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VA loans: A Call to action

Monday, November 23rd, 2009

In the quickly changing landscape of mortgages VA loans stand alone. The VA backed mortgage is very advantageous for those who are able to take advantage of it. Worries about appraisals for refinances? Gone. Worries about help making payments in hard times? Gone. Stress over a down payment for your first home? Gone.

From the outset the VA has worked to make VA loans both affordable and smart. Many veterans may not have the requisite 15-20% for a down payment on a conventional loan. The home that they are buying may not fall within the guidelines for an FHA purchase. The VA mortgage fills this gap for America’s Veterans and allows a nice home to be purchased with 100% financing. Along with this purchase the VA has services available when times are tough and the mortgage payment is in jeopardy of not getting made. Perhaps the easiest of the programs is the streamline refinance, where without an appraisal the veteran can refinance the loan in to a lower rate or shorter term with no cash out of pocket for the refinance transaction.

By using a VA loan veterans can ensure an increased level of stability, increased cash flow from lower payments, and access to the lowest rates at any given time through the VA streamline program and VA loans are the same whether you are in need of a Texas VA Loan or a California VA Loan.

To help with your purchase or refinance transaction, contact LowVARates.com to see how you can get on the road to home ownership, and lower monthly payments.

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Posted in Loan Processing, VA Loan, VA Purchase, VA Refinance, VA Streamline Refinance, underwriting | No Comments »

Follow up to VA Residual Income

Sunday, November 22nd, 2009

Last week I posted some information regarding VA residual income, but I didn’t really go into a lot of detail as to how its calculated and the factors that affect it.  Here is a link to that last post – VA residual income. Residual income is basically the income left after all the expense of the house, day care if applicable and state and federal taxes.  The VA has this requirement because they want to make sure the Veteran can afford the home and not get into any financial hardship.  Remember too, that the VA will guarantee a portion of the loan to the lender so there is some level of risk for the Dept of Veteran Affairs.

Factors in VA’s Calculation for Residual Income

As I briefly mentioned above there are some specific calculations when determining a Veterans residual income.  The way its calculated is all the same, but the outcomes can be very different.  Another term for residual income is balance available for family support.  Here is a list of deductions from a Veterans pay that will be used to calculate the left over balance:  Federal taxes, State taxes, Social Security, Medicare, Debts and Obligations and Monthly Shelter Expenses.

Federal Taxes – We can all count on 2 constants in life, death and taxes.  Anyone who makes money understands taxes so I wont go into detail about it.

State Taxes – See comment above.

Social Security – This is a depleting fund the government has set up to pay for others retirement and maybe your own.  I doubt in my life time I will never see any money from SS when I retire.

Medicare – Another Government health insurance plan.

Debts and Obligations – This is all the debt – example – car payments, credit cards, installment loans, etc.  This also includes child support and alimony. 

Monthly Shelter Expenses – VA uses this to determine the amount of monthly expenses for the utilities like gas, electric, water/sewer and garbage.  How much a Veteran actually spends each month for these housing expenses can and are obviously different from one Veteran to another, so the VA set the standard by multiplying the square footage of the home by .14 cents.  For example if the SQ footage of a home is 2500 X .14 the monthly housing expense would be $350 per month. 

Now that we know what to deduct from a Veterans pay, lets actually calculate the residual income. 

Veteran (Mike) makes $4875.25 GROSS every month and has a wife who doesn’t work and 1 child and lives in the state of Utah and wants to buy a home for $150,000 that has 1850 SQ feet.

Federal Taxes Deducted $361.29
State Taxes Deducted $225.14
Social Security $301.27
Medicare $70.69
Debts and Obligations (including new mortgage payment PITI) $850 for debt
$1072.23 for mortgage
Total debt $1922.23
Monthly Shelter Expense $259
Total Deductions $3139.62

So the gross is $4875.25 and the total deductions are $3139.62 which leaves Mike with a total amount balance of $1735.63 available for family support.  In the last post I gave a table for residual incomes required by region and loan amount.  The amount required for Mike is $990 (West, loan amount over $80,000 and family of 3).  Based on this scenario Mike would be able to qualify for his home.

With this post and my last post I would think I have hit on all points of VA Residual income and can be used as a reference.

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Posted in Loan Processing, VA Loan, VA Purchase, underwriting | No Comments »

Reusing VA eligibility: Can I obtain another VA loan?

Tuesday, November 17th, 2009

 The short answer is yes. Basically, once you’ve established eligibility, it’s sort of like establishing a credit limit. Your eligibility is for a specific maximum entitlement; some individuals may be able to purchase a home without using his or her full entitlement. In that situation, it is possible to put the remaining entitlement towards financing a second property. Additionally, it is possible to restore the full entitlement amount by meeting certain requirements and applying for restoration of entitlement with form 26-1880. The simple version of the restoration requirements are that the loan is either fully paid or transferred to an eligible veteran. There is a one-time-only option for restoration of entitlement if the original property secured with the paid-in-full-loan is still in the veteran’s possession. Once again, your loan officer will be able to handle all this for you.

