With every loan, they will do a ratio of debt to net. VA has a higher ratio than the traditional loans.
That being stated, you have a problem because you own that home, and as you stated you are underwater. Two issues may arise, and I stress may.
1. Depending how underwater you are, will you be able to rent it to cover the mtg, or will this increase your debt ratio?
2. They may require verification of a long term rental to offset that debt ratio. The reason why is you do not have any equity to pull from it.
VA loans are optimal for many because the guidelines are less restrictive, but they still have guidelines they must adhere to when going through underwriting.
VA does 100% loans, and as I stated before they will allow certain items to be rolled into the mtg., hence you are paying more for the house, but as TPG stated not everything can be rolled in. Upshot is no matter where you move the traditional deposit is 1% for escrow, which usually covers the amount that can't be rolled.
Honestly, VA became very popular because a traditional loan will require PMI, (very expensive) if you do not come with 20%, this is why you saw loans rolled out called 80/15/5, 80/10/10 and 80/20/0 The middle number is the second mtg, the last number is the % you will place down.
The higher your credit score, and the lower your debt ratio the better chance you can get one of these loans. I am not going to lie, 80/20/0 are almost non-existent and you need to be hitting that 800 score and very little debt. If you have both of these, best to your advantage to get your current home leased prior to moving, so you can offset the debt, with more income coming in from the rental.
VA is worth it if you have only 1% to cover the escrow. If you have used it before it will be 3% funding fee unless like TPG you have a high disability. 10-20% will not cut it.
I don't know when you intend to move, and unless things have changed, the clock is ticking for the military to pay for the move. I believe it has to be done within 24 months. So, if you are just downsizing and moving down the street to a smaller home, this may not be an issue, but if you are moving x country, you need to think about that.
Finally, my advice on selecting realtors.
1. They will enter and state this is my rate. Rates are negotiable, it is against the law to state you must pay this.
Now granted they will give a dog and pony show of why you should pay it, and honestly, realtors pay a lot out of pocket. You may believe that because they get 3% on a 200K home that walk out with 6K. They don't, not even close.
They pay out of pocket:
Advertising (an ad can cost 200 bucks)
MilitarybyOwner listing (costs about 100)
Lockbox on your home (costs @100 bucks a month)
E & O Insurance (160 a yr)
NAR/MRIS Dues (2000 a yr)
On top of that they:
Self employed --- usually hit with 35%+ tax rate for the good ones after the commission split.
Split the commission with the broker which can vary from 20-50% of that 6K.
As you can see, their net from that 6K on a good day is about 2K for your home, and even if it sells day 1, it is 30 days before closing.
2. Be smart
Interview 3 realtors from 3 National companies. I say national because I am going to assume you are near a military installation. Long & Foster in MD and VA are power players, but the fact is military members come from across the globe, and when they do their 1st search, they will look into National companies for a name recognition/trust issue.
I would suggest C21, Prudential, ReMax, etc.
This will be your mate, your partner. You will want to jive with them personally. I tell all of my clients, trust me you will call me screaming out of frustration, you may not believe it now, but this is emotional, and it will happen. Fear will be there, and you need to have that trust issue. I place it on the table minute one, and I let them know I get it.
3. Trick of the trade.
Combine #1 and 2. and go with their RELO dept. in the agency. Now tell them I want a lower rate because:
A. I will allow you to refer a realtor to me. I know you will get 25% of that commission off my new home, for doing nothing, but connecting me with a realtor on the other side.
Same if you are moving down the street. Just have them knock down their rental fee. Place the home in property management.
~~~ Reason why, it is easier to evict a renter when they are in property mgmt, than if you do it on your own. Part of that fee will cover the worse case scenario, going to court, serving papers, etc.
B. The new realtor for the buying side does not lock you into buying with them. If you don't like them, you can fire them. It is no harm no foul, esp. since your rate was already signed.
Beware the law may state the firm has 7 days to rectify the issue, in other words they may give you another realtor over and over again.
C. Do not pay the 250 to USAA, it is a waste of money because
~~~ They are not in the RE business, and will do exactly what I just stated, but charge you 250 to do it.
~~~ Their mtgs rates are competitive, but as I stated, once you pull your credit score you are dinged 4 pts, you would be dinged that if you went with BoA or Wells and they won't charge you 250.
As a realtor, since I suspect you will rent this property do the following now.
1. Get a home owners warranty, especially if the home is 8+ yrs. A hot water heater will cost more than the 400 for the yr warranty. HVAC will cost thousands.
~ If the home is older and has PBC piping (water lines) look at the warranty closely to insure they cover this, some will not.
~ The warranty may take time to employ, 30-60 days.
2. Think about pets..if you own one, esp. a cat, be prepared that cat odor is very distinctive, and that means steam clean everything, and be on top of the kitty litter.
~~~ I own both dogs and a cat. I and most realtors will say people are fearful of renting to people with dogs, but on a whole, they are better than cats. Cats unless declawed can use banisters as scratching posts. A 100 pound Great Dane does not equate to major damage compared to a 10 lb cat that sprays.
We have a rental property and allow dogs, but not cats, unless de clawed and spay. The dogs may not be under 2 yrs old. We get around this by stating on the listing case by case. We also have a hefty security deposit, and more regs...i.e must professionally steam clean carpets, with a de-flea/tick solution.
This allows more applicants for the property. We also charge higher rental cost because very few will allow pets out of fear.
3. If you are by a military base, you know what you get for BAH. That means look up the list and see what it is for what the avg rank in your neighborhood. Hopefully it will cover your mtg., don't list lower just to cover your mtg and the prop mgmt fee., be cognizant of what is the amount for the rank in your development.
The more you know the more you can arm yourself when the Realtor says I think it should be this amount.
4. Before they say this amount make sure you ask for a CMA (Current Market Analysis). This should include up to 9 homes within a 2-3 mile radii
~~~ There should be 3 active (on market), 3 rented within the past 3 mos, and 3 rented 6-9 months ago.
This will show you a trend...prices increasing, stabilized, or decreasing. Days on Market.
If schools are a biggie, make sure they keep in the same district. If your development has a pool/tennis courts/HOA make sure they have that too.
5. If you decide to rent/sell without a realtor.
~~~ The web sites Zillow and MilitaryByOwner are great, so spend the money there. They will allow you to download pics.
~~~ Still interview Realtors, and ask them to bring all contracts that will be required. I always bring them anyway because in VA, the contract is 33 pages long when submitted by the purchasing agent. When an offer is presented paper starts to fly, and I tell my clients read it now, so you can understand as you sign your life away.
~~~ Be prepared to have lookie Lou's and how you will do a credit check. That is something Realtors do for you. On top of that be prepared to be tied to the home.
~~~ If you place this on your own, Realtors, even for rentals driving a client around will have signed with the client, and that fee is expected. If you pitch a sign on the lawn, to get those realtors write somewhere Realtors welcomed. A client once signed, cannot legally dump them and rent behind their back. The Realtor by law can go after the fee.
~ Realtors usually charge 1 months rent to list, so it isn't a lot. As the owner you don't feel it, because they will incorporate it with the deposit, and the mgmt fee. In other words, let's say you rent for 1K, you may net 800-900 after the fees. Also check into the laws within the state, most require that the mgmt company holds that money for 10 business days before paying the owner. It is to clear the check.
For me the best client is/was the informed client. The more you understand the process the more you get what I do/did to achieve your goal. If I hide it, it was more likely you will freak.
