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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FREE Loan Modification Help Available from NACA–Save the Dream Tour is Happening Right Now in Los Angeles

I have blogged about NACA in the past–they are the organization that was able to get me and several people I know and thousands of others great loan modifications after our banks had already denied us…and they did it for FREE! They saved me about $1620 per month!

If you only own one property (the American Dream), or one property that has a mortgage on it, then NACA may be able to help you too.

You can attend one of the events like I did or you can do the process online and/or via one of their local offices; Oakland is the closest office to the Bay Area.

From what I have heard, people have the best success by attending the events. A “same day solution” may take 2-3 days to actually happen because of the large number of people who attend the events in person, but it is well worth all the time sitting and waiting, and overnight expenses if they are able to help you. I suggest taking food and drinks in with you so that you do not haveto pay the high food prices and eat junk food while you are there. Take a good book or something toread or do to occupy your time while you wait.

If your loan is owned by the bank you make your payments to and the bank is one that they work with, then you should have your modification terms before you leave the event, aka your “same day solution.” If your loan is only serviced by the bank you write your check to, and is actually owned by an investor or group of investors, then they can write up a proposal of new loan terms that represent an affordable mortgage solution for you and get them submitted to your lender, but you will usually have to wait 30-45 days or so to see if the investor(s) who own(s) your loan will agree to the changes.

From the NACA.com website:
“NACA’s historic Save the Dream Tour has been an incredible success with hundreds of thousands of participants. Thousands of homeowners received same day solutions saving hundreds some over $1,000 a month. All of NACA’s services are FREE. Below are the cities we’re planning to host events in 2011.

Los Angeles, CA Jan 20-30L.A. Sports Arena

Phoenix, AZ Feb 3-7 Phoenix Convention Center

Jackson, MS Houston, TX Minneapolis, MN
Seattle, WA St. Louis, MO Denver, CO
Atlanta GA Kansas City, MO Long Island, NY
Miami, FL Oklahoma City, OK Baltimore, MD
Orlando, FL Lansing, MI Hartford, CT
Columbus, OH Memphis, TN Chicago, IL
Las Vegas, NV Pittsburgh, PA Raleigh/Durham, NC
Dallas, TX ”

Visit NACA.com to find out more.

If you go to NACA, I would love to hear your feedback!

If NACA cannot help you and you decide that you need to sell your home or you would like to know if you have other options you did not know about, my team would be happy to help you! You can contact me directly at 925-577-8692.

Good luck!

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Livermore Real Estate Market Update–Probably have not hit bottom yet

You may need to short sale or do a loan modification if you have been struggling to make payments hoping your underwater home would increase in value so you could do a regular sale.

Lots of folks have asked me if home prices have increased in Livermore and I the answer is, not right now. In the first part of 2010, home prices did get a little better, but that was probably due to the tax credit incentive that the government was offering increasing demand for homes and with increased demand comes increased prices. Once no new real estate purchase contracts would qualify for the tax credit, home prices peaked in the second quarter of 2010, and began decreasing steadily in the second half of the year and home prices have returned to about the same as their Sept 2009 low, which were about the same as Livermore Home Prices in 2003 prices. Below, I have provided 3 charts to demonstrate the market data.
The first is a 10 year Livermore home price market history; the second a 5 year history; and the third is the real estate home price history from Oct 2009-Oct 2010 (the latest Zillow data available).If you have questions, let me know.

Looking into the would-be crystal ball that so many people think I have, I do not think we have hit bottom yet. I think as long as we are dealing with mostly foreclosures and short sales in the market, home prices will not increase and I think we will likely hit bottom in our around the end of 2012. Only time will tell.
So, for you homeowners who owe more money on your home than it is worth and are struggling with your mortgage payments hoping the market will come back in time so that you can sell your home via a regular sale and not a short sale or possibly lose it to foreclosure, you should realistically consider a different option since it will be quite some time before home prices will be back to where they were just 5-6 years ago. If you want to consider a loan Modification, I highly recommend working with NACA. Their services are free and if your loan is not investor owned, but is actually owned by the bank you write the check to, you can usually get a loan modification completed in just 2-3 days if you attend one of their save the dream events. They have one coming up this month that I will be blogging about, but you can check it out on their site at NACA.com. Their services are much better at the Save the Dream Tour Events than they are using the services online and the process is much quicker! I and folks I know have personally used NACA to complete loan modifications and I highly recommend them. If you have questions, let me know.

