VA workaround - Posted by aphco

import · March 17, 1999, 1:27pm

Posted by JPiper on March 18, 1999 at 01:23:50:

The due on sale clause is effective regardless of who it’s sold to.

VA’s loan guarantee is in place regardless of what happens. If you formally assume the loan and get a release of liability, then the seller retains that portion of his VA eligibility. There is no preferential treatment that I’m aware of for a Veteran assuming the loan.

JPiper

import · March 17, 1999, 1:27pm

VA workaround - Posted by aphco

Posted by aphco on March 17, 1999 at 14:27:42:

(same post from “cashflow forum”; I should have posted here.)

First off, let me say, bare with me. I’m a beginning investor, therefore, some of my assumptions/theories may be a bit off. My situation…

There’s a house that I want (possibly to live in) which has a qualifying VA assumable mortgage on it. It’s a 4br, 2.5ba priced between 10K-15K higher than the comps suggest for the neighborhood. The sellers have agreed that the house price will probably need to be lowered. To assume the 8% mortgage, they want 3K down. They’ve been reassigned and must leave in late June/early July. On the brochure for the house, it is written “cash to mortgage = 17,550”. Anyone know what that means? Is that how much room they have to negotiate on the price? Does this mean the amount remaining on the mortgage is actually 189,000 - 17,550 = 171,450?

I only want to have to qualify for the VA loan as a last resort. (I want to put out as little cash as possible right now to acquire this property.) Below outlines my steps to circumvent the VA (due on sale clause). Please let me know if this will work and if not, what I can do to make it work.

I would give the seller their $3,000 down payment.
To get around the due on sale clause, I would set up a land trust with either my attorney, my corporation, or an “unnamed trustee” as the trustee, and have it later transferred to my name.
At a later date, I will refinance the mortgage at the going 7% rate.

What liability does the trustee have at this point?

Does this plan sound feasible or should I just attempt to get them to go with a lease/option?

ALL comments welcome.

import · March 18, 1999, 12:01am

Re: VA workaround - Posted by Jason-DTX

Posted by Jason-DTX on March 18, 1999 at 01:01:11:

Cash to mortgage means they want a certain cash amount plus the mortgage balance. If you total the 2 together then it equals the asking price.
Most VA loans are backwards (they owe more than the house is worth) when they are made. If the VA loan is fairly new then these people do not have any equity, not even 3K, unless the house has appreciated greatly. More than likely it hasn’t. That’s why their price is $10-15k above comps. They want some equity and there isn’t any so they raised the price.
If you want the house to live in you can offer $3k cash to mortgage. Give them the 3k down and take over payments on the loan. You can put it into the land trust and take it over subject to. How motivated are the sellers - they don’t have to leave for several months.
If they agree to a land trust deal then you need to get Bronchick’s course and use it. It will tell you how to set up the trust. Then leave the loan alone, DO NOT refinance it, unless it gets called due. Its not worth 1% of interest savings to put the loan in your name.
Jason

import · March 17, 1999, 6:29pm

Re: VA workaround - Posted by MilNC

Posted by MilNC on March 17, 1999 at 19:29:17:

This is a question:

Maybe someone else can give some input here;
but I was wondering if the property is sold to
another VET, does the due on sale go into effect? Or, does the loan guarantee sort of roll over to the new
owner/vet?