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Posted in Loan Processing, VA Loan, underwriting | No Comments »

Banks usurping VA authority BAD for Vets

Wednesday, October 28th, 2009

Over the past few months, as the credit crunch has deepened, lenders have become increasingly strict with VA home loans. Instead of sticking to the VA guidelines, lenders are now implementing their own policies. Gone are the days when no credit is needed. gone are the days when an appraisal is not necessary for a VA streamline. Gone are the days when service to our country is the major prerequisite for a VA loan.

Now, to make matters worse lenders are pulling the rug out form under the nations veterans. Recently, AME Financial Corp decided that not funding loans already closed by veterans was in their best interest. Yes, that is correct. Loans that have CLOSED but not FUNDED will not be funded by AME. This means that Vets are left in a lurch on their VA loans. The locks that were guaranteed, are no longer valid. All time low rates are lost due to ineptitude on the part of the lender. A press release can be found here.

What does this mean for the everyday veteran?

It means that taking advantage of all time low rates just got that much more difficult. Sadly this sort of behavior is not uncommon of banks that are ready to implode. ml-implode.com tallies a running list of failed banks, and do not be surprised when AME becomes the next.

What you can do.

Start the process now to take advantage of historically low rates. We may never again see fixed rates below 5%. Take advantage before further tightening occurs. Contact your LowVARates.com preferred lender, Flagship Financial Group, as soon as possible to get started. The Streamline loan process takes about 5 weeks start to finish and can save you hundreds each month. And with the holidays upcoming you can forgo 1-2 mortgage payments with no penalty.

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Posted in Loan Processing, VA Loan, VA Refinance, VA Streamline Refinance, underwriting | No Comments »

G.I. LOW – July 4th No Cost VA Loan Giveaway

Wednesday, July 1st, 2009

G.I. LOW

In celebration of our nations independence, LowVARates.com is offering a chance at winning a TRUE no-cost-no-point home loan at a PAR rate during the month of July, 2009 to any and all United States Veterans or active military personnel. This amazing giveaway is valued at up to $12,000.00. A winner will be selected no later than August 15, 2009. It is simple to enter, just complete the online loan application, between July 1 to July 31, 2009.

We know what you’re thinking, what’s the catch? There is no catch! If you are an active military person, or U.S. Veteran you can qualify to win. Low VA Rates has been servicing active military and veterans over the past 10 years and wants to do what they can to help in today’s difficult economy.

For the winner to receive the no-point-no-cost loan, you of course have to qualify for the loan via a Low VA Rates approved lender. If you are selected as winner and then qualify, LowVARates.com will cover all lender fees, broker fees, and 3rd party fees associated with closing your home loan.

Online VA Loan Application

G.I. LOW NO COST LOAN GIVEAWAY CONTEST RULES AND REGULATIONS BELOW

(more…)

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Posted in General Veteran Information, Loan Processing, VA Loan, VA Loan News, VA Purchase, VA Refinance, VA Streamline Refinance, Veteran Service | 1 Comment »

VA Funding Fee – Which Veterans Pay it and Which do Not?

Wednesday, June 3rd, 2009

The VA funding is a fee paid by Veteran home loan borrowers when they use the VA’s home buying program. It is paid upfront and is allowed to be included in the final loan amount itself. VA loans do not have monthly mortgage insurance – sometimes called PMI or Private Mortgage Insurance. This VA funding fee goes directly to the VA and allows them to continue to offer veterans home loans. This funding fee in essence “takes the place” of that mortgage insurance. The VA guarantees the loan to the lender and the fee varies depending on the type of loan, if it is a first time use, manufactured home, disabled veteran and so on.

The Funding Fee is paid by nearly every veteran home buyer.  The only exception is for veterans who collect disability from the VA.  The fee is waived in that case. It is paid on all VA home loan transactions unless VA disability is received by the veteran.  The VA funding fee can vary  based on the type of service, whether you have been active duty or reserves and if the loan is a purchase, streamline refinance or cash out transaction.

Purchase & Construction Loans

Type of Veteran

Down Payment

First Time Use

Subsequent Use for loans 1/1/04 to 9/30/11
Regular Military None
5% – 10%
10% or more		 2.15%
1.50%
1.25%		 3.3%*
1.50%
1.25%
Reserve/National Guard None
5% – 10%
10% or more		 2.4%
1.75%
1.5%		 3.3%*
1.75%
1.50%

Cash-Out Refinances

Type of Veteran

Percentage for First Time Use

Percentage for Subsequent Use
Regular Military 2.15% 3.3%*
Reserve/National Guard 2.4% 3.3%*

* The higher subsequent use fee does not apply to these types of loans if the veteran’s only prior use of entitlement was for a manufactured home loan.