If loan modification is not the right option for you, a short sale may be what you need. I have been specializing in short sales for almost 4 years now and have lots of experience helping home owners get out from under upside properties usually with little or no out of pocket costs to the seller! Our goal is a non-deficient short sale for our client so that when the property closes escrow, the home owner has no more obligation to the bank. Many agents do not even know the difference between a deficient and non-deficient short sale. If you would like to know more, just let me know. I am happy to give free Alternatives to Foreclosure as well as Short Sale consulations to homeowners in Livermore, Alameda County, Contra Costa County, and parts of San Joaquin, Santa Clara, Solano and other counties.Just send me an email or give me a call.

Livermore Historic Market Data-Last 10 years

Livermore Zillow Home Value Index

Livermore Historic Market Data-Last 5 years

Livermore Zillow Home Value Index

Oct 2009-Oct 2010 ONLY- Livermore Market Data

Livermore Zillow Home Value Index

Buying a Home in the Bay Area after doing a Short Sale in Livermore, the Tri-Valley, East Bay Area & California

I had a very exciting thing happen to me a couple days ago while sitting in my Realty World-No Pressure Realty office in downtown Livermore, CA.  A couple of great past clients called me wanting to purchase a home. What was great about these clients is that I helped them short sale their primary residence in Vacaville, CA  in Solano County a little over two years ago and they want to buy a home in the Concord, CA area in Contra Costa County because it would be closer to the wife’s new job location.  They were interested in conventional financing options as well as possibly using a VA loan since the husband is in the military.

They have a unique situation…they had moved into their rental property in Fairfield, CA after they did a short sale on their primary residence in Vacaville, CA. That property is also under water, so I needed to find out how they would be able to buy a new home in Bay Area while still owning a property that was upside down.

As soon as they contacted me, I contacted a few of the loan consultants that I work with to see if they would be able to help them get a loan for a new property.

On December 1, 2010. Margalit Ir, Mortgage Loan Officer at Bank of America stated:

The guidelines at Bank of America to purchase a property after a short sales is as follows:

 Loan to Value > 80%  will be 5 years from the date of the short sale

 Loan to value < 80% will be 2 years from the date of the short sale.

Credit must be re-established with good repayment history.  Rental Income can only be considered if rent has been received for two years and is declared on the 1040 Tax returns.  Schedule E.

I also spoke to Delmy Steward, a great Sr. Loan Consultant at J.W. Bradley. She responded to their scenario of getting a loan after doing a short sale as follows:

I will check into it but I think we need 3 years from the date of a short sale/foreclosure.  They are viewed the same on the guidelines.  I do VA loans also and they do require a 3 year period from the short sale/foreclosure …

Since they are occupying a home that is upside down and does not have 30% equity even if they put on the application they will rent it out, we can’t use rental income to offset payment.  They will have to qualify with the old and new payment . I will have run their credit to be sure where they stand.

Both Delmy Steward and Margalit Ir are fantastic very resourceful loan agents who can work quickly and often get loans done when others cannot. 

If you or someone you know would like to speak to Delmy Steward or Margalit Ir about getting pre-qualified or preapproved for a loan, Margalit Ir can be contacted by phone at (925) 208-2475 and via email at margalit.a.ir@bankofamerica.com ; her website is http://mortgage.bankofamerica.com/margalitair . . Delmy Steward can be reached by phone at 925-864-7717 and via email at delmy.steward@wjbradley.com.

