressures you to refinance repeatedly, which is known as “churning.” Always verify offers directly with your VA lender or a VA loan technician.

Speak directly with your VA loan lender if you’re facing financial hardship. The VA also offers advice on how to avoid these scams.

The bottom line: The VA is committed to keeping people in their homes

If you’re struggling to keep up with your mortgage, know that you’re not alone. Don’t be afraid to get help. Your lender and the VA will guide you through your options to avoid losing your home. These options can include forbearance, loan modification, repayment plans, and more.

Speak with your mortgage servicer or a VA loan technician today to learn more about your options . Visto Mortgage clients can reach out through their Rocket Account by navigating to the Mortgage tab under Help > Payment assistance.

1 Visto Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

2 Refinancing may increase finance charges over the life of the loan.

3 The VA Streamline program may have stricter requirements in some states. In order to qualify for the VA Streamline program, you must have a VA loan. The VA Streamline is only available on primary residences. Cash-out transactions are not allowed. In order to qualify for a VA Streamline, a 0.5% minimum reduction in interest rate on the previous fixed-rate loan must occur if the new loan will be a fixed rate or a 2% minimum reduction in interest rate on previous adjustable rate mortgage loan must occur; a minimum of 6 months of consecutive mortgage payments must be paid on the current loan at the time of application. Some states may require an appraisal. Additional restrictions/conditions may apply.

Kate is a contributing writer and publisher who has worked with Rocket since 2022. She also works as a middle-school interventionist and has taught personal finance and life skills to high-schoolers.

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