Sub. 2 on VA Loan?

[agkatz]

I'm looking at a Sub.2 deal in Round Rock, but it's a VA Loan.  Does this make any difference?  Do they actually send people out to make sure they're living in the house?

Thanks,
Adam.

[StacyKellams]

Adam,

No, they don't send anyone out to make sure the VA person lives there. However, make sure the VA seller knows that their VA certificate will be tied up in that property until you sell or refinance them out.

In other words, they can't go buy another house with the VA until their name comes off this loan. They probably already know that, but sometimes they don't.

[Admin]

AK,
The only time I've heard of physical inspections is in relation to rural farm loans (like USDA) subsidized by the government.  The rumor is they have folks who get paid to go knock on doors once a year to make sure the borrower is still there.

Although I've not run across it, my understanding is that it might be possible for someone to have more than one VA guaranteed loan out if they only had a small amount of their eligibility benefits tied up in the first house.  So far, all the ones I've done were using their entire amount and the sellers were fine with leaving the benefit tied up.

Supposedly, if they have their VA loan foreclosed, they lose that benefit permanently.

[cchildress]

They wont lose the benefit permanently, just until any difficiency balances are paid and they have a min. of three years out of the foreclosure with ontime mortgage payments. but their benefits will be tied up in that house until it is sold or refinanced

[fadi]

I could be wrong about this, but I believe they get the remaining balance. For example, they get $250k VA allowance, they purchase a home for $100k then sell to you sub2, they still can use the remaining $150k.

I have taken couple of houses with VA loans on them. The second one, the seller contacted someone on the base to make sure they were ok with it before he agreed to close. He went on to purchase another home, but I believe he used conventional loan for the second.

[Dave T]

fadi,

I completely agree that you could be wrong.   

VA loans are made on the basis of an "entitlement." An entitlement is the amount of money the government will guarantee to lenders who make loans to veterans. The sum of the veterans entitlement plus any cash invested toward the purchase must be at least 25% of the purchase price or appraised value (whichever is less).

The VA guarantee at the start of 2002 was $60,000.  $60,000 divided by 25% is $240,000. This means most lenders will make VA loans up to $240,000 for an owner-occupied single-family home with no money down.  Borrowers who put cash into a transaction, or have equity when refinancing, may be able to borrow more.

All of the veteran's entitlement is used when a VA loan is granted.  If the veteran only borrows $150K, all of his $60K entitlement is used.  

[tatertot]

They don't have to knock on the door to see who lives there. All insurance companies send statements about the insurance coverage to every lender. There is either owner occupied insurance or there isn't.