Future Ex’s VA Loan Scenario (2013, heloc, approved, credit rating)

[raffandme]

Husband and I are separating, very amicably. He wants to use his VA to buy a smaller, single story house.

My realtor just comp’d our current home. The suggested listing price is $297,400. She believes a sale price of $280K would be easy to get. We’re in a desirable area and it’s a seller’s market.

The only encumbrance is a $45K HELOC.

The more I think about it, the less I want to sell. Financing would be difficult, if not impossible (self employed plus old 1970s and 80s student loans in ibr), and I really don’t want to leave the area.

Stbx wants to put the full 20% down to keep his payments low. He’s looking in the $130-140K range.

He’s 66; nets $2700/mo from part time employment and soc sec. FICO shows as 605 (!) on CK. The only account showing is a cc in collections from 2013 for $3600 that he has been ignoring. No ccs, no car payments.

I’m imagining a few scenarios and need to know if any of them make sense.

Option One:

First would be another HELOC, pulling enough cash for his DP. I also need cash to pay off ccs ($15K) and do some home repairs. We’re thinking about trying to tap another $50K.

How would that affect his VA loan?

We’re both bad with money. I own that. My problem is income. When I get large chunks, I disappear it. I just started two new 1099 jobs that will eventually pay pretty well, but, not necessarily a steady flow at all times.

We have zero for retirement.

If we tap the house for cash, he gets stuck with an additional payment that he doesn’t think he can handle.


Option Two:

Pull max cash out of the house. Give stbx the DP money. I take the cash I need. Put the rest in some kind of investment account that will pay it to us in monthly payments.


Option Three:

Reverse mortgage, taking cash out and monthly payments. These seem expensive and I don’t know much about them.


City-Data’s search feature is down.


Thank you.

[athena53]

They all sound scary to me. (Note: I am not a realtor, lawyer or banker but I'm very good at compound interest calculations.)

My guess is that as long as your STBX has his name on debt attached to the house you now occupy, he won't be able to get a loan on another one. So, even Option 1 would be difficult; he has a poor credit rating to begin with and would have his name on almost $100K in loans on your house and will want to borrow another $100K or so to buy his new place? Probably not happening. What the bank will focus on is that if you don't make the payments on the current house he can be held fully responsible for them, which will make it nearly impossible to keep up the payments on his new mortgage.

Option 2: no matter how you invest that extra cash, unless it's something volatile (which could go down), you'd most likely owe more in interest than you'd make in the CD, savings account, money market account, etc. You're just digging yourself into a deeper hole.

Option 3: reverse mortgages are scary as hell and at your age you won't get much from one (I'm assuming you're around his age).

I'd suggest you do the right thing and let him off the hook by selling the house, going your separate ways and attacking your debts. BTW, he should check with someone who deals with VA mortgages- it's entirely possible he wouldn't be approved even if you sold the house. That cc debt that he's ignored won't look good. He needs to check into that before you make plans based on the assumption that he'll be able to finance 80%.