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4 Tips to avoid delays in closing your VA loan

Tuesday, January 25th, 2011

I have been processing VA loans for four years and have seen all kinds of things go wrong at the last minute. If you have purchased or refinanced a home in the past you may be familiar with some of the frustrating holdups in actually getting to the closing table. While some of these issues may be due to third parties and are out of our control, there are several steps that you, as a borrower, can take to help the process go smoother and more quickly.

  • Give your Loan Officer accurate information upfront. During the pre-approval process with your VA loan officer you will be asked for several pieces of information that are critical in determining your eligibility for a VA loan. It is important that this information is as accurate as possible, or else you run the risk of hold ups later if it turns out that you do not actually meet VA or lender criteria.  I have seen loans held up because of misinformation that was discovered at the eleventh hour. Some of these critical items include: your credit scores, how much you currently owe and your current interest rate (if you are seeking to refinance), any second mortgage or home equity line of credit, bankruptcy or late payments on your mortgage, if your spouse is on the loan with you, etc.
  • Return phone calls and/or emails promptly. This may seem obvious, but after processing thousands of VA loans I have seen many closings stalled simply because the borrower did not return a call or email with critical information we needed to move forward.  Life is understandably busy, but time is of the essence, especially when you are trying to save money!  Closings need to be coordinated with title companies and lenders, and can be pushed back days or even weeks waiting for information from the borrower.
  • Supply all documentation requested by your loan officer. Your loan officer will have sent you a list of items needed from you in order to process your loan and have it approved by the bank. Some of these items may include the Note from your current loan (if you are refinancing), employment/income documentation, DD-214 to request your COE, photo IDs, proof of homeowner’s insurance, etc. Omitting any one of these items will cause your closing to be delayed until it is received and reviewed. Banks will not issue an approval to close until all of their documentation criteria are met. The more thorough we can be up front during processing, the more smoothly everything will go toward the end.
  • Ask all of your questions well before you get to the closing table. Make sure you understand all of the terms and conditions of your VA loan, such as third party fees, your new payment, the interest rate, etc. Be sure to ask your loan officer to explain anything you do not understand before you are closing so that when it comes time to sign you feel confident and ready. It is frustrating for everyone when a closing has to be postponed because of something that could

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Top 3 Reasons to Use a VA Hybrid Loan on Your Next Refinance

Friday, January 14th, 2011

The VA Streamline Loan is one of the most popular refinances right now due to its ease and the benefits that can be received through it. Not only can the veteran basically avoid jumping through all of the hoops that come along with obtaining a loan, but here are just some of the benefits that a streamline offers: no appraisal, an optional down payment, lenient credit requirements, no income verification, the possibility of deferring two months payments, and the possibility of getting an escrow refund of the money that is in the escrow account when the loan is paid off.

Now these benefits do depend on what lender you work with. The VA sets all of the rules in place, but since it is the lender that is lending the money and the VA is only guaranteeing the loan, the lender can determine if they wish an appraisal or a certain credit score is required.

The VA Hybrid loan is becoming more and more widely used for VA refinances now. Now hearing the word hybrid, you may think of a car. It’s actually the same idea. Just as the car combines gas and electric, the hybrid loan combines an adjustable rate mortgage (ARM) and a fixed rate mortgage. The VA took the best of each loan and made this one! Most veterans lifestyles requires them to move frequently and are not able to remain in their home for the duration of their entire 30 year fixed rate mortgage, so that type of loan was not working out the best for them.

Hybrid loans are a combination of a fixed rate and an adjustable rate mortgage. The introductory rate period is fixed, generally for a period of 3, 5, 7, or 10 years of the loan, with the lowest interest rate usually coming with the 3 or 5-year option. After the introductory period is over the adjustable rate begins. Studies show that many home owners only stay in their homes for 7 to 10 years, so a hybrid loan allows these buyers to take advantage of the very low rates in those first few years of their mortgages. After the adjustable rate begins, the rate can only adjust every 12 months and it can only adjust up to a max of 1% up or down per year, with a lifetime cap of 5%.

