Sellers

Freedom from your real estate and mortgage obligation – regardless of your equity position!

As a veteran who purchased real estate with no money down, you likely started out in homeownership with no equity or potentially even a bit underwater. Having decided to explore options for moving and selling your home, you are now faced with the challenge of lacking the equity to pay realtor fees and selling costs.

How It Works

Traditional exit options include paying out of pocket, going through a short sale, or being obliged to hold onto a home that you no longer want – not ideal strategies. Providwell offers a better solution by giving you the opportunity to take advantage of one of the greatest assets of a VA loan – its ability to be assumed by someone else. Our platform can improve your bottom line, preserve your credit and entitlement, and give you the freedom to move. We can help. Let’s talk.

Benefits

Instead of a traditional home sale, you may be able to allow a buyer to take over your debt and mortgage using your existing VA financing. The VA home loan benefit protects the veteran by allowing it to be assumed by any financially qualified person. Once this transaction is complete, they are the homeowner as well as borrower on the loan, relieving from any further obligation to it.

Facts and Figures

On average, military families move every 2-3 years. That’s 2.4 times more than civilian families. Military families who own a home financed by a VA loan often find themselves scrambling when the time comes to sell.

In 2021, there were 349,916 VA loans issued without any down payment. 75% of VA buyers also pay a funding fee which is added to your starting loan balance. This means you begin your homeownership underwater – owing 102-103.3% of the home’s starting value. When it comes time to sell, many VA homeowners haven’t paid the loan down enough to pay realtor commissions and seller fees from their equity – meaning they would have to come out of pocket in order to complete the transaction. Providwell solves this issue through its specialized assumption transaction process.

This is a guaranteed benefit of your VA entitlement and you should consider it as a valuable tool at your disposal. Everyone in the transaction wins – The Veteran, The buyer, The Department of Veterans Affairs.

FAQ

Get answers to common questions about selling your home via VA loan assumption

Benefits for buyers and sellers

Benefits of loan assumption for Seller and Buyer

For Seller:

Reduced Costs

Whereas a traditional real estate sale will cost the seller of a property 6% (on average in San Diego – 5% commissions and 1% transaction costs), an assumption through Providwell will generally shift all of these costs to the buyer. This allows the seller to sell when they have minimal equity – without coming out of pocket.

No annoying showings

We do all property related photography, marketing and assessment up front. A potential buyer has all the necessary and relevant info before they ever see the property. The seller will generally only need to show the property to one buyer- after there is an accepted offer.

No appraisal (no valuation concern)

Assumptions do not require an appraisal. The buyer bases the acceptability of the dal on the monthly payment, down payment and total payments overall versus alternative properties on the market.

Property condition not an issue

With no appraisal or home inspection review by underwriting, any property related conditions stay between buyer and seller. These are factors that could scuttle a traditional transaction.

Potentially improve bottom line (premium for including mortgage). Some transactions can yeid a premium for including the underlying financing in the transaction. There is a formula to determine how much extra the seller can get.

Reduced Fall out (terms are that good).

Due Diligence is done before the contract is signed. There won’t be unforeseen condition related items, last minute requests for repairs or renegotiations between buyer and seller. The deal is so significantly superior to traditional market properties that the buyer has additional motivation to perform.

For Buyer:

Lower Monthly payment

Providwell’s assumption deals start with an assessment of the transaction that the buyer can use to compare to other market properties. The monthly savings versus a similarly priced property ate generally 15-20% less.

Less paid overall

With a lower interest rate, the buyer will pay significantly less for the property versus comparable purchases. Additionally, the loan being assumed is already part way through the amortization schedule – so instead of 360 payments remaining, the loam might only have 340. This dramatically reduces the total paid over the life of the loan.

No bidding wars. The transaction terms are set before the deal is presented to buyers. An eligible buyer who enters into contract knows exactly what they are getting. There aren’t bidding wars that pit buyers against each other.

No appraisal

Property valuation is a non issue. No appraisal is required and the value to the buyer is set by the monthly payment and total paid in relation to comparable properties on the market. This means now low appraisals creating problems, no conditions called out which might render the property ineligible.

Property conditions wont render property ineligible

Before the property is presented to a buyer, we collect the prior Seller Property Questionnaire, a current Property Questionnaire and an independent home inspection. The potential buyer knows everything the seller knows as well as an independent assessment of the condition of the home, systems, etc. No additional requests for repairs or renegotiation.

Traditional options vs providwell

Providwell versus existing options.

