Subject to and VA loan - Posted by red

Posted by red on July 15, 2002 at 22:00:49:

No offense taken. Hope it goes through and you make that return. Looks like a very nice home. Excellent web site by the way.

Now I’ll do some studying on CFD.

Thanks for the help.

red :slight_smile:

Subject to and VA loan - Posted by red

Posted by red on July 15, 2002 at 12:00:00:

Can you do a subject to on a VA loan? If so, could you please elaborate on it? I ran across a house that has a VA loan on it and don’t know if a subject to can be done.

FYI, here are the numbers:

156K Mortgage (=Market Value)
@ 7.3% (about 1200 PITI/month)
Seller will pay 6 payments for taking over payments
No back payments

I will appreciate your responses.

red

Re: Absolutely! - Posted by Stacy (AZ)

Posted by Stacy (AZ) on July 15, 2002 at 13:01:00:

Red, I’d do this deal it a millisecond! Your seller is going to make 6 months of payments? Jeez, get it signed up TODAY!

VA loans can be taken over by getting the deed, absolutely. But did you know you can buy a VA property via land contract (contract for deed, bond for deed) WITHOUT VIOLATING ANY DUE ON SALE CLAUSE? So, you have a choice. Take it over by getting the deed, which violates the DOS clause, or take it over with a CFD, with no risk of anyone calling the loan. You can even change the insurance, tell the lender you now own it, and they can’t do a thing to you as long as the payments are being made. I love VA loans.

Still put it into a land trust, though. It protects the property from any liens that might come from the seller after the sale.

If you want to see the VA circular that details this, look at item 12 at the following link.

http://www.vba-arms.intecwash.navy.mil/admin26/circular/26_90_37.doc

Re: Absolutely! - Posted by red

Posted by red on July 15, 2002 at 20:31:31:

Thank you.

Here are a few more questions:

In the archives, there was a dicussion on the issue of
"getting back one’s eligibility" regarding VA loans.
If I understand correctly, even if one gets by the due
on sale clause as long as the bank does not find out
about it, the seller would still have problem getting
a second mortgage insured by VA if VA’s total exposure
becomes $200K some amount against that individual. So
if my seller wants to buy another house and get
another VA loan, then Subject to isn’t gonna solve his
problem in a way that would address his needs. Right?
Or am I missing something?

And with respect to CFD, I surmised from reading in
the archives that it may be to one’s disadvantage to
buy on CFD. You had mentioned that you liked VA loans,
is it because it is less risky to do CFD on a VA loan
and you don’t have to worry about due on sale clause
or for some other reason?

I did do some research both in the archives and
through some of the courses offered online. I am
somewhat knowledgable and have recently started to
look for deals. This is the one I felt I can take a
reasonable risk as my first deal and still have
limited downside exposure. May be later I can afford
to take on more risk for a higher turnover. We’ll see.

Thanks for your time. I appreciate it.

red

PS Stacy, feel free to post your response here instead of sending it to my email address in response to my earlier email for the benefit of others on the site.

Re: Absolutely! - Posted by Stacy (AZ)

Posted by Stacy (AZ) on July 15, 2002 at 21:29:57:

“So if my seller wants to buy another house and get
another VA loan, then Subject to isn’t gonna solve his
problem in a way that would address his needs. Right?
Or am I missing something?”

What I tell my sellers, if this comes up, is that they don’t need to use their VA elig. to buy a house. There are so many incredibly easy loan programs now, the VA program doesn’t really set itself apart as anything spectacular. Also, if they are truly motivated, they’ll have to swallow hard and go through with the deal. I always tell them my intention is to get the loan paid-off in 12 to 24 months. I’ve never had one go beyond 12 months, so I can throw that out, too. But, of course, no promises as to when.

“And with respect to CFD, I surmised from reading in
the archives that it may be to one’s disadvantage to
buy on CFD. You had mentioned that you liked VA loans,
is it because it is less risky to do CFD on a VA loan
and you don’t have to worry about due on sale clause
or for some other reason?”

I have no problem buying on CFD. Especially a VA loan, for the DOS issue. Other people have a problem buying on CFD? Fine. To each their own. Their state’s statutes may make it undesirable, I don’t know. General rules like that bug me. There’s room for many different tools in our toolbelts. If we all just blindly follow all the “rules”, we’ll miss out on many opportunities.

I agree that this may be a good first deal. 6 months of payments for you, right from the start is a great buffer! Get it under contract and L/O it for 5% to 10% higher than current FMV, and maybe get some cash flow. I don’t see how you could fail, unless the property is in a bad area.

Good luck.

PS; Sorry I was a little terse with you. Turns out one of the buyers I told you I was waiting for called just now and wants to go ahead with the L/O. This one will bring an amazing return. If you’re interested you can see it on my website at

http://www.phxhomebuyer.com/HomesForSale.htm

Maybe you brought me some good luck???