Some Active Military & Veterans Can Buy a New Home with a VA Loan Even if Their Current Home is Upside Down and Even if They Have Done a Short Sale on a Property in the Past!

The biggest challenge for people whose homes are upside down (that is, they owe more money on it than it is worth) is buying a new home. Typically, they will one of two alternatives:

1) They will have to short sale their property and wait 2-4 years before a lender will loan them money to purchase another home.

2) Buy another property when their current one is upside down .

In order to do option 2, your payments on the first property have to be current, you have to have a legitimate reason for purchasing a new home (cannot just be buying another home so you can bail on the first home), and you have to qualify for the payments on BOTH the old and new properties! If the underwater property is a rental property and you can provide evidence that you have been renting it out for at least 2 years, then a portion of the rents can be used to off-set the ability to pay for both properties.

Active Military and Veterans have a third option because the VA does not have what they term a Departing Residence Rule; that is, they do not have an equity requirement for the home that the person is leaving. That means that they will loan money to buyers who have an upside down property. Of course, there are some requirements and they all have to do with the new lender doing their due diligence to make sure that the buyer is not planning to do a buy and bail. I never have understood why a new lender would care what the buyer does as long as they pay their new mortgage that they are underwriting, but after the huge numbers of buy and bails that happened in the not so distant past, there have been new guidelines put in place to help prevent that from happening as much as possible in the future.

Here are the main non-credit score related guidelines for the third option per my understanding after speaking with several VA lenders:

1)       The current under water property cannot be secured by a VA loan.

2)      The current property cannot be on the market for sale.

3)      Person must be current on the payments for the underwater property.

4)      The buyers have to adequately answer the buy and bail related questions that the lender asks them (for example, why are they moving. If the person is moving to a comparable home in the same area simply because it is cheaper, that would not pass. There needs to be a reasonable explanation as to why the person needs to move).

5)      Buyer must be planning to rent out their current property OR qualify to pay both mortgages.

6)      If the buyer is planning on renting out the original property, then they will usually have to provide adequate documentation to the lender showing that they have secured a tenant for the home prior to the loan being funded. They used to accept a copy of a signed rental agreement, but since those can easily be forged, they usually require additional proof that you have a real tenant and not just a friend or make believe person on the rental agreement. Things like copies of the deposit check or perhaps evidence of the deposit being cashed or other things may be required.

7)      If the property is being rented, then the amount of the rent can be used to off-set the amount of the “be able to make both payments” requirement.

According to the VA lenders I have spoken to, there is not a requirement regarding how long the property has to be rented before it can be sold, so if being a landlord and renting the property does not work out for you for the long haul, then there would not be a reason that you could not sell it later.

Be aware, however, that if your home us still under water when you decide to sell it,  your short sale lenders for your property may require you to bring some amount of money to the table to do the short sale if they do not perceive you as having a hardship, especially after being able to purchase the new property. One explanation for your financial ability to purchase the property is the $0 downpayment requirement for VA loans and the rent from your tenant, so that latter part should not factor in too much especially if you had a real reason for needing to move…aka…a viable hardship.

In California, if you have original purchase money loans, you can often not pay anything to the short sale lenders to do the short sale because of the loans being non-recourse in the state of California. Refinanced loans and HELOCs, even original purchase money HELOCs, are treated a little differently, so I would advise you to consult with an attorney and tax professional to find out any potential implications for your particular situation. If you are current on all of your payments, old property and new, I can almost guarantee that you will need to pay them something, unless the loans are original purchase money loans and there is not a HELOC involved.

I have some great Active Military past clients whom I helped short sale their primary residence a couple years ago and they moved back into their previous primary residence which they had rented out. Since moving back into their previous home, they have had another child and their home just is not big enough for them anymore, especially when the husband is deployed and they need an extra bed for the additional adult who comes to stay with them to help take care of the children while the mother is working. Just last month, I helped them get into contract on a brand new home big enough to accommodate their family. They plan to rent their current home, just as they did before they moved back into it a couple years ago, so will just need to secure a renter and provide documentation of the rental agreement prior to the loan being funded.

The VA loan limit in Alameda and Contra Costa County is $1,000,000 and is $417,000 in harder hit areas like San Joaquin and Solano Counties. If the property the person is wanting to buy is more than the loan limit, the buyer will have to pay the difference, or if you use the lender my clients are using, you only have to pay 25% of the difference!

