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     | Sunday, April 02, 2000 - 01:42 pm  I am in the process of buying a house. My credit is terrible. (20+ collections which will fall off in about 18 months) but an income of $70,000 (Graduated from college!). We found a house which is For Sale By Owner - through a local attorney. The current owners are military and are being transferred. We made an offer and they have accepted it. The current loan is through VA at 7%. My parents have agreed to assume the loan, let us make the payments and when are credit is cleaned up refinance it in our names. We are paying the owners their equity (sale price $129,950 with $122,700 pay off on loan). My parents are doing nothing money wise except using their VA elgibility to assume the loan. The attorney who is handling has agreed to Quick Claim the deed to our name at the closing for no additional cost. What exactly is a quick deed claim? (we are not VA elgible). Our only other options was to have them get a loan for us (best rate was 9.75%) with 5% down because it would be considered investment property on their behalf. My parents have excellent credit. The first loan officer we were working with (before deciding to assume) told us their fico scores were 791 and 824. Are we going the right way?
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| | Sunday, April 02, 2000 - 06:09 pm Are your parents claiming that they will occupy the house?
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| | Sunday, April 02, 2000 - 06:27 pm No. The attorney called the bank who holds the note and was told that if you assume a VA loan you do not need to occupy the house. But, you can only have one VA loan at a time. They bought their house on a VA loan but paid it off 2 years ago.
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| | Sunday, April 02, 2000 - 07:25 pm "Applicants must have a good credit rating, have an income sufficient to support mortgage payments, and agree to live on the property." http://www.va.gov/publ/benman95/4HOMLOAN.HTM "A loan for the purchase of a dwelling for investment purposes is not eligible for guaranty as a home loan." http://homeloans.va.gov/LH/CH03.pdf
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| | Tuesday, April 04, 2000 - 01:55 pm Greg, once again you are wrong. Anyone can assume a VA loan, but by doing so the last elgible VA on the loan loses their elgibility until the loan is paid off. Another VA elgible person can assume a VA loan if they have elgibility left (no other VA loans). On a new VA loan the house has to be occupied for at least the first 12 months. If the loan is assumed by someone else, VA or not, they do not have to occupy the house because the 12 month period has already been satisfied. Now, if my parents were to take out a NEW VA loan, then yes, they would have to occupy the house for the first 12 months of the loan. Also, I can assume the loan from my parents but by doing so my parents would lose their elgibility for a VA loan until the house is paid off. A real estate attorney is taking care of the paperwork and closing. I also called the VA administration for information and they confirmed what the attorney told us (as stated above). I posted originally to see if others thought I was going the right route. I did not post to get into a online debate with you. (On a side note, I use to enjoy your post, but you seem to have a need to start debates over little stuff). Michelle
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| | Tuesday, April 04, 2000 - 05:34 pm To answer your original question, it's "QUIT" claim, not quick claim. It means that your parents "quit their claim" to the title. How you hold title and transfer title is very STATE specific, I'm used to Grant Deeds. A Grant deed specifies WHO you grant title to. And of course there are warranty deeds, not used in California. Quit claim deeds are sometimes used to remove one of several owners. Unless you are on title at closing, it won't work at all, because then nobody would own the property. I have no idea how the VA would appreciate your parents being off the title. Also, there are homeowners insurance consequences, when you move the insurance in your name, the lender loses the insurance and they *might* call the loan. Unless it's all legit and ok'd by the VA, they could foreclose if you just transfer ownership. Definitely find out from the VA BEFORE you transfer title. One solution might be to just add you to the title after closing. I hope your attorney knows what he's doing. It's really important HOW to hold title. Again, this is STATE specific, and you want to avoid probate, also consider a living trust. Or a land trust. I wished I had a good link handy. Anyone? And I hope you can keep that 7% loan for a long time! Good deal.
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| | Tuesday, April 04, 2000 - 06:50 pm Having eligibility left doesn't necessarily mean "no other VA loans." "A veteran who previously obtained a VA loan can use the remaining entitlement for a second purchase. The amount of remaining entitlement is the difference between $36,000, or $50,750 for special loans, and the amount of entitlement used on prior loans." http://www.va.gov/publ/benman95/4HOMLOAN.HTM "You may even have enough eligibility to purchase a home even if your previous VA loan isn't paid off." http://realtytimes.com/rtnews/rtcpages/19980907_valoan.htm So, two $70,000 loans on two different houses is possible. That's on the same page as the first quote I gave. What document gives the rules you're stating? Regarding the assumption, here's the relevant section of the law. <i>U.S. Code : Title 38, Section 3714. Assumptions; release from liability</i> "(a) (1) Except as provided in subsection (f) of this section, if a veteran or any other person disposes of residential property securing a loan guaranteed, insured, or made under this chapter and the veteran or other person notifies the holder of the loan in writing before the property is disposed of, the veteran or other person, as the case may be, shall be relieved of all further liability to the Secretary with respect to the loan (including liability for any loss resulting from any default of the purchaser or any subsequent owner of the property) and the application for assumption shall be approved if the holder determines that - (A) the loan is current; and (B) the purchaser of the property from such veteran or other person - (i) is obligated by contract to purchase such property and to assume full liability for the repayment of the balance of the loan remaining unpaid and has assumed by contract all of the obligations of the veteran under the terms of the instruments creating and securing the loan; and (ii) qualifies from a credit standpoint, to the same extent as if the purchaser were a veteran eligible under section 3710 of this title, for a guaranteed or insured or direct loan in an amount equal to the unpaid balance of the obligation for which the purchaser is to assume liability." http://www4.law.cornell.edu/uscode/38/3714.html So, section 3710 says: "Purchase or construction of homes (a) Except as provided in section 3704(c)(2) of this title, any loan to a veteran, if made pursuant to the provisions of this chapter, is automatically guaranteed if such loan is for one or more of the following purposes: (1) To purchase or construct a dwelling to be owned and occupied by the veteran as a home." http://www4.law.cornell.edu/uscode/38/3710.html I couldn't find the part about letting someone buy a house to be used as a rental. Please have the attorney and the Department of Veterans Affairs cite it. If your intent in posting those details is to find out if you're "going the right way," my opinion is that you are not. Not everybody has parents that could do such a thing. It creates an inequality in our society; there are supposed to be consequences for having bad credit.
