So we've had our house on the market for about 2 months now FSBO, and we've been negotiating with a family, and we've come to a verbalized deal where they'll assume the mortgage and pay us cash for the remainder of our equity. We've looked into the assumption process, and we'll be able to do it because it's a VA loan. So if everything goes through, they'll have a new house in about a month or so.
The downsides: When we transfer the mortgage to them I wont be able get back my VA loan benefits, because the only way that can happen is if the assumer is also military (or prior military) and they aren't. The other downside is we currently have APR of 5.25%, which isn't bad, but they were pre-approved for a loan for 3.25%. Unfortunately the loan they were approved for wasn't enough to cover buying our house, so that's why they wanted to go the assumption route.
So let's say we finalize all of the paperwork, and they assume the loan. Great! But could they then go and do a refinance right away with the bank that gave the 3.25%? If so, that would reduce their monthly mortgage payment by about $300, AND if my thinking is correct, I might have MY VA loan benefit, because the loan would no longer be a VA backed loan, freeing up that benefit for me to use again in the future. Is this possible? Any tips?
that is a very specific question you should discuss with your VA office.
Also for the following discuss first and for most with your real estate attorney and if it is a go have them draw up the mortgage paperwork:
Without knowing how much you owe = what is the possibility of some owner financing? If what they can borrow is sufficient to pay off your remaining mortgage, then you taking back a 2nd that would cover the difference. Set it up with a rate slightly higher than market for the risk you are taking on, with at the most a 30 yr amortization schedule with a balloon at the end of 3 or 5 years (nothing longer).
I think you should concern with property expert. Now you are just assuming your knowledge, but there are various issues need to check to provide VA loan benefits. So, for lease by owner you need to sure about all the pros and cons. Its better to concern with good expert or should go the Loan office for further inquiry. Since before applying to any case your point should be valid to get proper benefits.
Posts: 1 | Location: 8665 E Speedway Blvd, Apt 109 Tucson, AZ 85710 | Registered: Nov 29, 2012
Has the VA approved the assumption? It seems to me that if the other loan was $300 a month less and they were denied they can't afford your home. If they are allowed to assume the loan aren't you still responsible until it is paid off? Please consult with your local VA rep for all the ins and outs of this and maybe a loan officer you trust.
There is no way any of us can answer your question but, it is a good one, and I hope you will post back when you learn the answer from a qualified representative from the VA ~ be sure to to get it in writing before you act on it ~ since, all too often one hand doesn't seem to know what the other is saying when it comes to interpretations of some federal programs. Good Luck!