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Archive for the ‘VA Purchase’ Category

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VA Residual Income Requirements for Veterans

Monday, November 9th, 2009

Anytime someone wants to partake of the American Dream and own a home, they must go through a series of  checks and balances.  One of them is the capacity to make the payments every month.  This is calculated by determining the total debt ratio which is the gross monthly income divided by the total monthly debts; including the new mortgage payment.  Usually this is it when doing FHA or conventional loans. The VA, however,  has a step that trumps the debt-to-income ratio, called residual income, which has minimum standards depending on loan size, family size and geographical location.  The VA’s minimum residual income, which is also considered the balance available for family support, is a guide  and should not automatically trigger an approval or rejection of a VA loan.  Instead, it is considered in conjunction with all other credit factors.  An obviously inadequate residual income alone can be a basis for denying a VA loan. Sometimes the residual income can be marginal, but the VA can also look at other compensating factors such as good credit, monthly reserves and how the Veteran applying has handled their past housing expense.

The VA’s debt-to-income ratio is a guide and is an underwriting factor, however it IS secondary to the residual income calculation.  Over the years I have done many VA purchases and I have seen Veterans get approved and buy a home with over 55% DTI as long as they met the minimum residual income requirement.  I will now list what the requirements are in a table format:

Table of Residual Incomes for loan amounts of $79,999 and below

Family Size Northeast Midwest South West
1 $390 $382 $382 $425
2 $654 $641 $641 $713
3 788 772 772 859
4 888 868 868 967
5 921 902 902 1,004

Over 5  Add $75 for each additional family member up to 7

Table of Residual Incomes for loan amounts of $80,000 and above

Family Size Northeast Midwest South West
1 $450 $441 $441 $491
2 $755 $738 $738 $823
3 909 889 889 990
4 1,025 1,003 1,003 1,117
5 1,062 1,039 1,039 1,158

Over 5  Add $80 for each additional family member up to 7

Here are the states that fall into the regional locations determined by VA

Northeast

Connecticut, New Hampshire, Pennsylvania, Maine, New Jersey, Rhode Island, Massachusetts, New York, Vermont

Midwest

Illinois, Michigan, North Dakota, Indiana, Minnesota, Ohio, Iowa, Missouri, South Dakota, Kansas, Nebraska, Wisconsin

South

Alabama, Kentucky, Puerto Rico, Arkansas, Louisiana, South Carolina, District or Columbia, Mississippi, Texas VA loan, Florida VA loan, North Carolina VA loan, Virginia, Georgia, Oklahoma, West Virginia

West

Alaska, Hawaii, New Mexico, Arizona, Idaho, Oregon, California, Montana, Utah, Colorado, Nevada, Washington

Some might consider the residual income to be a deterrent, but I feel just the opposite.  With other loans as soon as you go over a certain DTI then the loan can be denied on the spot, but with VA that sometimes is not the case.  It gives the Veteran an additional outlet for approval which is especially nice during these hard economic times.

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Posted in Uncategorized, VA Cashout Refinance, VA Purchase, VA Refinance | 2 Comments »

Can a Veteran Home Owner Rent out a His/Her Current Home and Buy a New Home With a New VA Loan?

Thursday, November 5th, 2009

Using a VA loan to purchase your home is one of the smartest things you can do as ahome buyer.  I have said time and time again that anyone that is entitled to a VA home loan and does not use it, has got to be very uneducated when it comes to understanding his/her VA benefits.

One place where Veterans have tried and keep trying to use their VA benefits and are struggling, is when it comes to buying a rental or investment property or when the veteran is not able to sell his/her current home and wants to rent it out in the meantime and then go buy a new home.

Perhaps the most constant guideline that all lenders have when it comes to VA loans, is that the home most be intended as your primary residence and that you can only have one VA loan outstanding at a time per veteran.  The reason this VA loan guideline is pretty standard for all VA lenders is because it is an actual VA program guideline issued by the Department of Veterans Affairs.

I will attempt to layout some examples in the following table:

Veteran’s Question About the VA Loan and it’s Usage

Simple Answer

Suggestions for Veteran
Can I buy a home with a VA loan and rent it out to someone? NO If you are buying a multi unit property like a duplex or 4-plex and you are going to occupy one of the units then you could essentially buy a home with a VA loan and rent it out
Can I rent my current home that has a VA loan on it to someone else that is a NON-Veteran? Yes You will not be able to buy a new home with a VA loan until you refinance the home that is now being rented into a loan that is NON VA.
Can I have more than one VA loan at a time? NO Some exceptions to this rule are possible.  If two veterans are married and one veteran had a VA loan on a home prior to getting married, then the two try to buy a home together once married; this could happen if the veteran that has not used his/her VA loan before is able to qualify.
Can a Veteran use a VA loan more than once? Yes It is possible to have unlimited access to your VA home loan eligibility. As long as you are able to sell your current home with a VA loan on it, then you can always buy again with a new VA loan.