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| | Tuesday, April 04, 2000 - 08:40 pm Greg, I think you're misinterpreting what's said in your pastes. It says: " (ii) qualifies from a credit standpoint, to the same extent as if the purchaser were a veteran eligible under section 3710 of this title, ..." Keywords: *as if the purchaser were* which implies that the purchaser is NOT eligible under 3710 and those requirements do NOT apply. It looks to me like only the *credit* guidelines apply. And I think if we always actually PASTE the important quotes as you just did, we'll have a lot fewer arguments. Besides, most people (including myself) just don't have the time or have slow connections and subsequently never go to those links.
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| | Wednesday, April 05, 2000 - 06:42 am As I did in the Sunday, April 2, 2000 - 09:25 pm post, I pasted the important quotes, and, to back up what I said, gave links to the actual authority I quoted. If it is true that investors who are veterans can use their eligibility to acquire rental property, that practice would be exploited to the nth degree-- but it is not something you hear about. It breaks the sprit of the VA program (to house veterans in return for their service to our country)-- as opposed to dallying in real estate speculation, or allowing offspring-- who haven't served-- to buy a house. There goes the benefit given to you for your risking your life in the military. I would still like somebody to quote the actual guidelines; so far, the only guidelines I see are those that say that owner-occupancy is required.
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| | Wednesday, April 05, 2000 - 08:30 am Greg: Keywords *Assumption* vs *NEW loan* I have NO experience with VA loans because the limits were so low all you could buy with a VA loan was a tear downer or a condo. And oh my god, a veteran can actually find a buyer who gets to assume his loan while not even living in it! Greg, do you propose changes? You'd like to see this vet take out some credit card loans so that s/he can pay down the balance to where investors become interested in the property? Or would you prefer this vet to just default? Or should s/he refuse the transfer?
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| | Wednesday, April 05, 2000 - 11:43 am I'm not proposing any changes. The way the law reads is acceptable to me. If transactions like this take place, however, I would call for better regulation. I didn't write the guidelines, I'm just quoting them, and I'm not quoting this stuff off the top of my head-- I diligently searched for an argument against what I'm saying, but came up empty-handed. And, why would only investors be interested in the house? There is enough equity in the house-- given the numbers above-- to hire a real estate agent at 7% and pay an additional $1846 to close. For that I'm sorry for the veteran, but it is one of the costs of homeownership. I would not prefer the veteran to default on the loan. Perhaps there is a way to make it work using the following exception, and perhaps that is what they are using to justify their action. It is a caveat for extreme cases. From section 3714: "(ii) If the Secretary determines under subparagraph (A) of this paragraph that the purchaser does not meet the requirements of paragraph (1)(B) of this subsection, the Secretary may direct the holder to approve the assumption of the loan if - (I) the Secretary determines that the transferor of the property is unable to make payments on the loan and has made reasonable efforts to find a buyer who meets the requirements of paragraph (1)(B) of this subsection and that, as a result, the proposed transfer is in the best interests of the Department and the transferor; (II) the transferor has requested, within 15 days after receiving the notice referred to in subparagraph (A) of this paragraph, that the Secretary approve the assumption; and (III) the transferor will, upon assumption of the loan by the purchaser, be secondarily liable on the loan." We haven't heard from Michelle, the lender, the Department of Veterans Affairs, or her attorney explaining their rationale. Maybe the exception above is the case, here. Again, if what she is proposing is normal procedure, the real estate investors of every city would be pounding down the doors of those with VA loans, offering them great deals to let them assume their loans-- to avoid the larger down payments required for investment property. Guidelines. Law. The defense rests.
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| | Wednesday, April 05, 2000 - 02:13 pm Christine, thank you for the information on "Quit" deed. I had the attorney explain it to me and my parents will still be on the title. By doing the quit claim, if my parents were to die or something terrible like that, the house would go to me instead of into probate. We are going to assume the loan from them in about 18 months than it will go into our name only. Greg: Yes their are consequences for having bad credit. But how long should you have to pay for them? In less than 18 months my credit will be perfect. The collections on my credit report were beyond my control at the time. (Insurance cancelling because they didn't want to pay any more bills). Now laws have changed and companies can't do that anymore, but nonetheless, it was to late for me. I could wait 18 months to buy a house and get it in only my name. In the case of this house, regardless of my credit, we would probably do the same thing in order to get the 7% interest rate. It is predicted that by December home loans will be aboe 10%. It's unclear when the rate will come down. For this reason alone, my parents volunteered to help us so we wouldn't have the higher interest rate when we would qualify for a loan. I know I am blessed with parents who have great credit and the resources to help us and for this I am grateful and not greedy.
