This BLOG On VA Simultaneous Home Closings With VA Lender With No Overlays Was PUBLISHED On June 21st, 2020

Simultaneous Closings On Home Purchase And Sale:
Many homeowners need to sell their current homes in order to get funds for the down payment for another home.

• They need to count on the down payment from the sale of their exiting home
• They make the purchase offer with a contingency of selling their home
• This is often a turn off for home sellers and the purchase offer is often not accepted by sellers
• Gustan Cho Associates has a bridge loan program that will fund a bridge loan against the exiting property for 90 days
• In order to qualify for this bridge loan, the exiting property needs to have equity
• Gustan Cho Associates will offer a short term second mortgage bridge on the home of up to 85% LTV on the home buyer is selling so they can buy the new home

Today we will discuss a case scenario on a VA loan that the Team at Gustan Cho Associates just closed last week.

• It was a roller coaster of a loan, but at the end of the day, the loan closed on time
• Both the buyer and the seller were happy
• The all hands-on deck approach was needed to get this loan completed, from the client, the processor, the underwriter, the listing agent, the buying agent, to the title company
• Let’s go over this scenario in more detail

How Does Simultaneous Closings On Home Purchase And Sale Work?

• So in order to buy another house, they need to sell their current home first
• This is very typical and can be done with proper planning. 
• It is a chain process and is known as simultaneous closings
• Simultaneous closings normally happen the same day
• The homeowner might schedule simultaneous closings the same day by closing on their current homes first and closing on their home they are purchasing

Simultaneous Closings On Home Purchase And Sale Need To Notify Mortgage Lender, Realtors, Title Company, And Attorneys

Those who are planning on having simultaneous closings, they need to make everyone involved about plans, especially the mortgage lender.

• Mortgage lenders normally want to verify the funds for the down payment prior to scheduling a closing
• However, if borrowers tell them that they are requesting a simultaneous closing, the lender will probably just require a seller’s settlement statement and will allow the simultaneous closings

Case Scenario On VA Simultaneous Home Closings

A VA client (who will be named Eric for this blog) wanted to sell his current home and purchase a new home for his family. It seems simple enough.

• Eric had a 580 credit score and needed a manual underwrite per AUS findings
• See our AUS BLOG for more information
• Eric had $50,000 in equity in his home that was for sale
• Eric wanted to keep his payments as low as possible
• So he planned on putting $40,000 down on a $200,000 house
• This would make his total loan amount of $160000
• Eric found a buyer for his home

Then he went under contract to buy his family a new home.

When Things Can Go Wrong With VA Simultaneous Home Closings

At this point, everything with the loan was going smoothly.

• Eric was conditionally approved through underwriting, had his appraisal completed with no issues, and passed the VA termite inspection
• Two weeks before Eric was supposed to close on his current home the buyer’s loan fell through
• His buyer went out and financed a new vehicle during the mortgage process
• This action took him out of qualifying to buy Eric’s current home
• At this point, Eric made a very tough phone call to me
• Eric let me know that he will no longer be purchasing his family’s dream home
• Eric was very discouraged at this moment

I let him know that we have a few options:

• Option one was to sell the house to a cash investor for less than asking price
• This was not ideal and something Eric was not too fond of doing
• The second option was to find a renter for his current home as he had more than 25% equity in that property
• Meaning we could use 75% of the fair market rent for his debt to income ratio for qualification purposes

Issues With VA Simultaneous Home Closings

Eric did not want to juggle two properties, so this option was not viable for this family.

• Option three was to see if he could carry both mortgages and still qualify with his current debt to income ratio
• When we added both house payments to that ratio, his back and debt-to-income became 56%, well above the threshold for manual underwriting on VA loans
• Please see FHA and VA MANUAL UNDERWRITING for more information

This is when we found a solution to this complicated scenario.

• Eric had already paid down two credit cards that initially had a high revolving utilization percentage
• Eric also had a collection removed from his credit report that did not reflect when we originally pulled his report

Please remember at the start of this loan, Eric had a credit score of 580.

Importance Of Dealing With A Lender With No Lender Overlays

Since Gustan Cho Associates do not have any LENDER OVERLAYS, we were able to pull a new report and roll the dice:

• The following day we pulled Eric’s credit report and miraculously his score went up to a 667
• With the updated credit score, we were now able to get an Approve / Eligible AUS report
• Many lenders/investors do not allow borrowers to re-pull a credit report during the mortgage process
• Please understand that that is a mortgage lender overlay, not a guideline
• Now that Eric’s credit score is well above 620, AUS could approve this credit to carry both housing payments, and not downgrade to a manual underwriting situation
• With this, the mortgage team had a new loan to process and underwrite
• Both agents assisted in getting documentation from the seller and the buyer to help speed the process up

The also helped schedule this loan to close on a rush with the title company!

Covering Both Mortgage Payments At The Same Time

Now that Eric’s file is AUS approved, and can float both mortgage payments, we were able to close on his dream home! This was ideal for his family because he will be able to sell his house within 30 days before his first mortgage payment on his new home is due! This is just another example of overlays that could have killed his file. Luckily, he came to us for his loan, and all parties are happy. There are situations that pop up during the mortgage process that can kill your file, it is important to have a loan officer and mortgage team who can help find a way to get the loan completed. That means someone who understands guidelines like the back of their hand. You can be sure the associates from Gustan Cho Associates know their guidelines!

Make Sure Home Buyer Has Their Act Together

One screw up from the buyer’s side can blow the whole deal.

• Make sure the home buyer has an iron-clad pre-approval and is on top of their mortgage conditions
• Make sure the appraisal is ordered well before schedule and that the home buyer gets clear to close as soon as possible

Make sure as the seller that real estate agents and the buyer, as well as the buyer’s agents, are all on the same page.

Make Sure Everything In Order

Make sure to get a clear to close by the mortgage lender as soon as possible and meet all of the lender’s conditions.

• Try not to procrastinate and make sure to quarterback the team
• From realtor, mortgage banker/broker, title company, and attorneys
• If everyone is on the same page and work together as a team,  a simultaneous closing should go extremely smoothly

Choosing A Lender With No Overlays

Gustan Cho Associates has a national reputation for helping borrowers when other lenders cannot. Over 75% of our borrowers at Gustan Cho Associates are folks who either are stressing at other lenders or have recently gotten a last-minute mortgage denial. Gustan Cho Associates has a national five-star reputation and is known by many buyers, sellers, and real estate professionals for its no overlays on government and conforming loans. Gustan Cho Associates is also an expert on non-QM loans and bank statement loans for self-employed borrowers. Unlike other lenders, Gustan Cho Associates has ZERO OVERLAYS on VA Home Loans. There are no credit score requirements nor debt to income ratio requirements on VA Mortgages. We just follow VA Guidelines and not an ounce of overlays.