There are many benefits to this combination loan. Here are the main three:

  1. 1. LOWER INTEREST RATE DURING FIXED PERIOD

One of the main reasons people choose a hybrid loan is for the lower interest rates going into the loan. Hybrid loans typically have an initial start rate of 1-2% lower than that of a 30 year fixed rate. This can lead to savings of $100-200 monthly! The 3 and 5-year options tend to have the lowest rates. These rates are guaranteed fixed for the set option you choose (3, 5, 7, or 10), which is a considerable amount of time.

  1. 2. ADJUSTABLE RATES CAN DECREASE IN A DECLINING INTEREST RATE MARKET

When the borrower’s introductory rate is over, and the rates are lower than what your fixed rate was at then your rate gets even better during that time. This would reduce the payment even more and can save the borrower even more money!

  1. 3. FLEXIBILITY TO END THE LOAN

This may be one of the largest benefits of the loan. The borrower can enjoy all of the benefits of this loan, but avoid a possible rising interest rate. As mentioned before, most veterans and regular homeowners are not in their home for a full 30-year term. Most choose to take out this type of loan and terminate it by refinancing or selling (if they are moving) at the end of the fixed term. This is one of the main reasons they choose a hybrid over any other type of loan.

Of course there are a few drawbacks, but there are to every loan. The rate could jump up and then the borrower would be stuck paying a higher rate, but also as stated before there is an option to refinance and terminate the loan.

VA Hybrid loans offer savings and safety that many veterans are taking advantage of already.

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VA Jumbo Loans

Monday, December 20th, 2010

Currently, there exists a “perfect storm” of opportunity for qualified veteran and active duty military borrowers.  Between record low VA rates and rock-bottom home prices, those who have earned VA Loan Guarantee eligibility can still qualify for incredible financing opportunities.  While many VA borrowers are aware of the 100% financing benefits the loan guarantee program offers them on conforming loan amounts(</= $417,000 continental US, </= $625,500 in Alaska & Hawaii), many veterans are as yet unaware that there are financing options above and beyond conforming limits that still make VA loans a far superior alternative to conventional “Jumbo” loan options.  Here we will offer a brief comparison of the two as well as the more specific advantages and features of the VA Jumbo Loan Program.

While 100% financing is limited on VA Jumbo Loans, qualified veterans can still secure financing with smaller down payments and more flexible lending guidelines without having to carry mortgage insurance.

Most conventional jumbo loans require that the borrower bring at least 20% of the full purchase price to close.  By contrast, VA Jumbo loans generally require no more than 25% of the amount of the sales price over $417,000, or $625,000 in Alaska and Hawaii.

Let’s say a home sells for $700,000. Now subtract the maximum “zero down” VA loan amount of $417,000 and you get $283,000.  Simply take 25 percent of $283,000 and we determine that the down payment would be $70,750.  To sum up, for just over 10% down, qualified veteran borrowers can purchase VA homes in high cost counties with no mortgage insurance and with subsidized rate pricing.  By comparison, a conventional jumbo loan borrower would have to bring $140,000 to close and likely receive a much higher rate that a qualified veteran.

Currently however, in order to facilitate homeownership for qualified veteran borrowers in areas within the continental United States where the median home price exceeds the traditional $417,000 maximum (despite the recent home valuation trends of recent years), the Department of Veterans Affairs has extended loan guarantee benefits that allow for up to 100% financing.  Many of these “High Cost” areas are located in California or in high density, east coast states, like Maryland and Virginia.  To give one an example of the sorts of benefit loans available, consider the following counties loan limits, based on the 2010 updated figures.