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| | Thursday, April 06, 2000 - 04:41 am To answer your question, you should have to pay for the consequences as long as anybody else. If you mean by "perfect" that you will have a 900 credit score in a mere 18 months, you're dreaming. Some loan guy may have told you you would qualify for a VA loan assumption if you have no derogatories for 18 months, but don't think that a year and a half will make you spotless. VA loans have lower credit qualifications than conventional loans. What laws have changed regarding insurance canceling and the resulting collections appearing on your credit report? Who predicted that home loans will be 10% by December? Let's track that. Here's another prediction: They won't. That's pretty easy to do. But here are some numbers. "LONG-TERM MORTGAGE RATES UNCHANGED FROM LAST WEEK, ACCORDING TO FREDDIE MAC WEEKLY SURVEY" http://www.freddiemac.com/pmms/rate0330.htm That's this week. Here's last week: "STABILITY IN MORTGAGE RATES CONTINUES, ACCORDING TO FREDDIE MAC WEEKLY SURVEY" http://www.freddiemac.com/pmms/rate0323.htm Week before that: "MORTGAGE RATES FLAT THIS WEEK, ACCORDING TO FREDDIE MAC WEEKLY SURVEY" http://www.freddiemac.com/pmms/rate0316.htm March 9: "STRONG ECONOMY AND LOW INFLATION ARE GOOD FOR MORTGAGE RATES, ACCORDING TO FREDDIE MAC WEEKLY SURVEY" http://www.freddiemac.com/pmms/rate0309.htm March 2: MORTGAGE RATES SLIP FOR SECOND CONSECUTIVE WEEK, ACCORDING TO FREDDIE MAC’S PRIMARY MORTGAGE MARKET SURVEY" http://www.freddiemac.com/pmms/rate0302.htm February 24: "MORTGAGE RATES EASE A LITTLE FROM LAST WEEK, ACCORDING TO FREDDIE MAC’S PRIMARY MORTGAGE MARKET SURVEY" http://www.freddiemac.com/pmms/rate0224.htm I don't believe in the boogie man. And the Fed seems to have lost its control.
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| | Thursday, April 06, 2000 - 08:00 am I don't know about a VA assupmtion, but I did get a VA loan approved it a 12 month derog. (3 in 24 months). I don't know if that helps putting things in perspective.
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| | Thursday, April 06, 2000 - 09:02 am Greg, one of the reasons I maintain this forum is to help people save money. There are literally hundreds of postings advising consumers on how to NOT pay through the nose. Michelle has wonderful parents who obviously trust their daughter and feel that she is worth the risk. Your opinions on VA guidelines are absurd. "To answer your question, you should have to pay for the consequences as long as anybody else." Why do you have the overwhelming desire to be mean? Missing Sean? One bad hair day after the other?
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| | Thursday, April 06, 2000 - 01:30 pm Greg: What I meant was the most recent negative listing on my credit report is 5 and 1/2 years old. I was using a figure of speech when I said it would be perfect. It will be perfect in my eyes. Before Clinton passed the medical law (forgot what it was called) an insurance company could cancel you for any reason. In my case, they cancelled my husbands insurance after one of our children was diagnosed with a serious medical problem which required expensive test and surgeries. We had to pay those bills ourselves. Some went to collection and we simply did not have the means to pay them. Time has passed, and although it is not the most honest way to do business, it is in our best interest not to pay them cause they will fall off our report in less than 18 months and according to laws in my state the time limit to collect is past. Call me a deadbeat if you want, but while our child was sick I sold everything I had to pay for his treatment and travel to the Mayo clinic to receive treatment. Have I paid for this? Yes, in many ways, you have no idea what it's like to watch a child sit at deaths door. We were lucky because our child lived. (We did make sure the doctors themselves were paid). We are also lucky that our parents see our bad credit as out of our control and want to help. (they also paid for my childs $100 a day medication before we got insurance that would not cancel us). Buying the house will be cheaper than renting and they get the interest deductions until we assume the loan from them. It's called a win win situation. And this is the last time I will defend myself to you. Christine, thank you for understanding and providing the service you do to the people who need and want it.
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| | Thursday, April 06, 2000 - 01:36 pm BTW: In our local newspaper their was an article about rising interest rates. When we were deciding on who to get a loan through (before we found out about assuming) the interest rate went up almost a whole percent in one week. We called every bank and mortgage broker around and was told it would continue to climb unless we got a locked rate.
