Even when the value of your home is less than the balance of your mortgage, you have options, especially if you’re the holder of a VA mortgage loan.
If you’re planning to stay in your home for a while, waiting out the market is one alternative.
But for many members of the military facing new orders, that isn’t always a practical solution. Being proactive and contacting your VA mortgage lender to find out how they can help is a much better option.
Economically, these are unusual times and they call for unique solutions. And that is exactly what the Veterans Administration came up with when they began an inspired program that can help bridge the gap between an underwater mortgage and financial ruin.
Enter the VA Compromise Sale program.
Let’s say that you need to sell your home, and soon. It’s not a seller’s market and the only offer you’ve received is for less than your loan balance. Under the VA’s Compromise Sale Program, the agency can pay a “compromise claim” to cover the difference.
The buyer has the choice to assume your VA loan or secure his own separate financing. Either way, you complete the sale, avoid foreclosure and protect your credit rating and financial security.
Both VA-approved lenders and the VA itself can handle compromise sales. An appraisal is required.
As amazing and welcome as this program is, the VA Compromise Sale is not an everyday transaction. All stakeholders face a variety of requirements and shared sacrifice.
Lenders must agree to having their VA guaranty reduced by the value of the compromise. And part of the VA borrower’s entitlement will remain tied up in their first mortgage until the VA is reimbursed.
Basic eligibility requires a variety of criteria, including:
· The ability to document financial hardship
· A sale price that reflects fair market value based on current market conditions
· Reasonable closing costs
· An end result that is financially better for the government than foreclosure
VA borrowers have to sacrifice as well. Part of their entitlement will remain caught up in their first mortgage until the VA is reimbursed.
No one intends to default on a mortgage, but if you’re facing a must-sell situation, take action. A compromise sale may represent a viable and welcome solution.
Photo thanks to R. Clock via Flickr Creative Commons