 

There are always cases or questions that may not have been discussed in this post, and I hope you find the little bit of information I have shared useful.  Should you need more details or have a specific question, I certainly hope you can find it on LowVARates.com or that you will feel free to submit your question to our Contact Us page.

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Posted in VA Loan, VA Purchase, VA Refinance | 5 Comments »

How Much Money Should I Plan on Putting Down When Buying a New Home via a VA Loan?

Tuesday, October 27th, 2009

One of the first things a home buyer thinks of or plans on when preparing to purchase a home is, how much money will need to be put down to buy the home.  From about 2003-2006, no money down loans were a dime a dozen and very few home buyers were putting money down even if they had substantial money saved up.  Well after the mortgage meltdown of 2007-2008, the 100% financing or no-money-down loans are a thing of the past; for most home buyers.

Veterans and those using a VA home loan for the purchase of their house, still do not have to put any money down when purchasing or buying a home whether getting a Texas VA loan, Florida VA loan, or any other VA loan type.  Just because veterans are not required to have money to put down and are able to borrow the full sales price of the home, doesn’t mean it is always in the veteran’s best interest.  There are reasons to consider for making a down payment on a VA loan.

VA loans do not require mortgage insurance (PMI) and this is the main reason people would be interested in putting money down on a home purchase; by putting money down you can in many cases avoid paying mortgage insurance.  So if VA loans do not require the payment of a monthly mortgage insurance, then why would a veteran want to put money down?  Below is a list of some reason or options to consider for making a down payment on a VA loan.

Reasons to consider for making a down payment on a VA loan or VA home purchase:

Make your monthly payments on your mortgage smaller.  (budgeting) By putting money down a veteran is able to control more of the monthly mortgage payment that will be due each month.  Suppose you are buying a home for $250,000 and your rate is 6.5%.  Your monthly payment if you did not put any money down would be $1580.00 (PI only).  Putting down 20% or $50,000 would lower your monthly PI to $1264 and save you $316 a month.  These examples do not take into account your VA funding fee.
Pay a lower % on your VA funding fee. (lower your closing costs) The amount of money a veteran puts down on a VA purchase, will affect the amount of the VA funding fee charged by the department of veterans affairs and also has an impact on the monthly payments for the VA loan.  To fully understand how your VA funding fee will affect your VA loan please click here.  Just like a down payment will lower your monthly payment purely mathematically, a VA funding fee will also affect the final loan amount and thus have an impact on your overall monthly payment.
Emotional satisfaction of having some instant equity in your home. When a veteran doesn’t put any money down on the purchase of a home, the veteran will not have any equity in the house.  Knowing you have skin in the game and that you owe less on your home than what it is worth goes a long way in making you feel good, responsible and you also have given yourself more peace of mind.
Possible lower interest rate. Though most lenders or mortgage companies that work with veterans and do VA loans will not give lower rates or incentives for veterans that put money down, it has happened in the mortgage industry that a lender may be more willing to give a lower rate to a veteran that has shown responsibility in saving money and putting it down on the home.

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Posted in VA Loan, VA Purchase, va funding fee | 1 Comment »

Eligibility: How Do I Know If I Even Qualify?

Thursday, October 8th, 2009

There are some basic rules of thumb―currently on active duty for at least 180 days, 90 days of war service, 180 days of peacetime service before the 1980’s, or 24 months of continuous service after the 1980’s, or 6 years in the Guard or Reserves, or the surviving (un-remarried) spouse of service member who died on active duty or due to a service related disability. Of course these requirements assume an honorable discharge, but disability or hardship discharges are also acceptable. Just because you don’t fit these categories doesn’t mean you aren’t eligible either. There are other categories of acceptability, like cadets of Coast Guard , Military or Air Force Academies, midshipman from the Naval Academy , or officers from the National Oceanic and Atmospheric Administration. I admit I had to look that one up…try Googling NOAA. The complete list of eligibility is hard to find.