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| | Thursday, April 06, 2000 - 04:26 pm I don't recall the interest rates going up one percent in one week. When was that? Christine, if anything is absurd, that is. I'm glad I questioned it. The sad story of medical calamity is one of millions caused by a medical bureaucracy out of control. There is a remedy called bankruptcy, but not many are willing to take it-- they have misplaced pride that forces them refuse to do what is right for them and their children. Or worse, they just don't have the right information in the first place. FHA mortgage loans are available one year after personal chapter 7 bankruptcy. "An elapsed period of less than two years (but not less than twelve months) may be acceptable if the borrower can show that the bankruptcy was caused by extenuating circumstances beyond his or her control and has since exhibited an ability to manage financial affairs and the borrower's current situation is such that the events leading to the bankruptcy are not likely to recur." http://www.hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=HSGH&s1=(4155.1)[no]&op1=AND&l=100&SECT1=TXT_HITS&SECT5=HEHB&u=./hudclips.cgi&p=1&r=4&f=G So, one year is the most they would have to pay for the consequences-- the same as everybody else-- as we all concur by living in the United States of America, and by abiding by the laws and benefits for which our elected representatives voted on our behalf. I'm not being mean by telling the truth. Michelle, did you actually know the fact about FHA loans I just gave? Michelle is flat-out wrong again: The interest on a mortgage is only tax-deductible for main and second homes. http://www.irs.ustreas.gov/prod/forms_pubs/pubs/p936toc.htm I'll just keep quoting facts and providing links.
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| | Thursday, April 06, 2000 - 05:58 pm Greg, would you mind sharing some some of your practical experience? Have you ever underwritten a loan? You always post that FHA stuff, and sometimes I wonder if that is a guarantee. I.e., if someone after the bk doesn't get the loan as you always state, are YOU going to make/arrange the loan? It seems like you just read, and I hate to be the bearer of bad news, but there's words, and there's reality. During MY lending *practice,* FHA loans were more expensive than "regular" loans. FHA loan limits were even lower than VA. I never brokered a single FHA loan, even for the condos I found my clients better deals. I also learned that the lenders are liable for the loans even after they're sold. *I* was liable for the loans I brokered. When I didn't like a somebody, I didn't do their loan. Sometimes I had to tell my clients that their loans were declined for whatever stupid reasons that very clearly just were given to NOT make the loan. I hope that Michelle's parents receive good tax advice. It's none of my business what they put on their taxes. If they list Michelle's payments as rental income, they still get to take depreciation. Or maybe they decide to list it as a second home, and frankly, I couldn't care less. You wrote: "So, one year is the most they would have to pay for the consequences-- the same as everybody else-- as we all concur by living in the United States of America, and by abiding by the laws and benefits for which our elected representatives voted on our behalf." English please? I don't get that at all. Are you saying people concur with something because they have been born here? Greg, there are so many problems on this planet, why you are dwelling on Michelle's NON problem?
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| | Thursday, April 06, 2000 - 06:52 pm Why go thru the trouble of bankruptsy when it goes away in 18 months? We are getting the loan at 7% which is better than the 9% we were going to get if we went FHA. The 9% was that high because it would be considered investment property for my parents. And, yes Greg, it did go up that high in a week. Our mortgage broker quoted us 8.5% with 5% down and after a week it went up to 9.25% and posibbly higher. If we didn't use my parents credit to get the loan we were looking at 12% with 20% down. If VA is as easy as others say it is maybe we can get it in our name from the go. But, I don't think we are going to risk it. As far as getting a loan 1 year after bankruptsy - I would like to know who actually gets it. Maybe it's possible in guidelines but highly unlikely in reality. On the bankruptsy, from what I read, it is one year after you finish payback before you can apply for FHA. The amount of the medical bills we had, it would have taken 7 years to pay them back. The bankruptsy would also stay on my credit for 10 years. As far as my parents and interest I don't know what they have planned. The loan is only going to be in their name for 7 months this year and all of next year, at most. They have an attorney and investor who handles their taxes, investments and retirement funds.
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| | Thursday, April 06, 2000 - 07:11 pm I won't share any of my experience for the same reason that I don't on http://creditscoring.com: It is irrelevant and would be a target for some to point to my "motivation." My motivation is from my place as a consumer (I am one. Really. Please don't ask me to prove it.) who sees an inadequate credit system-- not just credit scoring. creditaccuracy.com is part two. So, as a consumer, I'm in no position to make loans. And, as this is a discussion forum, I'm not trying to sell (or guarantee) anything. The current FHA loan limit for let's say, Springfield Missouri, is $121,296. St. Louis is $142,050. Kansas City is, $153,615. http://www.hud.gov:80/pressrel/sf_fha00/mo.html http://www.hud.gov:80/pressrel/pr00-3.html Do you believe that? I'm trying to give the conversation a semblance of structure, and a basis. If you don't believe it, then we can have no lucid discussion. Things have changed in underwriting, too. Why is credit scoring so big, now? Automated underwriting. The lender uses it to justify their decision. If the machine buys the loan, the lender who wants to make the loan is justified in their decision because Fannie Mae's or Freddie Mac's system gave it a green light. Human bias, as you described above, is gone. That's good. Credit reports still have errors. That's bad. Those errors could be lowering credit scores so the loan doesn't get the green light. That's very bad. This is the lending world as it is, right now. the decision is heavily influenced by the credit bureaus data... and the score. And, you're not going to find Fannie Mae, Freddie Mac and FHA ordering lenders to buy back loans to which their AU systems gave the nod. That wouldn't be very good PR. If you or Michelle don't want to take any of what I'm saying as true, that is your prerogative. But I'm still waiting for any of the people giving her advice on this VA transaction to come forward and explain themselves. Regarding your request for translation: Michelle asked how long one should have to pay for bad credit. I responded that (given overwhelming medical expenses) it is one year. By living here, we all agree to abide by (concur with) the laws... and take the consequences of our plights as well as our successes. However, I see your point. If someone doesn't know the rules, they probably aren't concurring with them-- they're just living under them without knowing it. My mistake. I'm sorry. The FHA guidelines are not a cruel joke just waiting for people to read them and believe them, only to have their loans denied. I'm not dwelling on Michelle's problem. She started a thread and asked a question: "Are we going the right way?" I diplomatically answered it to the best of my knowledge and provided source material that point-blank, flat-out states that the VA program is to be used for owner-occupants. What did she respond with? "Greg, once again you are wrong." She proceded with false statements about VA eligibility rules. As I said, I rest my case. However, if someone asks questions, I'll respond. One more thing: we're not talking about someone who has had just one year follwing bad credit, but, rather, five years. If you can't establish enough credit, these days, after five years, then I'll be damned. Through the course of this discussion we found that they made an error in not taking relief through bankruptcy. Perhaps she and others can learn from it; that's not dwelling on one person. This is, and will continue to be seen by more people than you, Michelle and me.
