Tips and Traps When You Get a VA Loan To Buy a Short Sale in California

As any buyer out there looking for a home to buy in California can see, there are a lot of short sales listed for sale. It is very likely those active military and veterans that qualify VA loan and that are using their VA loan benefits, will be making offers on many short sales on their journey to purchase their home. As a quick refresher, a “short sale” is when a seller is selling their home, but their home value is substantially less than the balance on their mortgage against the property. In this case, the lender that holds the mortgage has to agree to take less than they are owed in the sale.

Buying a short sale is very different than buying any other type of sale. Here are some tips and traps to look out for when buying a short sale as your new home in California with your VA benefits:

Short sales take much longer than normal sales to close. They are getting better, but be ready for it to take 3-6 months from the time you get you offer accepted until the time you move into the property.
When you get a VA loan, a termite clearance is required. Many times the bank agreeing to the short sale will not pay for termite work and the sellers many times do not have any funds to pay for these types of things. Make sure your Realtor negotiates this up front on prepares you for this.
When you get a VA loan, you also have a VA appraiser appraise the property. Many times the VA appraiser can ask for small items such as broken windows to be fixed prior to close. Just like termite, many times the short selling lender will not pay for these items so be prepared.
There are certain closing costs a veteran cannot pay when they get a VA loan such as the escrow fee, loan processing fee, and loan underwriting fee. Make sure your Realtor is aware of this and it is negotiated up front.
What happens with a short sale is after the seller accepts your offer, their short sale package gets sent to the short sale lender. Once the short sale lender reviews the package including your offer, they will reveal what they need to “net” on the sale. In other words the lowest amount they will need to walk away with of their mortgage balance they are owned. Often times in a short sale, you can get all the way to closing only to find out the seller is “short to close”. This means the seller has to come in with additional closing costs to close. Many times the short sale bank will not budge from their NET and the seller does not have any money, so you can get a surprise and have more closing costs than you thought. So make sure your Realtor works with the sellers Realtor to get a crystal clear estimate of closing costs as soon as possible after your offer is accepted. This closing cost estimate document is called a HUD 1 or settlement statement. Ask for this right away.

Short sales can present some extraordinarily great deals for patient California VA mortgage buyers out there. So I hope my advice helps you be prepared when you make offers on short sales.

Keep in mind some of the wonderful advantages of VA loans for active military or veterans:

If you qualify VA loan it is a 100% financing zero down loan. It is the only 100% financing mortgage loan available today. The next best is FHA with 3.5% down.
VA loan 30 year fixed interest rates are still very, very low compared to historical norms
California VA loans available with 100% financing all the way up to $600,000, $700,000 and beyond depending which county you buy in California. This allows you to buy with VA 100% financing even in coastal areas such as San Diego, Los Angeles, San Jose, San Francisco and Orange County. A VA loan over $417,000 is a jumbo VA loan.
VA loan credit scores do not have to be perfect, you just need a 600 score to qualify.
You can get a second VA loan (and 3rd, 4th, etc…) even if you have had a VA loan before, but you can only have one at a time.
VA loan benefits include a waived VA funding fee for veterans if you receive any VA disability pay. This is a savings of thousands and thousands of dollars
VA lending has NO monthly mortgage insurance. You have to put 20% down to get any other type of mortgage with no monthly mortgage insurance.

Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions or want to apply for a VA loan.

Warmest Regards,

Rob Chomentowski

Sr. Loan Officer (and VA specialist)

858-922-7899

homeloan8@gmail.com