VA Loan Guidelines for Selling A House
Ask Kate about VA Loan Guidelines for Selling A House: Kate, We are charged with selling my late father's home. A neighbor of the home for sale wants to purchase the home. We have advised them the home will be sold "as is".
The individual has credit concerns and is looking to a friend in another state to help with financing the mortgage. The interested party has a letter of eligibility from the VA for almost three-fourths of the amount of the sales price.
Interested party stated she does not feel her credit is good enough to have the loan put in her name. So I am surmising the entire loan may go through "friend".
1) Should loan be secured through friend's state or state in which home is located?
2) Home is being sold "as is". Will mortgage company, bank, FHA or VA require necessary code updates prior to approving loan?
Any additional pointers or red flags you see ahead? Thank you!
Kate Answers: VA Loan Guidelines for Selling A House
Selling a house in its current condition with no promise of repair is an agreement between home buyer and seller.
But the lender is not obligated to lower its basic property requirements to comply.
I was asked many times to instruct an appraiser that a house was being sold as-is. Appraisers frankly don't care.
That may sound cold but this is the reality facing sellers, especially with FHA and VA loan guidelines.
Conventional, FHA, VA Minimum Property Requirements
What does the Veteran Administration require its appraisers to watch for? Safety, sanitation, and structural soundness. In spite of sounding quite basic, VA appraisals are notorious for requiring repairs to the subject property before the loan funds.
FHA (Federal Housing Administration) also has minimum property standards.
Now depending on the degree of "as-is", a conventional mortgage might be hold the path of least resistance.
Conventional, FHA, VA Occupancy Requirements
More than where
the mortgage is originated, if the person responsible for borrowing the money lives in a different state from the subject property, it will be considered an investment (non-owner occupied) purchase.
Non-owner occupied loans require greater down payments, more reserve savings, higher interest rates and additional closing costs. In general, a conventional loan, not FHA or VA, would be the best bet for the buyers who are not purchasing a personal residence.
Many veterans ask if a friend can co-sign for them? This is tricky (and by the way, it could be unlikely to find a willing lender) so I am going to quote directly from the Veteran Administration's Website
"Q: May a veteran join with a non veteran who is not his or her spouse in obtaining a VA loan?
A: Yes, but the guaranty is based only on the veteran's portion of the loan. The guaranty cannot cover the nonveteran's part of the loan. Consult lenders to determine whether they would be willing to accept applications for joint loans of this type. Lenders that are willing to make these types of loans will likely require a down payment to cover risk on the unguaranteed, nonveteran's portion of the loan. Unlike other loans, the lender must submit joint loans to VA for approval before they are made.
Both incomes can be used to qualify for the loan. However, the veteran's income must be sufficient to repay at least that portion of the loan related to the veteran's interest in (portion of) the property and the nonveteran's income must be adequate to cover the rest."
FHA allows non-occupant coborrowers for maximum financing, but stipulates he or she should be a close relative or long-established friend of the family.
Exceptions To Conventional, FHA, VA Loan Guidelines
One more thing. There are many exceptions to guidelines due to personal circumstances or qualifications. This information is intended as a jumping off place in your conversations. The danger would be for you to assume your buyer cannot use FHA or VA, for example if the friend is involved in the financing. But now you have a few questions you can ask regarding the financing of your late-father's house.
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