With all of the new lending guidelines, we are seeing a lot more FHA and VA loans popping up these days. These are great loan programs, but there are some differences and special guidlines that make these different than Conventional financing beyond just the lower downpayment requirements and PMI with FHA/funding fee with VA.
For some time FHA had restrictions on lending to borrowers purchasing a home that had not been owned for at least 90-days by the current owner…termed as seller or title seasoning requirements. This was recently reduced to 30-days. This is all fine and good and is relatively common knowledge among investors and agents alike. The tricky part is…is this also a requirement for VA financing? And if so, is it still 90-days??? This is a relatively new problem that has popped up because of all of the foreclosures and short sales that have been purchased and renovated for investment purposes.
I was up against this very question recently. My client was getting VA financing and wanted to buy a property owned by an investor who had only owned the home for 45+/- days. We were all good with the terms and the sellers were ready to sign on the dotted line when the listing agent called a loan officer friend to ask a question and she put the kabosh on the deal! She said the VA has a 90-day title seasoning requirement and my client could not buy the house!!!
After many calls and the deal almost falling through…we found out that the VA DOES NOT have a title seasoning requirement at all! Actually, their requirement is 1-day. Some individual lenders add what they call layers of risk “risk layering” and make title seasoning a requirement for VA loans; however, this is not a requirement of the VA. (but P.S. there is nothing online that even discusses this topic or outlines the guidelines pertaining to this)
Whew…was I relieved. Thank God this was not a competitive situation…we could have missed out because of this misinformation! My buyer was so happy to learn that he was in fact able to purchase the home and we ratified the contract the next day…but what a stressful weekend we had to sweat out because no one seemed to know for sure! I presented the offer on a Saturday and had to wait until Monday morning to get a definitive answer from a VA underwriter who could clarify the guidelines. This was so unnecessary!
But I learned something new…and if you didn’t know this then you did too. Before you begin your home search and are looking into lending institutions (for VA or FHA loans) find out if the lender layers risk and requires a greater than 30-day seasoning requirement for FHA or greater than 1-day seasoning requirement for VA. This will be important to know if you are looking at properties that have been recently rehabbed by investors. You may want to choose a different lender…it isn’t worth losing the house of your dreams.
I am not a financial expert or a lender…I am a REALTOR(R)…ask your lender to clarify all terms, conditions and restrictions pertaining to the loan you are getting. This is simply to facilitate that conversation and raise your awareness about what is happening in the marketplace in Northern Virginia.
Have a great night all!