Once you think you meet the eligibility requirements you need to get an eligibility certificate. The easiest way is to let your lender file for it electronically, but this only works for those who are in the VA records system. Basically, you have to file VA form 26-1880 with proof of service and mail it to the eligibility center in North Carolina. Unless you are the surviving spouse, then use form 26-1817. I couldn’t find a separate form for the special categories, but you might have to call the VA Loan Eligibility Center at 1-888-244-6711 for more information.

Don’t be overwhelmed; if you have a good loan officer they’ll make it easy. It’s his or her job to know all this, not yours. Next time: Reusing VA eligibility, Can I obtain another VA loan?

Resources: http://www.homeloans.va.gov

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Posted in General Veteran Information, VA Loan, VA Purchase, VA Refinance, Veteran Service | No Comments »

Where are rates headed?

Tuesday, September 15th, 2009

This is a question I get asked everyday, dozens of times.  The short answer is, I don’t know for sure, no one does.   With the current US economy in shambles, foreclosures at their highest rates in decades and unemployment at near 10%, no one can be sure of where rates are headed- lower, higher or somewhere in between.

I would like to offer some advice and history as to what rates have done in the past few years and hopefully with this information you can make and educated decision about what to do for your family and situation.

Not since May of this year have we seen available 4.5% 30 yr fixed available for VA refinancing.  That being said, it was on the rate sheets last Friday the 10th of September.  Because of the volatility of the market it isn’t available today- that is how quickly the markets turn and rates move.  I have seen rates repost differently 4 times in the same day.  What does it all mean?  It means, if you have a VA loan right now, then it is time to refinance if you haven’t already- if it makes sense.  Anytime your refinance there are costs- prepaid taxes and insurance, title insurance, the payoff to your current mortgage company and that is fine- so long as the overall savings outweigh the costs involved.

Last year in October 2008 and 2007 rates were great and during the early fall.  They tend to move up towards the end of the year but you can expect 4.75% to be available for refinances in October 2009, so long as the market remains steady and nothing out of the ordinary happens.  Do not delay the process though if you are considering a VA refinance for October.  It is time now to get your paperwork into processing because with the low rates there will be a backlog of many people trying to get in for a refinance in October.  So plan ahead and get moving on it now.  Finally, that really is the trouble with rates today, is no one can explain why they do what they do, and with America in a really difficult financial position right now the markets are just plain crazy.

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Posted in VA Cashout Refinance, VA Loan, VA Loan News, VA Purchase, VA Refinance, VA Streamline Refinance, va interest rates | 1 Comment »

The new TILA (Truth In Lending Act) changes and how they affect VA loans and veterans

Thursday, August 13th, 2009

The TILA or Truth In Lending Act of 2009 dramatically alters the rules that lenders must follow during the application and disclosure process of originating loans.  The new rules for the TILA amended disclosure requirements, sets waiting periods and institutes fee disclosure requirements that are even more strict then they have been in the past.

Lenders will not be able to close a loan until 7 business days following the mailing or delivery of the initial disclosures.   Also, if the Annual Percentage Rate that has been mailed/delivered changes by more or less than .125% or $100 then the lender is required to re-disclose or provide the borrower with corrected initial disclosures no later than 3 business days prior to the closing.  There is a option to waive these waiting periods but you have to prove a valid emergency so it is very likely that will be a vast exception to the rule.  Saturday is now included as a “business” day where previously it was not.  Sunday is the only non-business day now.

Also lenders will not be able to collect any fees upfront until after the signed TIL is received or after a 3 day waiting period. This has never been an issue because we don’t ever charge upfront fees anyway.

For VA home owners and those who wish to get a new VA loan it will affect you in one way more than anything – waiting.  For some reason the Fed believes that apparently loans are being closed too fast and people aren’t able to make decisions in what I feel is a regular amount of time on their refinance.  I believe it may also help those persons who maybe aren’t as familiar with the refinance process and become even more educated.

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Posted in VA Loan News, VA Purchase, VA Refinance, VA Streamline Refinance | 2 Comments »

BEDTIME STORY – VA PURCHASE OPPORTUNITIES

Tuesday, July 7th, 2009

Once upon a time, in a land far, far, away, there existed a magical kingdom where every citizen had the opportunity to realize the dream of homeownership. The banks in this magical kingdom were so benevolent and of such unparalleled generosity that they designed home loans to fit the needs of every citizen, regardless of credit or job status. Many citizens were able to purchase the homes of their dreams, even with little or no “gold” as a down payment.

The citizenry of this magical land lived blissfully for many years, until, one fateful day, the evil credit default witch appeared in front of the king and said, “Many years ago, when your land was in the midst of drought and famine, we made a deal. I provided easy access to the gold you needed to grow your banks and build up your kingdom. But you lent this gold too freely, and have jeopardized my investment.”

