On average, military members and their families move every 2.5 years. Sometimes relocation is necessary due to a change of assignment or promotion. Other times, it’s because a service member is being deployed overseas. But what happens if you have to move out of a home you bought with a VA loan? Below, we’ve discussed what happens to VA home financing when a military member has to sell their house.
Selling Your House with a VA Mortgage
Moving can be stressful, especially if there are children involved. Your spouse may need to find new employment in the place you’re moving to. And, depending on how old your children are, they may have to say goodbye to their teacher or friends and be enrolled in a new school. The good news is, that when it comes to selling a home with a VA loan, you need not take on any extra stress. The process is straightforward.
Paying Off Your Loan
If you have an existing balance on your mortgage, you will be given what’s called a mortgage payoff quote. This is a statement that indicates the remaining balance on your home loan, including any interest or fees you may owe. Mortgage payoff quotes are usually good for 10-30 days, after which you will most likely need to get a new one.
When you sell your house, the proceeds from the sale will go towards paying off all or part of your VA loan. Any extra money left over from the sale will be given directly to you and you can choose to put it towards your downpayment on a new home, as most homeowners do.
In some cases, a borrower with VA home financing may wind up with what’s called “negative equity.” Negative equity is when the amount owed on the mortgage is more than the home’s current market value. If this is the case, then the proceeds from selling your home may not be enough to cover what’s owed on your mortgage.
Selling your home can also impact your VA entitlement. If you’re able to pay off the remaining balance of your VA mortgage with the sale proceeds, then your VA entitlement will be fully restored. On the other hand, if you aren’t able to pay off the whole amount, then only a portion of your entitlement may be restored. However, even in cases like this, many borrowers still have enough entitlement, or what’s called second-tier entitlement, to buy a new home without having to put money down.
Learn More About VA Home Financing
If you have questions about VA home financing or selling your home, Mortgage Solutions Financial is here to help. Call our office today to speak to a VA loan expert and get more information.