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Posts Tagged ‘va closing costs’

True NO Cost VA Streamline Loans are Easier Than Ever

Thursday, July 22nd, 2010

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It is absolutely insane how low VA interest rates have gotten.  I have been doing VA streamline loans for the past 15 years and though YES it is tougher to do a VA streamline loan today than it was yesterday, VA interest rates are so low that I, an industry veteran would have bet the farm that they would never have gotten this low!  For years, in order to take advantage of the absolute LOWEST Rates possible, you would have to pay points and closing costs.  In essence this is not a bad thing, and we have posts that explain why paying closing costs actually makes sense.  However, due to some recent changes in the law and what VA lenders want, many VA loan officers cannot charge some of the fees that they used to be able to charge.

If you have not refinanced before due to closing costs I promise you that you should contact a VA loan officer immediately or apply online at LowVARates immediately to take advantage of this unique situation you have.  Because VA interest rates can change daily I am always hesitant to quote rates but would like to give you a range of what VA loan officers that I know are quoting today:

4.25% 30 yr fixed with little to no points

4.5% with no Lender fees at all

4.75 true NO COST loans.

The VA hybrid rates are around 3.25%

Please do yourself a favor and take advantage of the VA streamline loan which today is truly your diamond in the rough.  Our economy sucks, it really does and I know it will get better, but until then all military home owners with a VA loan should refinance now.

If your current rate is at 4.75% or higher there is no reason to not take advantage of the no cost or no point VA refinance loan.

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Posted in VA Loan, VA Refinance, VA Streamline Refinance, va interest rates | 2 Comments »

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 »

Veteran Home Owners – Why do Veterans Pay an Origination Fee?

Monday, May 18th, 2009

Why Veterans Pay An Origination Fee

I was on the phone the other day with a veteran borrower and they posed a great question, “Why do veterans have to pay an origination fee?”  I thought, hey that is a good question and I bet others have asked that very thing.  Veterans have access to the best mortgage financing available in America today, bar none.  The VA allows veterans to finance 100% of the home purchase price.  No where else can you find such a program.

With interest rates at 50 year record lows, many veteran families are taking advantage of the interet rate reduction loan offered by the VA.  Of course any time you refinance your loan there are going to be costs.  One of those costs is the origination fee.  It is almost universally 1% of the loan amount, or one point, as many call it.

Veterans pay this fee as part of the purchase or refinance and there are several reasons why.

1.  As a VA IRRL is processed it will be touched by nearly 20 people, from start to finish.  From processing, to the VA, to the current lender to the new servicer, the title company, the loan officer and many other in between.  There is work done by each of these parties and each party will receive compensation for the work done.

2. It is a fee for services completed– just like your taxes, or some other professional you trust, a lawyer or accountant.  You expect the refinance to be done correctly, quickly and completely,  as with any licensed professional.

3.There are a number of costs while processing a VA loan that the VA does not allow the veteran to pay for.  The largest of which is the underwriting fee charged by the new loan company.  It can be as much as $1000 and so any unallowable fee that is incurred as part of the refi must be paid out of that origination fee.

4.Finally there are some circumstances in which it is possible for the veteran not to incur an origination fee, or half of one etc.  Commonly when a veteran or other home owner who is looking to refinance wants to do a “low-cost” mortgage.  The lender will reduce their origination fee if the banks will pay for the refiance costs.  The banks do this by having a higher interest rate then what is available and will make up the difference on the loan.  This is not usually a great option because the rates on these “low-cost” loans can be up to 1.5% higher then the lowest rate that is being offered.  For example, 4.5% is a rate at which we have been refinances veterans for alomst 3 months.  You can do a “low-cost” loan at 6% but what good is that if you are already at a 5.5%.

Finally, you get what you pay for is what my Dad always said.  Over the years his words of wisdom have become more true to me.   See you around..

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Posted in Uncategorized, VA Purchase, VA Refinance | 3 Comments »