With that, the witch cast a dark cloud which hung over the land. Almost immediately, the citizens found themselves unable to make their payments. Banks began to close their doors and all the homebuilders were forced to slash their prices to try and make ends meet. The king watched gloomily over his lands from atop his castle tower and remarked to the queen, “The irony, my queen, is that homes have never been more affordable and yet, unaffordable at the same time.”

The queen considered the kings words for a moment, then remarked, “Truer words hath never been spoken, my king, unless of course, one is a veteran.”
THE END

For most of us, the days of 100% financing for home purchases are gone. For veterans, the VA purchase program still makes this possible. In some areas home prices have fallen by more than 50%. Veterans with active VA eligibility have a unique opportunity to take advantage of this perfect storm of low prices. Analysts agree that this is one of the greatest buyer’s markets in history. In many markets, those with access to financing (i.e. veterans) can name their price. For example, last month I helped a veteran in CA buy a home for $290,000 that once listed for $630,000. When the VA appraisal was finished on the home I could hardly believe what I saw. The home was 4300 square feet with hardwood floors, granite countertops (kitchen/baths), crown moulding, wine closet and (drum roll please) a fully landscaped backyard with a custom pool and spa.

If a veteran were to buy this home using the VA purchase program they would be able to purchase the home with:

  • 0% down
  • No mortgage insurance
  • No closing costs (assuming an easily obtained seller credit/concession)

The VA purchase program allows veterans to take advantage of the same breadth of loan programs available on the VA IRRRL (Interest Rate Reduction Refinance Loan) or “VA Streamline” program. These loan programs include:

  • VA 30 year fixed loan
  • VA 3yr Hybrid ARM or Adjustable Rate Mortgage
  • VA 5yr Hybrid ARM or Adjustable Rate Mortgage

If you’ve read any of the earlier posts on this blog, you’re probably already aware of the benefits of the most popular VA loan program right now, the VA 5yr Hybrid ARM. The veteran I referenced on the aforementioned purchase in CA was able to get into the home with the following payment breakdown

  • $1393.01 + Taxes and Insurance on VA 5yr Hybrid ARM at 3.875%
  • Taxes: $303
  • Insurance: $130
  • Total Payment : $1826.01

We are talking about a payment of $1826.01 on a home that was once financed with a payment of $4500+.

While a payment of even $1826.01 on a VA Hybrid might be out of reach for many veterans, the point is still valid. Veterans who know that they will be living in an area long enough to justify a home purchase should consider the benefits afforded by the VA purchase program. For now, VA guidelines have remained flexible enough to accommodate most veterans. However, Flagship Financial encourages all veterans to consult with a VA loan specialist prior to qualifying in order to determine payment tolerance. There is a significant difference between what one can qualify for and what one can comfortably afford. This doesn’t necessarily mean that a veteran should exclude the possibility of a VA purchase, it just means that they need to be more realistic about their expectations.

There is an old adage that says in real estate, the only rules are “location, location, location.” I might argue otherwise. Any location can be a good deal if the price is right. If prices are informed by the market, and we can accept that the market is an abstract entity that adjusts over time, then a more apt rule might be that real estate is all about “timing, timing, timing.” To paraphrase the queen, “Truer words hath never been spoken, especially if one is a veteran.”

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Posted in VA Purchase | 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 »

Road Blocks to Purchasing A Home With A VA Loan

Friday, June 26th, 2009

When it is time to live the American Dream and buy that first or last home, there are many decisions to be made.  Probably most important is the financing, unless you are planning on paying with cash…LOL

With that, the VA has offered home loan financing for many years and their program is considered by many to be the best financing option available in the country.

Now as with anything there are certain circumstances where due to limitations set by the VA obtaining that final loan can be difficult.   I wanted to bring out the most common ones and explain up front that these road blocks are in force to protect not hinder veterans.   The VA is looking to protect them and not the lenders with these guidelines.

1.  On every VA purchase loan there is a pest inspection required.  These are normally routine but sometimes they can be a pest…yes pun intended.   But again, if something is wrong with the pest inspection how much better for the home buyer to know upfront instead of after they have already moved in, committed funds to the new house and be stuck with sometimes very costly procedures.

2.  If the property has a well for the main source of water for the home then it will also be required that an inspection be completed.  Again to protect the veteran home buyer the VA needs to legitimize that this water is fit to drink, etc. so there will be no problems as they move in.