If you or someone you know is eligible for a VA loan and currently own an upside down property and need to move, give me a call or send me an email and we can discuss your situation to see if we might be able to get you into a new home using your $0 down VA loan. My cell is 925-577-8692.

I am glad there are at least some lending perks for our military folks right now since they put their lives at risk so we can all have the American Dream.

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Beware of Latest Real Estate Rental Scam in Livermore, and the East Bay Area

Renters, Landlords with Vacant Properties & Sellers with Homes on the Market, Beware of Latest Real Estate Rental Scam in Livermore, the Tri-Valley, East Bay Area, Online, and on Craigslist

There is a real estate scam that is taking place in the Bay Area that I have personally witnessed. Long story short, the Bay Area Real Estate Rental Scammers are renting-out properties that they do not own! There are variations of the three scenarios below. They go something like this:

1) A scammer locates a vacant property and begins marketing it for rent as if they own it; sometimes the window covering have been left up so people can actually see inside. Sometimes the scammer says that they live out of the area or out of the country, has the tenants answer a few questions via email, and agrees to rent the property to someone and send them the keys once the prospective tenant sends them the deposit funds and sometimes first month’s rent; money is sent. Of course, when the people send the money, they do not receive the keys. They same property is supposedly “rented” to several people who send in money and do not receive keys.

2) The scammer locates a vacant property that is not for sale and changes the locks on it and shows the home as if he is the owner. He then writes up a bogus rental agreement, collects the money and gives the tenants the keys to the property; sometimes they collect rent for a while, but usually they disappear after the keys are given. The “tenants “ move in and later either the actual homeowner or the bank, if the property has been foreclosed on, discovers that these “tenants” are living in the property and have to deal with getting them out.

3) A similar scenario is that the home is actually listed for sale or rent (it may or may not be vacant) and the Bay Area Real Estate Scammer snags the photos, property descriptions and such from the online listing sites and advertises the property online as if they own it and tells people that the current tenants are not being cooperative for showings, so they will have to rely on the marketing photos if they want to rent the property. Sometimes the person is local and sometimes not, and the rest of the story goes like scenarios 1 & 2 above.

I have seen both scenarios #1 and #3 personally. I saw and see #1 on quite often. Scenario #3 happened with one of my listings in Dublin. The prospective tenants actually knocked on the door of the property with the Craigslist posting in hand and asked the homeowners/sellers, whom they thought were the uncooperative tenants, if they could see the inside of the townhouse style condo since they could not see through the windows. The sellers got a copy of the marketing info the people got from Craigslist and emailed it to me. We flagged the posting on Craigslist and researched to see what kind of action could be taken. Sellers reported it to the Federal Trade Commission, but nothing came of it.
The craigslist ads usually have an anonymous email address, so unless Craigslist gets involved, there is no way to track who posted the ad.

If you own a vacant property, make you or someone you know goes into the property on a regular basis and make sure that the locks have not been changed , no one has moved in, that nothing is out of place, and there are not any signs that someone has been in the property or walking around it. You should notify the neighbors of the vacant property regarding whether or not there should be people coming or going, so they can help you keep an eye out. Keeping mail from being delivered there, newspapers out of the driveway, marketing flyers off the front door and porch, the blinds shut, and the gates locked help to keep people who should not be on your property away.

If you are looking to rent a property, make sure that the person trying to rent it to you actually owns the property! You can find out by giving the name of the “owner” and the property address to me or a real estate agent you know and we can quickly pull the county records for you and let you know if you are actually dealing with the owner of the property or not.

If you would like a free list of all the homes for lease that are listed with agents, just email me your criteria (for ex. cities, min bedroom and baths, max rent per month, if you have any pets, and any other requirements you have) and I will set up a free Client Portal for you on my site and will send you notifications of homes listed for rent by agents on the MLS and any new ones that come on the market. You can also visit my website and search for rental properties without setting up a Client Portal for free and without obligation. You will need to click on the Homes for Sale link , enter your search criteria and then select “lease” as property type. You can come back as often as you like to search homes or if you want to be sent automatic updates of homes that meet your criteria, you will need to quickly set-up a free Client Portal on my site, input your search there and select automatic notifications.
I hope this information allows you to avoid being scammed in Livermore, the Tri-Valley, and the East Bay Area!