Facing foreclosure is a stressful situation, but as a veteran, you have options. The VA Partial Claim Program is designed to help you stay in your home by providing financial relief when you fall behind on mortgage payments.
Instead of losing your house, this program allows the VA to cover missed payments with a second, interest-free mortgage that you won’t have to repay until you sell or refinance.
Understanding how it works can help you take advantage of this safety net. This guide will break down the program, who qualifies, and how it can help you avoid foreclosure.
Understanding the VA Partial Claim Program
The VA Partial Claim Program is a foreclosure prevention option available to veterans with VA-backed home loans. It provides assistance when you’ve missed mortgage payments and need a way to catch up without facing immediate financial strain.
Here’s how it works: The VA pays off your past-due payments, and in return, you receive a second mortgage on your home. This second mortgage is interest-free, meaning you don’t have to make monthly payments on it. The balance is only due if you sell, refinance, or pay off your primary mortgage.
This program helps veterans stay in their homes without modifying their loan terms or taking on unaffordable repayment plans. However, it’s not a free grant—you’ll eventually have to repay what the VA covered.
For veterans struggling with their mortgages, the VA Partial Claim Program offers a lifeline. It allows time to recover financially while keeping homeownership intact.
Who Qualifies for the VA Partial Claim Program?
If you’re a veteran struggling with your mortgage, you may qualify for the VA Partial Claim Program. However, not all veterans are eligible—certain conditions must be met.
- First, you must have a VA-backed home loan. This program does not apply to conventional or non-VA loans. Your loan servicer must also approve your participation based on financial hardship.
- Second, you must be behind on mortgage payments but still able to afford future payments. The VA covers missed payments but won’t assist if you can’t sustain the loan moving forward.
- Additionally, your mortgage must be at least 30 days past due but not already in foreclosure. Servicers often look for a temporary hardship situation, such as job loss, medical expenses, or deployment-related financial strain.
This program is most beneficial if you expect financial stability soon but need immediate relief. If you’re facing long-term financial struggles, other options like loan modification or refinancing may be better.
Ultimately, your loan servicer and the VA will determine eligibility, so contacting them early is key. If you qualify, this program can be the difference between losing your home and securing your financial future.
How the VA Partial Claim Program Works
Falling behind on your mortgage can be overwhelming, but the VA Partial Claim Program provides a structured way to regain stability. Here’s how the process works and what you can expect.
First, contact your loan servicer. They will assess your situation and determine if the VA Partial Claim Program is the right solution. If approved, the VA will cover your past-due payments, bringing your loan current.
Instead of immediately repaying the missed amount, the VA creates a second mortgage on your home for the total covered amount. This second mortgage has no interest and requires no monthly payments.
You won’t have to repay it unless you sell, refinance, or pay off your primary mortgage. At that point, the balance of the second mortgage must be paid in full.
This program does not change the terms of your original loan. Your monthly mortgage payments will resume as usual, and you must continue making on-time payments to stay current.
The VA and your loan servicer handle most of the paperwork, making the process relatively simple. However, you must meet the eligibility criteria and prove that you can afford future payments.
If approved, this program can be a lifeline for veterans struggling with temporary financial hardship. It offers a way to stay in your home without an immediate repayment burden, allowing you time to regain financial stability.
Pros and Cons of the VA Partial Claim Program
The VA Partial Claim Program can be a valuable tool for avoiding foreclosure. However, it’s important to weigh the benefits and potential drawbacks before deciding.
Pros
- No immediate repayment required – The second mortgage doesn’t need monthly payments.
- No interest – Unlike other loans, this assistance is interest-free.
- Avoids foreclosure – Helps you stay in your home while catching up on missed payments.
- Simple process – The VA and your loan servicer handle most of the paperwork.
Cons
- Second mortgage requirement – The missed payments must be repaid eventually.
- Not a long-term solution – If you’re facing permanent financial hardship, this won’t fix ongoing issues.
- Eligibility restrictions – You must have a VA-backed loan and meet specific criteria.
- Tied to your home – If you sell or refinance, you must repay the second mortgage in full.
For many veterans, the benefits outweigh the drawbacks, especially if the financial hardship is temporary. However, if you’re facing long-term financial struggles, exploring other options may be a smarter move.
Alternative Foreclosure Prevention Options
The VA Partial Claim Program isn’t the only solution for veterans struggling with mortgage payments. If it doesn’t fit your situation, here are other options to consider.
- Loan Modification: This adjusts your loan terms to make payments more affordable. Your servicer may lower the interest rate, extend the loan term, or add missed payments to the loan balance.
- Repayment Plan: If your hardship was temporary, your servicer might let you catch up gradually by adding a portion of the missed payments to future monthly payments.
- Forbearance Agreement: This allows you to pause or reduce mortgage payments for a set period, giving you time to recover financially before resuming normal payments.
- Refinancing: If you qualify, refinancing could provide a lower interest rate or better loan terms, making monthly payments more manageable. However, this option requires a good credit score and financial stability.
- Selling the Home: If keeping the home isn’t financially feasible, selling before foreclosure may help you avoid damage to your credit and secure a fresh start.
Each option has its pros and cons, so working with a VA loan specialist or housing counselor can help you choose the best path.
Conclusion
If you’re struggling with mortgage payments, the VA Partial Claim Program can provide a crucial safety net, helping you avoid foreclosure without an immediate repayment burden.
By allowing the VA to cover your missed payments and setting up an interest-free second mortgage, you gain the breathing room needed to recover financially. However, this isn’t the right solution for everyone, and alternative options may be worth exploring.
The most important step is to act early. Reaching out to your loan servicer and exploring your options can make the difference between keeping your home and facing foreclosure.