DEAR BOB: Due to illness and bad financial management, I am about to lose my home to foreclosure. The bank already started proceedings. My payment is $546 per month, but my disability and welfare is only $625. Do you see any solution to my problem? Mrs. A. T., Washington.
DEAR MRS. A. T.: 1) Talk to your lender. If your income problem is temporary, many lenders will declare a moratorium on payments until you get straightened out financially.
2) If your financial picture looks bleak, you should be able to sell your home before foreclosure takes place. Be honest with your real estate agent about your problem so that a quick sale can be arranged to salvage your equity.
3) Don't do nothing. That may sound strange, but I've seen homes needlessly lost by foreclosure because the owner hoped some miracle would happen to rescue him at the last minute. You've got to get busy and take the initiative if you are to avoid losing the equity in your home.
DEAR BOB: Is it true that since I have never had a VA home loan I am still eligible, even though I am a World War II veteran? Margolis M., Washington.
DEAR MARGOLIS: Yes, it's true. There are no longer any time limits for GI home loan eligibility. Ask your local VA-approved lender.
DEAR BOB: How can I find out if I can qualify for a VA or FHA home loan? Several years ago I went through bankruptcy. But I've paid my bills on time and have established good credit since then. Hamilton A., Arlington.
DEAR HAMILTON: Talk with a loan officer and your local FHA-VA approved bank, savings association or mortgage broker. This person can go over the qualifications with you and tell you what size loan you can get.
By the way, in my area I find that mortgage brokers are now the best source of FHA and VA home loans since many banks and savings associations have pulled out of this market. After you find out if you qualify, a few phone calls can tell you the best place to get your VA or FHA home loan. Better yet, ask your real estate agent to do your loan shopping for you.
DEAR BOB: We want to get an extension on that "residence replacement rule" beyond the 18 months allowed. At the moment, we cannot afford to buy a replacement house, nor can we afford to pay the tax on our sale profit. Carlos D., Wheaton.
DEAR CARLOS; Sorry, but no time extensions are allowed. However, if you build a new house and start construction within 18 months after the sale of your former principal residence, you can take up to 24 months after the sale to complete the new home and move in. See you tax adviser for details.
DEAR BOB: I enjoyed your recent article on tax-deferred property trades. But you said such exchanges only apply to business or investment property. Is there any way I can trade my home, in which I have about $90,000 equity, for an apartment house? Henry G. Falls Church.
DEAR HENRY: Yes. But you'll have to first convert your home into investment porperty. This is done by moving out and renting it to tenants. You can then trade it for "like kind" investment or business property of greater value, such as apartments, offices, stores, or even vacant land, and defer paying the tax on your profit.
But a direct, tax-deferred trade of your personal residence for investment or business property can't qualify for a "like kind" tax-deferred exchange using Internal Revenue Code section 1031. That's why you must first convert your home into investment or business property before trading it. fAsk your tax adviser to explain further.
DEAR BOB: Last July we bought our home with a $95,000 VA home loan. In October my husband learned his job is to be transferred in March to Atlanta, so we must sell our home. I read in the newspaper about how hard it is to get new mortgages. Do you think we should keep our home until the market gets better, renting it to tenants until then? Vivian L., Reston.
DEAR VIVIAN: You probably don't realize it, but your VA home loan is a tremendous asset if you sell your home. VA and FHA mortgages are assumable by any buyer for a mere $50 assumption fee. Since most homes do not have such an advantage, you should have no trouble selling your home, possibly at a premium price.
While you didn't indicate your home's market value, I'll presume you paid $95,000 for it and got a 100 percent VA home loan. It may not have appreciated much in just a few months, but I'll bet you can get at least $100,000, with a $5,000 down payment. The good financing adds value to your home at resale time.
However, retaining your home for rental is a good alternative, since it is sure to go up in value in future years. A drawback, of course, is that you will be living a considerable distance away and will need a local person to keep it rented and to handle any problems. A local realty agent may be willing to do this for a minimal fee.