  • Los Angeles VA loan limit: $593,750
  • San Diego VA loan limit: $437,500
  • Alameda VA loan limit:$962,500
  • San Francisco VA loan limit:962,500
  • Orange County VA loan limit:$593,750
  • Riverside County VA loan limit:$417,500
  • Fresno County VA loan limit:$417,500
  • San Bernardino County VA loan limit:$417,500
  • Sacramento County VA loan limit:$418,750
  • Santa Clara County VA loan limit:$633,750

While these areas have been designated as “High Cost” counties for the years 2009-2010, there is little indication as to the depth, extend or duration of how long these areas will be able to enjoy these benefits.  In fact, even despite what the VA has indicated they will currently guarantee, the extent to which lenders will honor or offer financing across these conditions exist on a case by case basis.  The best bet for any borrower looking to take advantage of these temporary benefits is to contact a VA approved loan officer who can navigate through the various opportunities available to you.

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VA Loan Benefits in 2010 compared to other loans

Monday, November 29th, 2010

One of the huge benefits in the VA loan program is that no down payment or mortgage insurance is required. Conventional mortgages require a minimum down payment of 5 percent. The VA program allows financing of up to 105 percent of the sales price or appraised value of the home, and borrowers can finance the closing cost of the mortgage as well. So a veteran can purchase a home without any money out of their pocket with a VA loan unlike a conventional loan.  Even with FHA loans, VA mortgages offer so much more advantages regarding interest rates, credit scores, mortgage insurance and down payments.

A lot of concerns with getting a loan is if your credit score is good enough for the type of loan you want. The best thing about the VA loan program is they have looser requirements with credit score than FHA loans, and the conventional mortgage industry.  The government sets no minimum income or credit score standards for VA loans. In most cases if a borrower has a credit score of at least 580 they are able to be accepted for a VA loan, with a conventional loan you have to have at least a 620.  In some cases with a conventional loan and a borrower has a credit score under 720, the borrower must make a larger down payment of at least 20 percent.  The great thing about a VA loan is there is no down payment necessary with a lower credit score. They’re completely open to borrowers with bad credit, and the rates are reasonable.

Interest Rates with a VA Loan are very low compared to other types of loans. With non-VA loans, borrowers pay a higher rate for every 20 points their credit score drops below 720. But with a VA loan, borrowers get the same low rate, whether their credit score is 605 or 785. That’s one of the things that make VA loans such an amazing deal for any veteran or active-duty military families who need a mortgage. Veterans don’t need to worry about being refused because they don’t have money for a down payment or have a bad credit score. Having a VA loan, there are so many more benefits then negatives.  With other types there is, so U.S veterans are most likely making the best decision when choosing a VA loan.

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Veterans and Military home owners need to refinance now and not wait

Friday, November 5th, 2010

The Federal Reserve Wednesday announced its latest effort to spur economic growth: a plan to purchase up to $600 billion of government bonds through June 2011.  The Fed, as it is called, is trying to lower interest rates, in the hopes that doing so will loosen the supply of credit and spur more economic activity. The central bank’s main tool for reducing rates is to slash the short-term overnight lending rate that banks charge to one another, the so-called Federal Funds rate. Bring short-term rates down, and long-term rates tend to follow. In normal times, that’s as far as the Fed usually goes. In the past three years, the Fed has reduced the Fed Funds target rate 10 times, from 5.25 percent to between zero and .25 percent. It’s been at that extremely low level since the fall of 2008. This is one of the reasons we have seen such amazing rates during the last couple years and why they have remained low.

BUT- that does not mean that VA interest rates will go lower.  In fact, if anything they have reached levels that they can’t break through going lower, with inflation and such.

Investors love to repeat the mantra: Don’t fight the Fed.   Also with as much firepower as the central bank possesses, the Fed isn’t the only dominant economic power in the world. And interest rates can be impacted by all sorts of factors. If China’s central bank cuts back sharply on its purchases of U.S. government bonds, which they could do at anytime, interest rates will rise. Investors’ attitudes about the pace of growth, or inflation, play an important role in determining market interest rates also.  And where we have seen rates low for such a long time, more of the same seems unlikely.

