[VetMomOfFour]

I have spoken with three VA reps who have all given me different information and multiple lenders who have provided conflicting information as well. Our situation goes like this:

We had to short sale on my husband's first home. It was in Georgia (he was awarded it in his divorce... Yay us... ). We tried to sell the house in 2007 and there were no takers so we rented it out. The house received a ton of damage by the tenant (even a stolen dishwasher) so we fixed it up and rented it again in 2009. The renter left a year later and we tried to sell again in 2010. No takers. So, we tried to rent it. No takers. We were paying the mortgage in full and on time (in addition to our primary residence in California) for over a year before we decided that our only option was to sell short. This was not an easy decision but all the competition was either a foreclosure or short sale and nobody was biting. After the price was lowered it sold short within a month.

We just requested my husband's COE and it states that the VA suffered a loss of $16,780. The basic entitlement is listed as $0 and the total entitlement charged to previous VA loans is $36,000.

Most lenders have told us that they won't even consider lending to us until two years after the short sale (it closed in Dec 2010). One local lender said that VA does not specifically state that a borrower has to wait two years so they are willing to finance our home loan so long as we have VA loan entitlement. Unfortunately, that same lender does not seem to understand second tier entitlement. The house that we are looking to buy is on the market for $350,00. We would offer a bit less because it is a foreclosure and needs improvements. I have talked to the VA and have been told three different stories:

1. We cannot get funded for two to three years because VA treats short-sales like foreclosures and foreclosures fall under the same stipulations as bankruptcies. I read Chapter 4 of the Lender's Handbook and fail to see any place that states that short sales are treated the same as foreclosures.

2. That given the max guaranty minus the used portion of our basic entitlement that the VA would guaranty 25% of a maximum loan of $273,000. Anything above and beyond that would require a down payment.

3. That $0 basic entitlement means that we can not take advantage of second tier entitlement because that is determined by multiplying the basic entitlement by four and we don't have a basic entitlement so there is no starting point.

Our lender agrees with story number three.

I have done so much research and talked to so many different people that at this point I am really just looking for someone who REALLY knows the rules and what is/is not allowed. If we can't buy a house for two years - then so be it. If we have to pay back the $16,780 that the VA lost in order to restore entitlement and use our eligibility - then so be it. But so far, it feels like nobody can give me a real answer based on facts, policy, law, rules, etc. Its all so wishy washy and is very frustrating.

I apologize for the crazy long email and any rambling I may have made you listen to. :)

Thank you so much for your time,

Natalie