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| | Thursday, April 06, 2000 - 07:25 pm Michelle: Did your broker tell you that your parents could have an FHA loan for investment property? Risk what? That's one year from the time the court issues your discharge. That's a few months after you initiate the paperwork (filing the petition).
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| | Friday, April 07, 2000 - 01:52 pm Yes, they were going to go FHA originally, but after we found out about assuming the loan at $300 a month cheaper we decided to go VA assumption. As far as my credit, I have reestablished it and continue working on it. I currently have 3 VISA's all in excellent standing. No lates and generous increases. I only keep a very small balance on them. I have read books and followed the advice. Charge and pay off and carry only small balances. I also have a gas card (amoco) which for some reason is not on my report. I also have two department stores in great standing. I have a couple student loans but they are not in repayment. I am making paymentss on them just to have an installment loan on my reports. When we applied for a home loan we were told we would have to have all the collections paid off. If we did that it would take our entire down payment and not really benefit us. It would take another year to have the down payment. We figured we would just wait and buy when the collectins fell off. My credit score is in the 565 range. Reasons why it is low, according to the CRA's is: too short of length of time on current revolving accounts, collections and serious delinquency. I assume the last two are one and the same. I have had some luck writing the bueaus and petitioning errors because some of the collections are duplicates. I have appreciated some of your input. We are going to go ahead with the assumption, because we really need a bigger house and we can afford it. Maybe in some people's eyes it's wrong to go this route, but for us it is better than waiting the year for the collections to fall off. Maybe I should have looked at bankruptsy 5 years ago, it's to late to look back and say what if.
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| | Friday, April 07, 2000 - 04:06 pm Michelle, there's absolutely NOTHING wrong with what you are doing. You'd be an idiot to get your own loan even if your credit scores were 900+ and you never had a collection in your entire life. The only person who might have a problem is the seller, as it looks like he *might* not be able to get another VA loan until you pay off his loan. The VA has very complicated rules, but YOU are ok as long as they draw up the assumption papers. http://www.homeloans.va.gov/faqpstln.htm
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| | Sunday, April 09, 2000 - 07:24 pm HUD Directive Number 4155.1 "Unless otherwise stated, FHA's single family programs are limited to owner-occupied principal residences only... To prevent circumvention of the restrictions on FHA-insured mortgages to investors, we generally will not insure more than one mortgage for any borrower." Under the guidelines, your parents could not use the FHA program to purchase the house for you. Did the same people who told you your parents can assume a VA loan on a property they plan to use as a rental tell you that? Christine said my opinions on the VA guidelines are absurd. Michelle, when you said, "Maybe in some people's eyes it's wrong to go this route..., " what did you mean? Why did you say that if the VA guidelines support your plan?
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| | Monday, April 10, 2000 - 01:40 pm Greg, you are simply restating what you have already said before. Now I will repeat myself. My parents financed their house through VA but PAID it off, therefore they are elgible for VA benifits again and will not have more than one VA loan. As far as who told us we could go this route, I already answered this once, a real estate attorney and the VA office both said we could go this route, in addition the bank who holds the note says it's ok. When someone purchases a house under VA they have to occupy the house for at least the first 12 months of the loan. Because this is not a new loan, the 12 month period has already been fullfilled by the current owners. You DO NOT have to be VA elgible to assume a VA loan. My cousin assumed a VA loan a few years ago and they are not VA elgible. BUT in order for the seller to retain their VA elgibility for a future loan, either a VA person has to assume the loan or the loan has to be paid down below your elgible amount. You continue to quote information on new loans, the rules are different on existing loans. The reason I have been told: 1. Some VA's have difficulty selling their homes and go into default when the military transfers them, by allowing non VA people to assume the loan it saves the bank money in foreclosure. 2. When a VA is transferred but plans to return to retire in the area they can rent the house out vs. selling it. But by doing so they can not get a new VA loan to buy another house. A gentleman whom I work with told me he had a real difficult time selling a house when he was in the military and being transferred. The buyer assumed his loan and now he is not VA elgible until the loan is paid off. But to him it didn't matter because he had to get rid of the house and his credit was in great shape so he could easily qualify for other financing. The area I live in is heavily military. In the Sunday newspapers real estate agents advertise if the owner is willing to let VA's or non VA's assume their loans. One particular ad read this week read "Motivated seller. 7% assumeable VA loan." I called the agent and she told me the owner needed out of the house (already transferred out of the area and the house was vacant) and was willing to let a non VA assume the loan. The buyers credit of course, would have be pass the banks guidelines. Lastly, my comment regarding why some people may think it is wrong to go this route was directed at one of your previous comments. You said something to the affect that I should have to pay for my mistakes because other people with the same problems don't have parents to help them. Well, if people feel that way, tuff, I am going to let my parents get the financing for me until I am able to assuming this same loan using my own credit because the interest rate is so low.