Moreover, what does the Fed believe it will gain by adding more and more government bonds to it balance sheet?   That is the question isn’t it?  There are a couple of risks. First, low interest rates and the expansion of the Fed’s balance sheet tend to weaken the dollar. But the second — and larger — risk is that it won’t work. Interest rates are already exceedingly low, and it’s unclear how “lowering” them a bit more will induce companies and individuals to change their behavior significantly.  In the current situation, Fed Chairman Bernanke is cranking up the volume while the political system is sitting on its hands. Imagine a two-engine jet trying to fly with only one engine working.  We need to really see both entities policies working in tandem to reap the maximum effect.

So where does this all leave us?  What it means is don’t expect rates to be any better tomorrow then they are today.  Now is the time to take advantage of the lowest rates in nearly 65 years.  It is time to realize that if foreign powers decide to exercise their options and Wall Street/investors attitudes are still in the doldrums, and then later could very well be worse than now.  As 2010 comes to an end there are also likely changes to loan programs for 2011 that could also jeopardize refinances next year that you could “get away with” this year.

Eric Jorgensen is an experienced VA loan officer and can help you with all of your VA mortgage needs.

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How VA loans can put money in your pocket

Wednesday, November 3rd, 2010

Have you recently looked into your wallet and noticed there is less money in there? No not because your teenagers are cleaning you out but because the economy and times in general are just tougher. Well because of this situation and the current market for homes and interest rates, it may be the time you have waited for to refinance, using the VA’s VA Streamline IRRRL loan. IRRRL stands for Interest Rate Reduction Refinance Loan. This is not a new program; the VA has offered it for years and years. Because interest rates are so low right now, many people are finally getting around to it and in some cases taking advantage of the program again from just a couple years ago.

Let’s look at the program.

The VA allows for current VA mortgage holders in good standing, those who have been current on their payments for 12 months, and those who have had the loan for less than 12 months can still qualify, just have to meet qualifications that include that the refinance is beneficial to the borrower.

Commonly having a second mortgage or home equity line of credit (HELOC) make the process more difficult but not necessarily impossible. You see because these liens are subordinate to the current first mortgage- the VA loan- the lien holder on the 2nd or HELOC has to agree to remain in a second lien position when the VA loan is refinanced. This is called subordination. Most companies agree to subordinate to the new VA first mortgage.

Ok so let’s continue to look at how the refinance can put cash in your pocket. As part of the refinance process the current VA loan servicer, the company that the payments are made to now, will be paid off. When that loan is paid off, the interest that is due on a payoff is included. So commonly, there are two months in which the veteran/homeowner will not have to make payments, they are simply deferred. That frees up two months worth of current house payments, in some cases like with larger loans that could free up $5000 or more.

Next, as part of that payoff to the current servicer, they are no longer able or required to pay out escrows, tax and insurance payments, on the loan. So they will return whatever is left in the escrow account when the higher refinanced loan is paid off. The new loan includes those prepaid taxes and insurance built into the loan so when the new payment comes due, there are already taxes and insurance built into the account for when they are due later that year.

So let me give you an example with actual numbers. I have a client where the current monthly payment on their 6.25% loan is $1956. They will not have to make that payment for the next two months, since the interest is included in the payoff, so $1956 x 2= $3912. Then the escrows refund is $4623. So $3912 + $4623=$8535 cash in their pocket from the VA streamline rate reduction refinance.

You can see how easy it is to put money in your pocket from taking advantage of the VA refinance program. Oh yeah don’t forget this example above, not only are they putting $8535 in their pocket but they are also lowering their monthly payment by $276 a month

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Top reasons to use a VA streamline refinance

Wednesday, October 27th, 2010

The VA Interest Rate Reduction Refinance Loan (IRRRL), or VA streamline refinance, is an excellent way for veterans and active duty service members to reduce their monthly mortgage payment by lowering their interest rate. And let’s face it, we could all use lower monthly payments these days!

