[AZ] Can my sister legally gift me her home while keeping her VA loan without refinancing or triggering the due-on-sale clause?

Lexi, Chatbot

I understand that navigating a property transfer can be complex, especially with a VA loan involved. Has your sister discussed her intentions with the lender regarding the gift of the property?

Lexi, Chatbot

Are there any specific concerns or conditions your sister has regarding the transfer of ownership?

Lexi, Chatbot

Is there anything else the real estate lawyer should know before I connect you? Rest assured they'll be able to help with your property transfer.

Lexi, Chatbot

Thank you for providing the necessary information. Here is a general overview of the steps involved in transferring property ownership under these circumstances:

1. Consult with a Real Estate Attorney
2. Understand the VA Loan Implications
3. Draft a Gift Deed
4. Record the Deed
5. Consider Tax Implications
6. Maintain Loan Payments

By following these steps and working closely with a qualified attorney, you can facilitate a smooth transfer of ownership while maintaining the favorable loan terms.

Legal Eagle

Hello! Legal Eagle here, and I am an attorney specializing in your area of law. I am more than happy to help you with your situation!

Have you confirmed with the lender whether they will allow a deed transfer to you while keeping the VA loan in your sister’s name without triggering the due-on-sale clause?

Legal Eagle

Ok thanks! Just a few more questions.

Has your sister considered any potential future scenarios, such as what happens if she can no longer make the loan payments?

Legal Eagle

Understood! So you're just wondering what you can do here, correct?

Legal Eagle

Ok! I just need a little time to draft up a high-quality answer. I'll be with you as soon as possible. It won't be terribly long, ok?

Legal Eagle

I'm so sorry about this situation! I want to address your situation with a detailed response, so if you have any questions, don’t hesitate to ask, because this law stuff can get complicated.

Legal Eagle

You can record a deed in Arizona so the house is legally in your name (AZ Rev Stat § 33-411) , but the VA loan stays in your sister’s name and that carries the risk of the lender calling the loan due under the due-on-sale clause. VA loans can sometimes be assumed with lender approval, which is the safest way to keep the good rate and shift liability. If you go forward with just a deed transfer and private contract, know that it protects you two between yourselves but not against the lender’s rights. (12 U.S.C. § 1701j-3)

You asked if a contract can handle this and what the process looks like.

A contract can set out who pays and indemnifies whom, but it cannot change the fact that your sister remains liable to the lender unless there is an approved assumption or written lender consent. (38 U.S.C. § 3714(a)(1))

Here is a sample:

Property Transfer and Loan Payment Agreement

This Agreement is entered into on [date] by and between [Sister’s full legal name] (“Grantor”) and [Your full legal name] (“Grantee”). Grantor has agreed to transfer ownership of the property located at [full address], Pima County, Arizona, Parcel No. [insert] to Grantee by Gift Deed.

The property is subject to an existing VA loan held by Planet Home Lending under Loan No. [insert]. Grantor remains legally responsible to the lender for repayment of the loan. Grantee agrees to make all monthly loan payments directly to [the lending company]  in the amount and manner required to keep the loan in good standing. Grantee agrees to pay all property taxes, insurance premiums, utilities, and other expenses relating to the property from the date of transfer forward.

If Grantee fails to make payments, Grantor retains the right to resume payment or take any action necessary to prevent default. Grantee agrees to indemnify and hold Grantor harmless against any financial loss, collection action, or damage resulting from Grantee’s failure to meet these obligations.

This Agreement does not change Grantor’s liability to the lender. Both parties understand that only the lender can release or substitute liability under the existing loan. This Agreement represents the entire understanding between the parties and may only be modified in writing signed by both Grantor and Grantee.

Signed:[Grantor’s full name][Grantee’s full name]

Date: _____________

Legal Eagle

Legal Eagle

Hello! I want to make sure I fully answered all your questions and that you feel completely supported.

I hope I’ve provided the information you were seeking.