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| | Monday, April 10, 2000 - 02:18 pm The only thing more frustrating than loging in to find no new messages at BayHouse, is finding the only message is one refuting Greg's usual diatribes. You got rid of Sean. Why is Greg still here?
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| | Monday, April 10, 2000 - 04:07 pm Michelle: The point of the last post was that the guidelines state that, "FHA's single family programs are limited to owner-occupied principal residences only... " In other words, the same people who told you your parents can assume property through the VA program to be used as a rental told you that they can get an FHA loan for rental property (they can't, see the link above). But even when I point it out, quoting the rule and providing a link to the FHA guidelines, you disagree. I can't come up with any more proof. On you first point, again, a veteran does not have to restore his full eligibility before obtaining another VA loan. Yes, someone who is not a veteran can assume a VA loan. I never said they couldn't. But, the property listed in your paper for assumption under the VA program are for owner-occupied property. It doesn't say "VA Assumption, Investment Property," does it? If you think about it, what I'm saying makes sense. If they are available as rental units, using the VA program, the landlords in town would scoop them up in a heartbeat (usually, they have to make, at least, a 10% down payment). The reason they don't assume them: the program won't allow it.
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| | Tuesday, April 11, 2000 - 06:05 pm Greg, you are nearly impossible to reason with. You have a tendancy to believe only what you want to believe and keep asking the same questions which I have answered numerous times. I belive this is an fruitless battle. Really, you should become a politian. READ MY POST!!! FOR THE THIRD TIME, the people who told us we could assume the VA mortage (Bank who holds note, real estate attorney and VA office) are not the same people who told us my parents they could get a loan and let us reside in the house(mortgage broker). The mortgage broker also told us we would have a higher interest rate and 5% down vs the 0 to 3% because it would be considered an investement (if we took out a new loan). Hense, we are assuming their loan (cheaper interest). Now, why should I believe you over the bank who holds the note, a real estate attorney who has been in the business for 15+ years and the VA office? The real estate attorney charges a flat rate regardless of who buys the house. After they accepted our offer they received three more, so it's not a matter of being desperate for a buyer. Personally, it is probably more effort for him to go this route versus someone who comes in with a preapproval. Why would the VA office tell us we could go this route? How would they benefit? Why would the bank tell us this? For obvious reasons, it would NOT be in their best interest to lie to us. The sites you have posted are in reference to NEW loans. Find me a site that directly states assumed loans? FYI: I called my cousin to find out how she was able to assume the VA mortgage in the house she lives in (her credit was much worse than mine) come to find out her parents assumed it and she assumed it from them a couple years later. How were they able to do this? The reason people are not scooping up the VA loans in the neighborhood for investments is because the houses are not in rental neighborhoods. In my zip code a house hasn't sold below $120,000 in a very long time. The majority of the houses are in the $200,000+ range. In order to make the mortage payment and keep up on the repairs the rent would have to exceed what most people are willing to pay in rent. Yes, some people do but the majority won't. It would be a very poor move on the behalf of the investors. In addition, the city council is very much against rentals in this suburb. I currently rent a townhouse and the management company is constantly being fined and sued by the city. Just last month they were fined $30,000 for failure to maintain a creek which runs through the property (property is up for sale now). Most investors won't go into neighborhoods were they know they will be watched and have a difficult time finding decent people willing to pay the high rent. Now, closer to the military base (different town) their is a TON of rental property (of course it is not maintained). I don't know for sure, but I am willing to wager that the investors of the propery picked it up cheap from the airman who needed to sell fast. My neighborhood consist of high ranking officers who can afford to let it sit while waiting for buyers.