The VA streamline loan is only available to those who already have a VA loan. There are a lot of advantages to streamlining your VA loan:

  • No appraisal required!
  • The VA does not require you to credit qualify.
  • No down payment, and all closing costs are rolled into the loan, so you bring nothing to closing!
  • Lowering your interest rate and monthly payment can save you money every month.
  • You don’t make a mortgage payment for two months after you close, saving you two month’s worth of mortgage payments!
  • You can choose to reduce the term of your loan (i.e. Go from a 30-year to a 25, 20, or 15-year loan) to save thousands on interest over the life of the loan.
  • You can refinance from an Adjustable Rate Mortgage (ARM) to a Fixed rate, avoiding costly interest rate hikes when the ARM rate adjusts.
  • You can refinance from a fixed rate to a VA 3/1 or 5/1 Hybrid ARM, lowering your interest rate and monthly payment considerably.
  • The streamline process is painless and relatively quick. You could be refinanced in just a few weeks and saving money!

Rates are at an historic low right now, so if you have a VA loan, chances are good that you will be able to benefit from lowering your interest rate with a streamline refinance.

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Time to buy a home with a VA loan

Monday, October 25th, 2010

With mortgage rates near 65 year lows, it could be the best time in the past decade or so to buy a home.  There is plenty of “stock” available in nearly every market and in some markets, like FL, AZ, CA and a few others, prices have come down from near top of the market “values” compared to just a few years ago.

The “bad” news, well it has become somewhat more difficult to qualify for a home loan. The good news however, is that there are less hoops then you might think on VA Loans still.  So for those that do qualify for a VA loan and there are MANY that do, it is still the best option for a purchase or a refinance.

Let’s talk about a few of the hoops, and see how easy they really are to get through.

1.  Income qualifying-  The VA has simplified the debt ratios and allows some of the highest DTI, Debt to Income, ratios in the industry.  I recently had an approval on a 54% DTI, that is 13% higher than current conventional guidelines.

2.  Appraisals- it has to be done by a VA certified appraiser.  This is a great benefit to the buyer.  The VA has more strict guidelines that protect the veteran/active duty buyer from getting into a home that isn’t safe, hasn’t been maintained well or doesn’t adhere to current “livable” standards.

3.  Seller Concessions- the VA offers up to 6% seller paid concessions on purchase transactions.  So if you were buying a $280,000 home, the seller could offer $16,800 in concessions to make the deal work.  That is obviously a HUGE amount of concessions and I haven’t seen the need for that much but hey it’s available and an option if it really came to that.   In addition, almost all purchases currently have some sort of seller concessions to help pay for closing costs.  It is just the way the market has moved with all the volatility in the real estate market.  Sellers are willing to give concessions away so they can sell the house at all, in this kind of market.

4.  100% financing- best of all no money down financing is still available.  Boy that is when I wish I had access to the VA’s loan program.  We had to bring an arm and a leg to close so as to avoid paying mortgage insurance- which also the VA doesn’t have on any of there loans.  On VA loans they charge a funding fee, which goes to guarantee the loan, unless you collect disability from the VA and then they waive the funding fee altogether.

5.  VA Rates- among the lowest in the country, the VA “specialized” for government loans only offer rates as low as 3.25% today.  The best I could get on my own loan was 3.875%.

I hope I have helped to inform and bring up to date what the current market is to allow VA eligible home buyers to buy a house right now.

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Top 5 Reasons to Use a VA Streamline

Monday, October 18th, 2010

Using a VA streamline loan is a smart idea for anyone with the opportunity to do so. There are a number of benefits to the veteran, which will be presented in the following paragraphs. VA loans tend to have more flexibility and to be more attainable, due to the fact that more lenders offer them. It is often easier for the veteran to qualify, making it a convenient choice compared to other types of loans. Here are just five of the main reasons to choose a VA streamline loan!