Other Types of Loans

Type of Loan

Percentage for Either Type of Veteran Whether First Time or Subsequent Use

Interest Rate Reduction Refinancing Loans (IRRRL)

 0.50%
Manufactured Home Loans 1.00%
Loan Assumptions 0.50%

Should you want to see this chart directly on the VA website, click here.

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Posted in Loan Processing, VA Loan, VA Purchase, VA Refinance | 2 Comments »

VA Refinance-Payoff Statements for Veterans

Thursday, May 28th, 2009

During a VA refinance, processing will need to get in contact with the veteran’s current lender to request a payoff statement on their current VA home loan. A payoff statement of payoff demand is a statement from the borrower’s current lender showing the amount due on a VA loan to be paid off during the refinance by the new lender.

When requesting a payoff statement, the current lender usually charges a payoff statement fee. This is a fee that a lender charges to provide a statement showing the amount due on the loan. The fee varies depending on the lender. Generally payoff statements are received via fax and because of this method of delivery; the current lender can sometimes charge a payoff demand fax fee. The fax fee just like the payoff statement fee varies depending on the borrower’s current lender.

Once the payoff statement is received, processing will look at a number of different things on the statement; first would be the principal balance or note balance. This balance is the original amount that the borrower borrowed minus the principal portion of the borrower’s regular monthly payments and any other payments that were made directly to the principal balance of the home. Next processing would look at the per diem on the loan, this is the daily interest charged on a the VA loan.  In addition to the daily interest you are charged you may also have other fees or amounts due added to the amount owed on your home.  Some examples could include:  escrow overdrafts, unpaid late or legal fees, forced insurance premiums etc.

Payoffs are an important part of a VA refinance because they will allow for the new lender to see if the veteran is current on his/her payments and how much the new lender will need to pay the current lender to payoff the loan.

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Veteran’s Guide to Understanding a VA Good Faith Estimate

Tuesday, May 26th, 2009

Veterans must understand how to read and interpret a good faith estimate (GFE).  This is probably one of the most important documents when deciding what company to choose to handle the financing on the VA LOAN.  This GFE disclosure IS REQUIRED by the Real Estate Settlement Procedure Act (RESPA).  If you don’t get one then the broker or lender is not adhering to laws that govern the mortgage industry. 

WHAT IS A GFE ?

In a nutshell this disclosure should list all the costs associated with the VA loan.  It will show the new monthly payment, payoff amount or purchase price amount, taxes and insurance and funds required to close or funds the VETERAN is getting back (refinance) and debts being paid off if applicable.  There are specific costs and they are broken down into categories or numbers.  I will list them below:

800 – ITEMS PAYABLE IN CONNECTION WITH LOAN

These are all the charges that the lender or broker will charge.  In this section would be listed the ORIGINATION or DISCOUNT FEE.  The appraisal and other broker or lender fees will be listed here too.  Please remember the  veteran will not pay the “junk fees”.  The DEPT of VETERAN AFFAIRS will not allow an originating company to charge these fees which in return should benefit the veteran.  Here is a list of the NON allowable charges.  NON allowable means that the Veteran cannot pay them; on a refinance the broker or lender must pay them or not charge them at all, and on a purchase the seller can pay them.

NON Allowable Fees/Charges

  • Attorney Fees
  • Brokerage Fees
  • Prepayment Penalties
  • HUD/Inspection Fees
  • Signing Fees
  • Escrow/Closing Fee

813 – COMPENSATION TO BROKER

Yield Spread Premium (YSP) is the fee the bank or lender (the entity lending the money who you will make first payment to) has the ability to pay the broker a fee or premium for locking your rate in at an above PAR rate.  We will discuss, understanding interest rates and points at another time.

1100 – TITLE CHARGES

All of the Title Charges will be listed here.  They are title insurance, title exam, wire and endorsements.  Just like the broker there are fees here that the title company cannot charge a Veteran. 

1200 – GOVERNMENT RECORDING & TRANSFER CHARGES

The fees listed under this section would be recording fees, city and state tax stamps.  The recording fee is what the county recorder will charge for recording the new Deed of Trust.  State and City tax stamps are state specific.  Some states have tax stamps and other do note. 

1300 – ADDITIONAL SETTLEMENT CHARGES

This area would list any pest, termite inspections and home inspections.

900 – ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE

This heading makes it sound like the VETERAN must pay for these before the loan can close.  This is not the case.  Is simply is referring to monies collected before the first payment.  The charges listed here are the interest that needs to be collected before the first payment is due.  With VA loans interest is billed in arrears which means when a payment is made in June the Veteran is paying for the interest accrued in May.  So lets say you close on the 20thof the month.  You will have 10 or 11 days of interest collected in this section.  With VA LOANS the VA FUNDING FEE is listed in this section.  If  Veteran is receiving VA disability then there will be no funding fee.  Veterans should pay close attention to this.  An experience broker knows not to charge a VAFF when disability is being received by the veteran.

