The process of a short sale for a home that is mortgage backed by a VA loan is very similar to a traditional short sale process. The following is a breakdown of the important distinctions between the two:
A short sale program with a VA loan is actually considered a “compromise sale.” Therefore, in the situation of a veteran owning more on a home than it’s worth and sells their home, the VA will cover the remaining balance of the mortgage and early closing costs.
The most significant difference between a compromise sale and a traditional short sale is that the lender receives the full balance owed by the veteran.
As of January 2011, veterans are also entitled to $1,500 for relocation assistance.
Compromise Sale Requirements
A compromise sale situation occurs when the veteran is experiencing financial hardship that makes meeting their mortgage obligation impossible. These hardships could include: the recent loss of a job or decrease in salary, major medical expenses, death of the primary wage earner in the home or an involuntary relocation.
It may also be required that the veteran sell any significant assets to help offset the mortgage deficiency. The VA will then review the veteran’s current situation to qualify them to undertake a compromise sale.
*The VA warns veterans to be cautious of various scams that take advantage of distressed homeowners. Contact your VA mortgage lender before signing anything.
Short sales for a VA Loan are different, but not that much from the normal process for a short sale. If you’d like more information about VA loans or the compromise sale process, contact your local VA lender, Darren Copeland at 816-268-4025.