Specialist · Tucson, AZ · Member since 2009 · 108 posts · 24 votes
I have an 80/20 short sale I am working with a retired sailor. The 80 is a VA loan but the 20 is regular. If I short off the 20 will this affect their ability to use their VA benefits for another VA loan later? For that matter if you short a regular VA loan, does this affect their ability to get another?
Hi Samuel, yes a default on a VA will effect the VA entitlement until it is fully paid. This will be the amount elgible for a loan guarntee, perhaps a lower loan amount could still be made, but the SS will be a default. Best to call the VA.
However, the VA, as you probably know, provides a gurantee not the loan and qualifying for the loan is another matter, even if the guarantee is there, the lender may not make it. Bill
I’m not positive as I only do streamlines for VA loans but in the second situation it depends on if there was any eligibility amount left. Subtract whatever the loss was from the original eligibility amount and you would get your number. Bear in mind underwriting would most likely be a little tougher given the circumstances
As for the first situation if the government incurs no loss then eligibility would not change
Hi Samuel, yes a default on a VA will effect the VA entitlement until it is fully paid. This will be the amount elgible for a loan guarntee, perhaps a lower loan amount could still be made, but the SS will be a default. Best to call the VA.
However, the VA, as you probably know, provides a gurantee not the loan and qualifying for the loan is another matter, even if the guarantee is there, the lender may not make it. Bill
Tyler, forgive my ignorance but I really didnt understand what your post meant, would you expound a little more?
Bill, what kind of negative effects occur? So if it is not fully paid that affects the entitlement, but if the VA was the 80 and I only shorted the 20 without touching the 80 then she would be ok?
No problem. Lets say the veteran had $250,000 of eligibility to start with and he used it all on this house. The house sells for $200,000 (which is a short sale), the government pays the lender out a $50,000 loss. The veteran would lose $50,000 of his eligibility and would be left with $200000 for the next house. That being said even if the VA is willing to guarantee the $200,000 lenders will put this borrower under the microscope during underwriting due to the previous short sale.
Samuel, if the VA is paid as agreed there is no effect on the senior lien. They VA lender doesn't care what happens in subsequent positions. However, again the SS, even with a second will effect the credit (if it's held by a credit reporting note holder or if any judgement is ultimately filed arising from that write down). Sorry I missed that, Bill
Ok, that explains it thanks. I didnt know that with VA you only have a certain amount of eligibility that can be decreased through short sale. Ha I guess I should learn more about VA loans, seeing as I will be probably be using one shortly ha