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| | Tuesday, April 11, 2000 - 09:55 pm Michelle has said it numerous times, I got a response from the VA today. Here it is, in its entirety: From: VAVBAPHO/RO/LGYINQ <VAVBAPHO/RO/LGYINQ@vba.va.gov> Subject: FW: Assumption requirements? Date: Tue, 11 Apr 2000 11:34:40 -0400 Dear Ms. Baker, Thank you for your inquiry regarding the assumption of a VA loan. All VA loans are assumable. They may be assumed by either a veteran or non-veteran. The process depends on whether the original loan originated before or after March, 1988. The following information primarily addresses those loans that originated after March 1988. Does the buyer have to be eligible? An individual does not necessarily have to be an eligible veteran to assume a VA loan. For all assumptions for loans originating after March 1988 however, the person or persons assuming the loan must be qualified by the lender based on income and credit. If the assuming party is an eligible veteran, he can substitute his/her entitlement for the selling veteran's entitlement. This process allows the veteran seller to re-use his entitlement to purchase another loan. It also allows the buyer to refinance at some later date with an Interest Rate Reduction Refinancing Loan. Is Owner Occupancy Required? If a veteran assumes a VA loan using his/her entitlement, he/she must occupy the home for a reasonable time just like a regular purchase. A reasonable time is usually considered one year. The occupancy requirement does not apply to a non-veteran. What are the Requirements for an Assumption? The VA guidelines which lenders use in the qualification process for assumptions are the same as in a regular purchase. Current guidelines regarding credit are found in VA Pamphlet 26-7 (Lender's Handbook) in Chapter 5, Change 34 dated 11-13-97. These are guidelines only and some lenders may include additional requirements. First, the lender must consider your income to be adequate to cover the mortgage payment and your other expenses. Satisfactory credit generally is considered to be established with at least 12 months of good credit by the veteran and the spouse after the date of the last derogatory credit item. Collection accounts do not necessarily have to be paid off as a condition loan approval, but there must be a record of satisfactory re-payments. Account balances reduced to judgment by a court must be paid in full or subject to a repayment plan with a history of timely payments. Is There a URL? The following URLS should be available: (http://www.homeloans.va.gov/; http://www.homeloans.va.gov/handbook.htm/; http://www.vahomes.org/la/home.htm) If you have additional questions, please contact the Phoenix Regional Loan Center at 1-888-869-0194, ext. 4758. --------------------------------------------- It's so unusual and greatly appreciated to receive a response from a government agency. A human being with enough brain to comprehend my questions took the time to answer all questions completely. Mark that day on the calendar! And, I hope that it resolves this argument. As clearly stated by the VA, VA loans do NOT have an occupancy requirement for assumptions, unless assumed by a veteran who is using his entitlement. Apparently Michelle's parents are NOT using their entitlement. As I suspected, the SELLER's entitlement is reduced by Michelle's loan until it is paid off. The SELLER already fulfilled the occupancy requirement. Good luck, Michelle!
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| | Wednesday, April 12, 2000 - 08:42 am Subject: FW: Assumption requirements? Date: Wed, 12 Apr 2000 13:37:38 -0400 From: Greg Fisher To: VAVBAPHO/RO/LGYINQ@vba.va.gov BCC: gfisher@erinet.com If "The VA guidelines which lenders use in the qualification process for assumptions are the same as in a regular purchase," then the party assuming the loan must be an occupant of the subject property. From the Lenders Handbook at http://www.homeloans.va.gov/chapter.htm: 2.07 MISUSE OF VETERAN'S ENTITLEMENT a. A basic requirement of law for VA's guaranty of loans for the purchase or construction of dwellings is that the veteran has a bona fide intention of occupying the property as a home. An entitlement is not being used properly if the veteran arranges to sell or convey the property to a third party prior to the closing of the loan. b. From time to time, cases are brought to VA's attention in which a veteran had no intention when the loan was made of occupying the property as his or her home. Generally, the veteran who was a party to this illegal practice was induced to obtain a guaranteed loan by persons who were fully cognizant of the seriousness of the offense. Therefore, when VA learns that the veteran-purchaser transferred title to a home within 90 days after loan closing, VA will determine the circumstances involved in the transfer. If it is found that a sale of the veteran's entitlement was involved, the matter will be referred to the Office of the Inspector General for investigation. You were asked, "Is Owner Occupancy Required?" You responded, "If a veteran assumes a VA loan using his/her entitlement, he/she must occupy the home for a reasonable time just like a regular purchase. A reasonable time is usually considered one year. The occupancy requirement does not apply to a non-veteran." _____________________________________________ Your email: From: VAVBAPHO/RO/LGYINQ Subject: FW: Assumption requirements? Date: Tue, 11 Apr 2000 11:34:40 -0400 Dear Ms. Baker, Thank you for your inquiry regarding the assumption of a VA loan. All VA loans are assumable. They may be assumed by either a veteran or non-veteran. The process depends on whether the original loan originated before or after March, 1988. The following information primarily addresses those loans that originated after March 1988. Does the buyer have to be eligible? An individual does not necessarily have to be an eligible veteran to assume a VA loan. For all assumptions for loans originating after March 1988 however, the person or persons assuming the loan must be qualified by the lender based on income and credit. If the assuming party is an eligible veteran, he can substitute his/her entitlement for the selling veteran's entitlement. This process allows the veteran seller to re-use his entitlement to purchase another loan. It also allows the buyer to refinance at some later date with an Interest Rate Reduction Refinancing Loan. Is Owner Occupancy Required? If a veteran assumes a VA loan using his/her entitlement, he/she must occupy the home for a reasonable time just like a regular purchase. A reasonable time is usually considered one year. The occupancy requirement does not apply to a non-veteran. What are the Requirements for an Assumption? The VA guidelines which lenders use in the qualification process for assumptions are the same as in a regular purchase. Current guidelines regarding credit are found in VA Pamphlet 26-7 (Lender's Handbook) in Chapter 5, Change 34 dated 11-13-97. These are guidelines only and some lenders may include additional requirements. First, the lender must consider your income to be adequate to cover the mortgage payment and your other expenses. Satisfactory credit generally is considered to be established with at least 12 months of good credit by the veteran and the spouse after the date of the last derogatory credit item. Collection accounts do not necessarily have to be paid off as a condition loan approval, but there must be a record of satisfactory re-payments. Account balances reduced to judgment by a court must be paid in full or subject to a repayment plan with a history of timely payments. Is There a URL? The following URLS should be available: (http://www.homeloans.va.gov/; http://www.homeloans.va.gov/handbook.htm/; http://www.vahomes.org/la/home.htm) If you have additional questions, please contact the Phoenix Regional Loan Center at 1-888-869-0194, ext. 4758.
