Use VA Home Loan For Loan Modification On Investment Property
Q: Aloha. I am a real estate agent in Hawaii. I have a client who purchased a home with a friend. They are currently trying to get a loan modification on that home. The home owner’s husband who is not on the loan would like to buy a home on his own using his VA loan benefit. If the wife and husband have kept all of their finances separate, will he be able to get his VA loan on his own without any consequences?
A: If the wife and husband have kept all their finances separate, the husband should be able to buy a home on his own.
You have a couple of issues to consider. First, most borrowers have been unable to even get their lender’s attention to modify their loan unless they have stopped making payments on the loan. If your two friends stopped making payments on their loan, their credit history and credit score will take a big hit. If they are the only people on that loan, only their credit histories and credit scores will take a hit.
You should know, however, that most lenders are unwilling to extend loan modifications to homeowners on second homes or investment properties.
You live in a state that has a large number of investment homes and vacation properties. Your friends should understand whether they qualify for the loan modification or not. Frequently, lenders will grant temporary loan modification status to borrowers.
During the temporary loan modification time period, many lenders will not report those borrowers as having paid their loan on time and as required under the loan. Due to the temporary modification and the payment of less than what was required under the loan, the lender may report the borrower as not having paid the amount required. These reports to the credit reporting bureaus will damage the borrower’s credit.
If your friends know that they can apply and qualify for a loan modification, good luck. Few permanent loan modifications have been granted.
Back to your core question, if the husband did not cosign on any his wife’s loans, his credit should not be damaged by his wife’s loan modification and he should be able to pursue his purchase.
Before he buys, he should make sure that he would not need his wife’s income to qualify for the purchase of the home and he should make sure that his credit is not tied to his wife’s credit in any way. He should pull a copy of his credit history for free from AnnualCreditReport.com. This site will furnish him with a copy of his credit history from each of the three major credit reporting bureaus. He can obtain all three of them and make sure that his credit history is clean.
Keep us posted on what happens with his loan application and your friend’s loan modification.
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I have some rentals in Louisiana and one that is mortgaged through GMAC. The federal government does not have a home loan modification program that I fit into. However, my mortgage company has one that they offer. Actually a couple different ones. So I suggest to at least attempt to call the mortgage company if you have rental properties. Not all mortgage companies do this, but I am lucky mine does!