Creative Real Estate Financing

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Brent Grizzle
  • Investor
  • San Diego, CA
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VA Loan - Subject To

Brent Grizzle
  • Investor
  • San Diego, CA
Posted Nov 16 2022, 11:37

I have a Seller willing to do a Subject To sale, but only one objection remains.

It is a VA loan. Seller says she probably won't buy again, but doesn't want to lose her eligibility for another VA loan.

Is there a workaround?

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Joe Homs
  • Flipper
  • Mission Viejo, CA
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Joe Homs
  • Flipper
  • Mission Viejo, CA
Replied Nov 16 2022, 13:12

@Brent Grizzle VA loans are assumable. The new buyer just needs to qualify.

How to Assume a VA Home Loan

For the assumption to take place, you must meet these requirements

  • The new homebuyer meets the lender's credit and income requirements
  • The new homebuyer must assume all mortgage obligations
  • The new homebuyer must pay the funding fee unless otherwise exempt

The VA funding fee on a VA loan assumption is 0.5% of the remaining loan balance. Those exempt from paying the VA funding fee typically include Veterans with a service-connected disability, Purple Heart recipients and surviving spouses.

Non-Veterans assuming a VA loan must pay the VA funding fee.

Good Investing...

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Brent Grizzle
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Brent Grizzle
  • Investor
  • San Diego, CA
Replied Nov 16 2022, 13:51

Thank you, Joe! 

As a non-veteran assumption, would that make the owner unable to use their VA loan again until the existing loan is paid off? That is the issue I am running into. The seller would like to keep their eligibility to use the VA loan again.

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Mike Hern#1 Buying & Selling Real Estate Discussion Contributor
  • Investor
  • Scottsdale Austin Tuktoyaktuk
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Mike Hern#1 Buying & Selling Real Estate Discussion Contributor
  • Investor
  • Scottsdale Austin Tuktoyaktuk
Replied Nov 16 2022, 15:14
Quote from @Brent Grizzle:

Thank you, Joe! 

As a non-veteran assumption, would that make the owner unable to use their VA loan again until the existing loan is paid off? That is the issue I am running into. The seller would like to keep their eligibility to use the VA loan again.

Why not do Subject To instead of Assumption? Veterans are issued a max allowable to borrow. They can own more than one home as long as they stay under the benefit amount. If the benefit amount is $600,000 they can buy 2 $300,000 houses, that kind of thing.
If you take the house Subject To, the next lender will usually accept 80% of the payment on the underlying loan as an offset toward the vet's DTI Ratio. Check with your mortgage broker (not with a bank).

Check in with @Chris Mason: He should be able to be more precise (and correct.)

https://www.biggerpockets.com/...

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Andrew Postell#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Lender
  • Fort Worth, TX
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Andrew Postell#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
  • Lender
  • Fort Worth, TX
Replied Nov 16 2022, 15:32

@Brent Grizzle if you assume the loan that loan then goes under your credit.  It's not on the veteran's credit report any more so it doesn't count against them.  If you took the property "subject to" the existing loan then that loan DOES stay on the veteran's credit.  Do the assumption route and that should solve most of what you and the customer are asking for.

Lender Texas (#392627)