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| | Wednesday, April 12, 2000 - 09:18 am Greg, I'm sorry to have to say that your postings are not exactly an enhancement to this forum. You've been pestering Michelle, she spent a tremendous amount of time trying to explain certain real estate principles to you. And you just don't get it. It's like talking to a rock! You're wasting the posters' and readers' time. You're wasting MY time. I'd really appreciate it if you posted your rants on your own site, feel free to post an occasional link here for the people who WANT to read it.
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| | Wednesday, April 12, 2000 - 01:09 pm Christine: Amen. Thank you for your clarification. Greg: You could give anyone a headache. You really need to a get a life of your own and stop making mountains out of mole holes. Enough is enough.
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| | Wednesday, April 12, 2000 - 01:59 pm Greg- Do you think Michelle, her attorney, or her parents are doing something illegal? Yes, or No. Christine- Please don't shoo Greg away... The messages are getting thinner as it is. IMO Greg was tactfully debating a questionable practice. As a Vet, I too don't like to see the system abused. At the very least it appears Michelle is violating the spirit of the VA home loan program. Michelle- Please remember men and women in uniform DIED for those benefits. If you are upset because you expected more warm-fuzzy answers...
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| | Wednesday, April 12, 2000 - 02:47 pm Well, as a veteran of the Navy, I understand and agree with your sentiment. I'm afraid that there are two problems with your stance: No messages are preferable to annoying messages from Greg, that's number one. Two, Chirstine has made it clear on a number of occasions that she isn't interested in debate on questionable practices, unless the practices in question are hurting consumers. Anything that screws the system is a good thing, and to be encouraged, if I understand her position correctly. It is unlikely that this site will, any time soon anyway, endorse anything like an open minded, fair debate. Christine has an agenda, and as long as you do not conflict with that agenda, you are allowed to post here. This is why both Sean and RCB are no longer welcome here. This is why Greg has worn out his welcome. I agree that an open forum would see more traffic - I stick around in the hopes that watching the traffic drop off will help Christine to realize that - but don't hold your breath.
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| | Wednesday, April 12, 2000 - 04:05 pm Jack - my father fought in WWII. I don't believe he is abusing his rights. I've talked with my parents about what they are exactly doing. They are assuming the loan. They are not going to use my dad's elgibility. (I originally thought they were) The family who owns the home are both in the military and only used one of their elgibility. Therefore, it's not important for them to regain the benifits which was used on this home loan. I think my father has seen more blood and death than the people who own the house. My parents are helping me. I am the one paying for everything. They are only using their credit. It's not like they are assuming the loan to make a profit or going to rent the place out. We are going to assume the loan from my parents in a year. From Christine's post, it sounds like we might not even have to wait a year. My credit has no blemishes in the past 5 years. How is this bad and abusing the system? I guess I am unsure of why everyone is giving all this slack. Their are people out their who don't have the credit to buy houses and have to rent. Why not slam all the landlords who buy houses to make money? If there weren't people who were buying property to rent out, where would all of these people live? My current landlord takes my money every month and hasn't made a single repair in the 5 years I have been here. I have never been late with my rent. And now my parents want to help me out because they see how hard I have saved the past 5 years to come up with the $8,000 to buy the house (in addition to finishing up school and getting a stable job). Would it be any different if we assumed the loan directly from them? Maybe the world would be a better place if people would help each other out instead of figuring up sceams to screw them.
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| | Friday, April 14, 2000 - 12:23 am Why can't people understand that it's in the vet's interest to have an easily assumable loan??????????????????
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| | Monday, May 08, 2000 - 05:18 pm Just an update for those who are interested. So far it appears everything is on track. We are due to close in 3 weeks. My parents have gone through the loan process. First my mother only wanted to reveal certain parts of their assests. She figured if she showed them her bank accounts that would be enough. Her accounts have over $200,000 in them. Well they wanted her income tax return, from them they found out their true net worth. Wasn't that big of a deal. My mother is just very secretive about money matters to everyone but family. I was worried what the bank would say when they saw their income tax and all their W2 from their investments (not to mention the income they had last year being retired which was 6 figures). The lawyer had to reassure my mother that they would only use the house as equity and not their income or investments. The bank sent them a copy of their factual report. I talked with the banker who said my fathers FICO was 890 and my mothers was 832. He said he wasn't surprised by how well their investments were doing and that people of that age usually don't reveal all their assests. He said their would be no problem with the loan going through but we still haven't received it in writing. Should come later this next week.
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| | Monday, May 29, 2000 - 05:32 pm We closed on our house!!!! Everything went as planned. Closing went better than planned. The seller paid all of our closing cost plus the first payment. Because it was an assumed loan a payment would have been due three days later. Probably won't be back on here for a week as it will probably take that long to find the computer amongst the boxes.
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| | Monday, May 29, 2000 - 08:55 pm Congratulations! When assuming loans that first payment is something to look out for since it covers the interest for the time you didn't own the house. Anyway, it's good to see that sometimes things work out well. You got a GREAT loan!
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