  1. The qualification process for that of a VA loan is much easier than for one of a conventional loan. A VA loan is a specific type of loan available to  US Armed Service veterans, who have served at least 90 days during wartime or 181 days during peace time and were not “dishonorably discharged”. They may be a retired veteran or the spouse of a veteran who died in the war or due to service related wounds and have no re-married. There are many ways to qualify for a VA loan.
  2. Credit standards are much less strict. Typically this is where many borrowers have trouble with their loans. The VA looks for a clear 12 month credit history. Also, credit scores do not affect the rate of the loan.
  3. There is no down payment required. This payment could be used for many other things, such as savings, paying off other debts, possibly a payment on the home later, or maybe a family trip! If the borrower chooses, they can make a down payment, but just keep in mind that it is not a requirement!
  4. The amount that the VA allows the veteran to qualify for is generally quite a bit larger than that of a conventional loan, while also having lower interest rates. (Rates follow the market, but can become even lower if the veteran does opt to make the optional down payment.) A veteran can get a home for $0 money down and up to $1 million! Most states in the United States have a loan limit of $417,000, as chosen by lenders; however, in some states the max goes up to $625,500. Specific lenders in any state will allow higher loan amounts to fund, up to a maximum of $1,000,000.
  5. The government limits the amount that can be charged in closing costs, origination fees, and appraisal fees. There are also no mortgage premiums required. Lenders are prohibited from requiring one. This is because of the guarantee put on the loan.

Veterans should take advantage of the VA loan if they can qualify for this option. Another perk to the veteran is if they have any kind of service disability. They can look into getting their funding fees waived as well. There are so many benefits to the VA streamline that it would be hard to not look into it. It is definitely one to take into consideration when buying a home.

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VA Loan Benefits

Wednesday, October 6th, 2010

In the current economy, many homeowners have not been doing well. Homeowners who cannot make their monthly mortgage payments are becoming delinquent on their mortgages and facing possible foreclosures on their homes. But in the midst of the mortgage crisis, the VA loan program has still been successful. VA loans, which are exclusively available to veterans and men and women serving in the military, provide multiple benefits to borrowers that enable them to finance their homes and stay grounded in the struggling home market.

VA Loans Have Lower Delinquency Rates Compared to Other Home Loans

This type of financing remains a popular option for qualified applicants who want to finance their home in an affordable way. In 2009, the Department of Veteran Affairs guaranteed 325,673 VA loans, proving that the bad economy was no match for the program. These loans have a delinquency rate of only 5 percent. This is quite low when compared to the delinquency of other types of home loans, which are as high as 30 percent! This shows that the VA must be doing something right with its home mortgage program to be able to maintain such a low delinquency rate.

Why VA Loans Continue to Be Successful

VA loans offer many benefits to both current homeowners and prospective homeowners that allow them to save money upfront and over the life of the loan. This type of financing is unique in that it does not require borrowers to make a down payment on purchases. Many lenders are reluctant to offer this type of incentive because they consider it to be risky in this unstable housing market. The elimination of the down payment saves first-time home buyers thousands of dollars in out-of-pocket costs, which allows them to have more money for other expenses associated with buying a home. Homeowners who already have a mortgage can refinance their loan into a VA loan to receive a lower rate, cash or to consolidate their debt!

Currently, VA mortgage rates are at historical lows, which makes now a great time for individuals to get a VA loan. Compared to other types of home loans, these loans can offer even lower rates. With a low rate, homeowners can reduce their monthly mortgage payment and have more money available for other expenses. This type of financing also does not require mortgage insurance, so borrowers can save even more money over time.

Eligible Applicants Should Take Advantage of This Great Opportunity!

This type of financing is also easy to use because it has lenient credit and income requirements; applicants do not have to have perfect credit to be eligible! This is good news for those who may have been turned down for a conventional loan. Applicants will need to have a credit score of at least 620, and they must have gone one year without any delinquent payments. Consider financing with a VA loan to receive a low rate and save money! Interested veterans and service members should speak with a loan specialist to learn all of their options and how they can get started today! Our office makes it easy and simple to refinance. We have over ten knowledgeable loan officers in our office. They ready and willing to help you and inform you of all the great VA programs offered to you. Make sure to call us to take advantage of the great rates and benefits we can offer you!

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