1000 – RESERVES DEPOSITED WITH LENDER

WithVA loans your taxes and insurance will need to be collected with your monthly payment.  An escrow account is used to hold the money that is owed for taxes and insurance.  When a Veteran makes a payment a portion of the payment gets deposited into an account.  This account will continue to build payment after payment until the taxes or insurance are due.  The lender will make the payment for the Veteran.  This is very helpful because it will prevent unforeseen expenses on the home owner and delinquent taxes and insurance.  The amount collected upfront varies  based on the dates they are due.  For example, lets say that taxes are due in December and the Veteran is refinancing and their first payment is due in March.  The Veteran will have made 10 payments before taxes are due, but you must have enough for the year plus 2 months as a cushion.  So in this section we would collect 4 months.  This same principle applies to the insurance.

TOTAL ESTIMATED FUNDS NEEDED TO CLOSE/ TOTAL ESTIMATED MONTHLY PAYMENT

This just gives the overall costs and details of the transaction and the total new monthly payment.

Like I said earlier.  This is a very important disclosure and should be looked at very carefully.  In my experience the GFE should be used to compare offers from other companies and it also shows how competent the originating company is.  Remember also, that this is just an estimate.  Usually this will never be 100% accurate to the final costs.  Those are listed on the HUD 1 or Settlement Statement, however, the GFE should be as close as possible and should give Veterans a good idea what to expect cost wise when buying or refinancing a home.

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Posted in Loan Processing, VA Loan | 1 Comment »

Veterans-Why do you Need Title Insurance on a VA Loan?

Wednesday, May 20th, 2009

Between home owners insurance, property taxes, flood insurance, the VA funding fee and your mortgage payment, you may think to yourself, “What is title insurance and why do lenders require veterans to have it on VA loans?” Title insurance is a policy that protects your mortgage lender against problems relating to the property’s title prior to the date when you purchased your home. Because your home may have gone through several ownership changes, it is important to be protected against anything that could have gone wrong with your title prior to your ownership.

Title insurance insures the lender against a financial loss in case the title has any unknown judgments, outstanding liens against the property including foreclosure, unpaid real estate taxes on the property and the title insurance protects you and your lender if a lawsuit is filed against the title. An example of what title insurance protects the lender against would be if someone who previously owned the property had forged a signature in transferring title. Instead of the lender or you having to pay for this problem out of pocket, title insurance covers the insured party for any claims and legal fees that arise from such problems.

Before issuing a title insurance policy, the title insurance company will search the public land records for matters affecting title to the property. The purpose of this examination is to determine ownership of the property and to identify any possible problems and all liens against the property. If problems are revealed by the title search, frequently they can be resolved so that clear title can pass to you.

Title insurance is required in most states to close on a mortgage for both a purchase and a refinance. On a VA refinance you will need to purchase a new title insurance policy so that the new lender can be protected the same way that the old lender was.

So even though title insurance may seem like a useless expense it actually will save you and your lender in the long run incase you end up having any problems with the title on your home.

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Posted in Loan Processing, VA Loan | No Comments »

Refinancing a VA Loan – Why Your FICO Score is Important

Monday, May 11th, 2009

Having good credit is key when refinancing or purchasing a home. Mortgage lenders look at lots of criteria regarding credit when deciding an applicant’s credit-worthiness. The main thing that lenders look at is the veteran’s FICO score. A FICO score is a number which represents an individual’s credit rating. It is based off of the compilation of the veteran’s current credit score, forms of credit used, new credit, the length of the credit history and the payment history. When refinancing or purchasing a new home you want to make sure that the borrower has the highest possible score they can have to get the lowest interest rate available. The better your FICO score is, the better your chance is of getting the best rate available. Most VA lenders today are requiring a FICO score of 620 or above but if you currently don’t have a 620 FICO score, don’t worry there are ways to increase it.

By using online sources such as CreditXpert, a program designed to help processing determine what action can be taken to increase a borrower’s FICO score, a borrower can increase their FICO score by following simple steps. CreditXpert gives specific instructions for the veteran to take to improve the his/her overall FICO score. These actions usually require paying down credit card debt or fixing a collection notice. In using CreditXpert, numerous borrowers who at one point had too low of a FICO scores to refinance were able to increase their FICO and ultimately get the lowest interest rate available. So remember if you think your FICO might be too low for the current interest rates available, always call and check because you may be missing out on historically low rates on VA loans.

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Posted in Loan Processing, VA Purchase, VA Refinance | 1 Comment »

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