He has a VA certificate and can get a better interest rate. He will buy it and it will put 35K in my pocket.

Are you living together now? If you are, then the underwriters might be wary of the loan. If you are living separately, then there should be no problem.

This should probably not be a problem as long as its handled as a business transaction. This means he needs to pay a fair market value for the property. You can't just sell it to him for the balance of the mortgage unless that is a fair value.