3.  The VA also requires a full VA-approved appraisal inspection.  This is done by a VA-certified appraiser and is even more strict then normal conventional ones.  In most cases there isn’t any problems but every once and a while the appraiser will find items that don’t meet building codes,  on really old homes the VA is particularly careful so that the veteran buying the property won’t have unexpected costs associated with older homes.

4.  When purchasing a home using the VA eligibility, one of the calculations preformed is a residual income test.  Basically, it determines how much left over cash is available after all the bills have been paid each month.  The requirements vary by region and in the more expensive parts of the country sometimes this ratio prevents veteran home buyers from qualifying for the home loan.

5.  Eligibly for a VA loan is also based on a honorable discharge from the military and anyone without that also can’t qualify to use their loan entitlement.

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Posted in VA Loan, VA Purchase | No Comments »

Veterans should purchase a home now with a VA loan

Friday, June 19th, 2009

I have been in the mortgage industry since 1997 and more importantly I have been dealing almost exclusively with veterans and VA home loans since my very first days as a mortgage loan officer.  I have seen a lot of changes in regards to veteran home loans, VA mortgages and other financially related VA products over these years.  I can tell you right now that one of the current changes that oddly enough has been a positive change in light of all the negative news hitting mortgages lately, is the fact that prospective-veteran home owners are currently in the best position they have been in years!

Housing Meltdown/Downturn

As many of you are aware, our country’s housing sector has seen huge pricing and value deterioration from 2007-2009 and we are still not sure if we have bottomed, though many feel we are close.  There are many reasons to blame for the housing meltdown: greedy home buyers, shady mortgage people, crazy loan programs, just take your pick.  I can tell you that over the years I have been approached by many different angles from many different people, companies and even lenders or banks, trying to convince me to stop doing VA loans and to do this or that loan because I would make more money or because it was a better loan.  I am proud to say I never strayed from the VA loan path and it has been one of the smartest decisions of my life.  That said, let me get back to the topic or the large decline in US housing prices.  For a long time, the average veteran home owner could not afford to buy a home with a VA loan or VA mortgage due to the fact that housing prices were so high that one would have to lie about what he or she made at work, in order to get a home.  Sadly enough, many of you may have done that and to do such were forced to do a NON-VA loan and went stated income or some other crazy route and may have bought more than you should have.  Gladly enough, many of you kept renting and waited, NOW IS YOUR TIME TO SHINE!  Housing prices are back down to good and normal levels, and realistically all other NON-VA loans have been removed from existence or are very hard to get into. (other than FHA loans, which here at LowVARates we gladly endorse and can offer.)

Why the VA loan to purchase property?

A question I love to ask my veteran borrowers is “why not use a va loan?”  Interestingly enough there are about 28 million eligible veterans and only about 10% of them have ever used a VA home loan to purchase property.  Studies have proven that about 20% of the veteran or military population have never even heard about or are aware of the VA home loan benefits they are entitled to.  Veterans, you have done so much for the rest of us that it is frustrating to hear these stats and realize how many deserving veterans are not aware of the VA loan.

Here is a list of my favorite reasons a veteran should use a VA loan to buy real estate:

  1. 100% financing.  This means no money down and many times no money out of your pocket at all since the cost to buy the home can be paid for by the seller.  In today’s housing market it is simple to get sellers to give you all sorts of perks and to get all your closing costs paid for.
  2. Loan is backed by the credit of the US Government.  This does not mean your credit does not matter.  This means that the VA (US agency) is willing to guarantee your loan to the bank.  That said, should you get into some financial bind down the road, the bank and the VA are much more willing to step in and assist to the extent they are able.
  3. Streamline refinance when rates drop. Many times interest rates may not be as low as you would like when you finally decide to buy a home.  This should never matter to a veteran getting a VA home loan.  The VA has made it almost free and easy to refinance to a lower rate if and when rates should drop at any time after you close your loan.
  4. Protection from unscrupulous lenders/brokers. The VA audits its approved lenders and its approved loans and if the loan was done wrong, or if something was charged that was not allowed to be charged, then the VA can and does make the lender or broker refund the money at no cost to the veteran.
  5. Lower than normal interest rates. In today’s market many banks are offering special interest rates to take a VA loan.  Why would a lender do this?  Simply put there is a lot of fear out there today surrounding non-government backed mortgages and many banks have decided to try and get many more va loans on their books.

Veterans I urge you to continue your research and to make sure when you do purchase a home, that you use your VA entitlement and use a VA home loan.  You will never regret it I can promise you that.

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Posted in VA Loan, VA Purchase | No Comments »

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