Another possibility is FHA financing after completing a short sale. If the short sale was non-deficient and the seller had not been late on any of their mortgage payments, and a few other guidelines, there is an FHA loan program that does loan to people right away after doing a short sale. Given the current California housing market and the fact that most of the properties for sale in Livermore, Alameda County, Contra Costa County, Solano County, the tri-valley, and East Bay, Bay Area are either short sales or foreclosures, a person using the special FHA financing after doing a short sale would likely need to rent or live in some sort of transitional housing for a few months until a new property could be identified and purchased. There is definitely a benefit to using FHA financing…with its very low 3 1/2% down payment, so the inconvenience of transitional housing may be worthwhile for many.

I will keep you posted to let you know how things turn out with my great clients.

Are you considering buying a home in California before or after doing a short sale? Have you already bought a home after completing a short sale? Did you use conventional or FHA financing? Who did your loan? Did you get a loan from a bank or a mortgage broker? I would love to hear about it!

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Congress Extends Tax Credit Closing Deadline Until September 30, 2010

Congress Extends Tax Credit Closing Deadline Until September 30, 2010

Congress has passed a bill to give homebuyers another three months to close on their home loans and receive tax credits up to $8,000. The bill applies ONLY to homebuyers who met the April 30, 2010, deadline with a signed contract to purchase a new or existing primary residence. The bill would extend the deadline to September 30, 2010, for homebuyers to close on their real estate transaction. The previous deadline was June 30, 2010. President Obama is expected to sign the measure into law. He better or he is going to have an estimated 180,000 homebuyers (as estimated by the National Association of Realtors) who will be very angry at him since that is the number of buyers estimated to be affected by this law.

This is great news for buyers who have had offers in on Short Sales before the April cut-off date and for loan agents who promised their clients they would meet the June 30, 2010 cut-off date and were not able to deliver.

As we all know, or you should be learning, most banks are taking their sweet time processing short sales, so this will give most buyers time to close their transactions. If you are a buyer in a transaction with Chase as the primary lender on your short sale, I will warn you now, do not get your hopes up, especially if the homeowner is current on their mortgage payment. Chase has a nasty habit of moving those short sale files into the loan modification department repeatedly because the system canot figure out that people who care about their credit do whatever they can to keep their mortgage paid. If a file is not easily determined to be in imminent default or in default, the bank’s system moves these files to the loan mod department…where the people cannot read the big bold letters SHORT SALE that agents often write all over their offers so this very problem does not happen. I have had this happen three times with the same file this year. It is also funny that even though the system can move an account number from one department to another, it cannot transfer all of the associated documents…AKA, the SHORT SALE PACKAGE from one department to the other. All of this moving from department to department pretty much starts the process over with each change. Sellers have to provide updated pay stubs, bank statements, etc. continuously. Agents of these short sales need to call at least twice a week to make sure their file is in the right department and that they still have everything they need AND that the file is still moving forward. It is truly amazing how they supposedly lose various documents continuously.

If you have a Chase SS going and the seller has stopped makig their payments, there may belight at the end of the tunnel for you. However, I heard today from my short sale network, that Chase is not releasing deficiencies on a lot of their short sale in the new version of their approval letters. If sellers will only agree to a non-deficient short sale, that may kill a deal.

I am expecting some Chase approval letters to come over in the next couple of months. I will let you know what my experience is. If you have had received a Chase Approval letter recently, I would love to hear what your experience has been. Would even love to see a copy of the letter…with anmes and account numbers black-out of course.

I think the right bill should have said that anyone in contract as of April 30, 2010 and closes that transaction will qualify for the credit. Why do they have to have a cut-off date? What are your thoughts?

I have a short sale in Livermore, CA right now where a loan agent told the buyer they would close on the 28th and docs did not arrive until 6/30/2010….two days after the buyer was supposed to close escrow. The buyer now has decided to wait a couple weeks before he closes escrow and have the docs redrawn.

I personally think the loan agent of the bank/company the loan agent works for should have some liability for broken promises. You simply should not be able to make promises like that and get away with no keeping your end of the bargain in my opinion.

Do you think Obama should sign the bill into law? Why or why not?

Do you think there should be some sort of punishment for loan agents who made promises that they did not keep and may now be bailed out by the new law if President Obama signs it?

Have you or someone you know been negatively impacted by this deadline or loan agents who could not make the deadline? I would love to hear your thoughts and about your experiences!