VA Home Loan FAQ | What Is A VA Compromise Sale?
If you are a veteran trying to sell your home, a VA compromise sale may be a solution worth looking into. If you’re not familiar with the term, a VA compromise sale is designed to assist veterans who need to sell, but face taking a loss due to a declining housing market.
A VA compromise sale is designed for veterans that have a VA mortgage and need to sell in the current market for various reasons. You might be moving overseas as a change of station or going through a divorce. Whatever the case, taking a loss on the sale of your home could be financially devastating.
Fortunately, you may qualify for a VA compromise sale.
How a VA Compromise Sale Works
The benefit to a veteran approved for a VA compromise sale is simple. The VA will pay the difference between what you owe and what you are able to sell your house for. Rather than take the loss on your own and possibly lose your VA eligibility in the process, VA assists in redeeming your remaining balance after the sale.
How to Begin the VA Compromise Sale Process:
- Provide proof of your financial trouble and an explanation as to why you need to sell the home.
- Provide a VA appraisal to prove the market value of your home at the time of sale.
- Closing costs must be common and typical for a VA loan.
- No second liens are allowed. However, VA does say they will make an exception if the total is not significant.
Another important part of the approval process is that the VA compromise sale must cost the government less than if the property went through foreclosure. So in essence, if the cost to foreclose on the home is greater than a VA compromise or “short sale” on home, then there is a greater chance of getting a VA compromise sale approved.
You may also be required to sign a promissory note if your VA loan originated before December 31, 1989. This would involve you entering into a payment plan to pay back a portion of the loss that VA is taking on your behalf. This sum would end up being less than what you would owe if you did not originally have a VA loan, and the payment plan itself is formulated around what you would reasonably be able to pay.
If you think you are eligible for a VA compromise sale, don’t hesitate to contact me for further information.
