Questions AFTER Closing on a VA Home Loan
Q: My home was appraised by VA and now I am having problems with its condition. Wasn’t the appraisal an inspection of the property and can’t VA help me with these problems?
A: Although the VA fee appraiser must view the property from both the exterior and interior to determine its overall condition, the appraisal process is not intended to be an “inspection” of the property.
While the appraiser is an experienced observer, and is required to recommend needed repairs based upon his or her observations while completing the appraisal, the appraiser is not expected to recommend cosmetic repairs, ensure that mechanical, electrical and plumbing systems work properly, climb on the roof, etc.
VA cannot guarantee that all defective conditions will be seen by the appraiser, or that the property will otherwise be satisfactory to the buyer in all respects, and we have no authority to assist veteran homeowners with the correction of defects in existing homes.
VA encourages homebuyers to satisfy themselves that the home they intend to purchase is in a condition that is acceptable to them.
Q: I purchased a newly constructed home that was inspected by VA (or HUD/FHA) during construction and I have complaint items which the builder is not taking care of. Is there anything VA can do to help me?
A: If the new home was inspected by a fee compliance inspector assigned by VA or HUD during construction, VA has complaint processing procedures that are used to attempt to get the builder to correct construction defects which the VA determines are the builder’s responsibility.
A complaint must be registered with VA within the first year of ownership. Ultimately, VA does not have the authority to force a builder to make corrections to a property.
Also, some problems about which a veteran complains may be determined by VA to be within minimum standards of acceptable building practice. In such cases, VA will not look to the builder for correction.
However, when builders refuse to correct items which VA determines are their responsibility to correct, VA will take administrative sanctions against them and refuse to do further business with them.
In the end, some veterans may still need to pursue legal action against the builder.
Q: My lender has increased my payments into the escrow account for taxes and insurance. What can I do?
Q: The amount my lender is collecting for taxes and insurance doesn’t seem right. What can I do?
A: VA does NOT require lenders to maintain escrow accounts. VA does require that lenders ensure that the property is covered by sufficient hazard insurance at all times and that property taxes are paid.
Most lenders decide to use escrow accounts to do this, but they are not required by VA and VA has no standards governing them.
They are governed by RESPA which is administered by the US Dept. of Housing and Urban Development. For more information, click here.
Q: Does having a VA loan limit a veteran’s right or ability to sell the property?
A: No. A veteran may sell the property to a veteran or non-veteran at any time. However, if the loan was closed after March 1, 1988, and it will be assumed, the qualifications of the assumer must be reviewed and approved by the lender or VA.
Q: When a veteran sells the property to someone who will assume the existing VA loan, is the veteran released automatically from personal liability for repayment of the loan?
A: No. If the loan was closed after March 1, 1988, the lender or VA must be notified and requested to approve the assumer and grant the veteran release from liability. If the loan was closed prior to March 1, 1988, the loan may be assumed without approval from VA or the lender.
However, the veteran is strongly encouraged to request a release of liability from VA in order to avoid owing a debt to the Government if the loan assumer (or a subsequent assumer) fails to pay the loan.
Q: If a veteran obtains a release of liability, is restoration of entitlement automatic?
A: No. The assumer must not only qualify from a credit and income standpoint, but he or she must be a veteran with sufficient entitlement to substitute for that used by the original veteran in obtaining the loan and meet occupancy requirements.
Q: If a veteran has trouble repaying the loan, what should he or she do?
A: It is best to talk with the lender as soon as possible to explain why the payments are late and when and how those late payments will be made.
If there was a job loss, divorce, or other serious problem, and the regular monthly payments cannot be made, then it may be best to sell the home to avoid foreclosure. VA may be able to assist in arranging a repayment plan or other alternative to foreclosure.
VA offers home loan counseling through its 9 Regional Loan Centers (RLCs). Call our toll-free number (800-827-l000) to request a call-back from a Loan Service Representative or click here for the phone number and address of the RLC closest to you.
Q: What is VA refunding?
A: When VA refunds a loan, the loan is purchased from the private lender.
VA only refunds a loan when the veteran has had problems making the payments due to circumstances beyond his or her control, the problems have improved so that payments can now be made or will be in the near future, but the loan holder is not willing to wait before taking action to terminate the loan.
Refunding is rare because most lenders prefer to work out the problems, if at all possible, rather than selling the loan to VA and thereby giving up the right to future income from that loan.
Q: How does a VA compromise claim payment work?
A: When a veteran attempts to sell his or her home and the expected proceeds from the sale are not enough to pay off the existing loan, and the veteran has no other source of funds to complete the transaction, a VA compromise claim pays the difference.
As with any claim payment by VA, the veteran usually remains liable to VA for the amount of the claim payment. However, the compromise claim is usually less than the claim which would have been payable if the sale had fallen through, the veteran had failed to make the loan payments, and the lender had foreclosed on the loan.
Q: If a veteran dies before the loan is paid off, will the VA guaranty pay off the balance of the loan?
A: No. The surviving spouse or other co-borrower must continue to make the payments. If there is no co-borrower, the loan becomes the obligation of the veteran’s estate.
Mortgage life insurance is available but must be purchased from private insurance sources.