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Question for Jackie or anyone with Experience with this..
Are there anything to be aware of Wrapping a VA Loan ( Would do an exact wrap and then have a second for cash flow in this situation )
Things I am aware of:
1) It would not free up the amount of VA Eligibility available, that would remain unchanged.
2) The original borrower ( Veteran) would still be very much on the hook with the VA for the payment and continued Insurance on the Home.
3) The VA does collect on their losses from the Borrowers, its kinda like student loan debt, never goes away.
Any clarifications on How.. anything else I need to look out for?
State in question is Georgia.
Well, almost correct
1 A veteran can only have 1 VA loan at a time. So, it is true that they cannot get another VA loan.
2. The original borrower is still liable for the loan. But you should NOT keep their insurance. You need to get your own insurance then name the borrower as additionally insured. Make sure you also get a Power of Attorney so you can sign any insurance checks.
3. not sure what you mean by losses that the VA will collect. If there is a default, the VA will foreclose. They may go after a deficiency judgement.
Some other things you need to be careful about – make sure this is a fixed rate loan with NO balloon.
You do now want to wrap the underlying then create another note for the cash flow. Just do one note that wraps the underlying loan and also includes all equity or cash flow. see the file vault for a seller finance wrap report.
And I highly recommend taking title in a LAND TRUST.
If the VA loan is in your name, you may consider doing a lease option for the 1st year. If they make their payments on time, then convert to seller financing.
Instead of selling with seller financing , you could also sell the beneficial interest of a Land Trust so you don’t have to go through foreclosure if they default.
I think testing the buyer with a lease option first is good. Or ONLY do a lease option instead of seller financing. Give them, 2-3 years to get new financing to cash you out.
If you do seller financing, you may also consider adding a balloon .. so the buyer has to get new financing after 2-3 years.
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