Often, our clients find themselves in a position where they would like to sell their home, but have minimal equity. This creates a challenge because home sellers typically rely on the home’s equity to pay the selling costs- including realtor commissions and other transaction costs. Traditional options include coming out of pocket to pay these fees, or undergoing a short sale or Foreclosure.

The Math:

Typical selling costs in Southern California are about 6%. That comprises realtor commissions averaging 5% and Title/Escrow/Other of about 1%. So, in order for a seller to complete a transaction and use equity to cover all costs, they need about 6% commission, or a 94% loan-to-value.

In 2021, there were 349,917 VA purchase loans with zero down payment. Of those, 80% also paid a Funding fee of about 2.3%. So all of these Vets started their homeownership journey with zero or negative equity.

Over time, an amortizing loan- such as a VA loan- will pay down the balance. Meanwhile, home values will fluctuate. There will be a period between a purchase and the time a home achieves 94% Loan-to-value. That might be very short, such as 2019-2021, when we saw double digit price appreciation, or it might take longer if the market is soft or declining. During this period, what does a homeowner do it they need or want to sell?

Traditional options include:

Coming out of pocket

Short Sale (Called a Compromise Sale for VA loans)

Foreclosure

Hold onto a home that the Vet no longer wants.

If the Vet Comes out of pocket, they preserve their credit (no late payments, and no loss by the lender). Also, their entitlement is fully restored. However, this takes money, which might not be desirable or affordable.

Short Sales and Foreclosures both damage credit and cost the Vet a portion of their entitlement. The effect on credit will be significant and both of these routes will limit the Vet’s ability to buy another home for a long time (up to 7 years). The entitlement loss it equal to the claim paid by the VA. This is gone forever, unless the Veteran pays the VA back.

There are many reasons a Vet may want to sell and many reasons that keeping a home might not be desired or possible.

Providwell solves this sales challenge by navigate one of the VA loan’s little known or used Loan benefits – Assumption. By crafting a transaction that allows a home buyer to assume the Vet’s mortgage, we avoid Short Sales, and Foreclosure and generally, the seller doesn’t need to pay anything out of pocket.

How? VA loans carry better than market terms. This is part of the VA’s “thank you for your service” by promoting affordable Veteran homeownership. When a non-Veteran assumes a VA loan, they acquire these terms and as a result, are less concerned with property price or equity. We present the transaction in a way that makes financial sense for the buyer. Transaction costs are paid by buyer.

This results in an improved outcome for all parties involved. The Seller avoids damage to credit, loss of entitlement and out of pocket costs. The buyer acquires a house that is more affordable that traditional FHA or conventional options. The VA avoids paying a claim. The loan servicer avoids costly short sale or foreclosure actions. Providwell earns a commission for a successful transaction.

How do you get paid?

The buyer pays our fee. The buyer also pays your closing costs.

I’m upside-down. Who would buy a house that costs more than it is worth?

Because your VA loan terms are so much better than those offered by the current market, the buyer is paying less than they would be if they financed this home at market value using, for example, an FHA loan.

Why haven’t I heard of this?

Assumptions are difficult transactions, which is why most of them fail. We are experts in realty and mortgage who specialize in VA loan assumption.

Do I need an appraisal?

No. Neither you nor the buyer needs to get an appraisal.

Do I have to show the home and deal with a bunch of people?

No. You are paired with a qualified buyer who is ready, willing, and able to take over.

Do I have to pay anything?

Not usually, but every transaction is different. We look at every aspect of your loan terms, value, and property to determine the best solution for you.

Does this mean I can’t get another VA loan?

You probably can! With any unused or “bonus” entitlement, a veteran can own 2, 3, or even more VA-financed homes. Additionally, some banks have veteran programs that don’t require any entitlement at all, such as Navy Federal, which offers a 0% down loan for vets that isn’t a VA loan.

What if I’m behind on payments?

The math gets trickier, but the transaction can still work!

What happens to my entitlement?

It depends on whether the assumer is a veteran (who can substitute their own entitlement) or a civilian. If a civilian assumes your mortgage, the portion of your entitlement you used is tied up until the loan is paid off.

Does it hurt my credit?

No. The loan balance, interest rate, and monthly mortgage payment simply transfer to the new borrower and purchaser of your home. The loan will begin reporting on their credit and will appear as fully paid and closed on yours, leaving you with no further involvement.

Is this legit?

Absolutely! The very first page of every single promissory note on a VA loan states that the loan is assumable. This actually is part of its entailed benefits.

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