10March2009
Posted by VA Loan Pro under: Other.
This is a little off the mortgage topic, but if you’re a veteran business owner than this applies to you. I was recently helping a friend, who is a veteran, set up a small mortgage company in another state and like all brokers he had to get a surety bond. It seems to be an odd little industry and we had trouble finding much info that specifically applied to vet owned business, so I thought I’d list a few resources here.
This article talks about one of the leading companies that specializes in veteran surety bonds. We also found some good information at Surety Bonds .com and on State Farm’s website.
Post a comment if you’ve had any expericence getting a surety bond for a veteran owned business or if you know of any good resources that I’ve glazed over.
12August2008
Posted by VA Loan Pro under: General Mortgage.
Even if you may think that you can’t be taken advantage of by predatory lenders, you should still be careful and know how to spot bad lending practices. Many borrowers have lost their homes due to predatory lending, but there are signs that can help you avoid being taken advantage of by a lender when you are getting a mortgage loan.
Some signs to look for to spot predatory lenders include:
• They may estimate a home to be worth more than the market value. If you suspect that your lender is inflating the appraisal value of the home you are trying to purchase they may be trying to inflate the price to get the loan to go through.
• If a lender quotes you a specific interest rate and closing costs and then raises these costs when it is time to close the loan. This happened frequently in predatory lending practices and many people went ahead and signed high interest rate bad deals because they were fed up with the process, thought this was the best deal they could get, or were really eager to purchase the home and did not want to have to wait for a better deal and risk the purchase falling through. Don’t be afraid to walk away from the deal.
• If the lender tries to pressure you into taking a balloon mortgage, a high interest rate mortgage, or an adjustable rate mortgage because it is the best you can get based on your circumstances. Don’t be pressured into a bad deal.
• They may try to tell you that they are the only lender who will finance your loan due to income, credit, or other issues. In these cases they are trying to make you feel insecure and inadequate enough to take the deal instead of going to another lender. They are hoping that you will be embarrassed and stick with them to avoid having another lender look at your personal information.
All of these are methods that predatory lenders use to try and trick people into high interest rate loans that they can not afford. Mortgage brokers get their fees paid on a commission basis which means that the large the loan amount, the more money they make. Don’t take out a loan for more than you can afford. Don’t fall prey to predatory lenders. For more information on predatory lending go to www.fha.gov
9July2008
Posted by VA Loan Pro under: VA loans.
A VA loan is a type of mortgage loan guaranteed by the government in the case of default. VA loans are administered by the Department of Veterans’ Affairs, and part of the original GI Bill of rights signed into law in 1944. As confusing at that sounds, the loan itself it very easy and offers eligible veterans specialized home financing created just for them.
As attractive a loan program VA financing is, it is estimated only 18% of all veterans actually use the benefit available. As other types of mortgage lending programs evolved over the past decade, veterans were offered financing considered “faster” or “less complicated” than VA. Whereas other programs might have seemed more streamlined and less restrictive, the VA loan program is designed to protect the veteran. Any specific guidelines attached are to insure veterans are given benefits the program was originally designed for.
While VA loans are designed for eligible veterans, and in some case spouses of veterans, it offers the ability for 100% financing, meaning zero down payment. In addition, the interest rates offered are at least current market rates, and sometimes below. The program also allows a higher ratio (gross income times proposed house payment plus debts) than other type lending programs. It also allows the seller or lender to pay a portion of closing costs associated with the loan and requires no mortgage insurance. VA loans are also the only loan program that restricts what a borrower can pay in the form of costs. The benefit of this is less cash required at closing, and can often times mean no cash when you close.
While the Department of Veterans’ Affairs regulates VA lending, they delegate the process to approved lenders and banks referred to as “automatic”. A fully approved lender will also have what is called a LAPP designation. This is important when selecting the lender, as those without the actual designation are required to submit the VA loan to a company that does. It is important to understand VA only reviews a loan for credit determination under specific circumstances pertaining to delinquent refinance transactions and also requires a designated lender to submit it for review. If a loan is not approved by the lender, VA does not override that decision.
There are two main requirements in obtaining a VA loan, eligibility and primary residence. In the case of purchasing a home using VA financing, it is required the home be a veteran’s primary residence. In some cases, if a veteran is deployed overseas, home purchase may still be an option, provided it is for the use of their spouse and the veteran signs a form stating they intend to occupy it upon return.
The veteran must also have eligibility to purchase a home. As determined by the VA, eligibility varies depending on when, how and the length of service performed. Veterans that served or are currently on active duty differ from reservist and national guards that have never been called to duty. Another factor for eligibility is determined by the year in which a veteran enlisted. Eligibility includes veterans that received an honorable discharge and served on active duty from 90 days to two years, depending on when they served.
VA loan financing is a benefit bestowed to honor those that served, and continue to serve, our country and should have special guidelines just for them. For more information on purchase or refinancing your dream, contact an approved VA lender to get you started on a VA financing program.
1July2008
Posted by VA Loan Pro under: VA loans.
Although there are significant advantages to a VA loan, there are drawbacks in comparison to a conventional loan as well. Carefully weighing these factors will help you determine which type of loan is best for your financial health.
• Maximum loan amount: Although there is no maximum of the value of the home you can purchase, there is a maximum VA loan amount. Without a down payment, in 2008, the maximum VA loan amount you can take is $417,000, with 25% of that value guaranteed by the VA.
• One-time funding fee: Congress enacted a one-time funding fee for VA loans, with the fee ranging from 1.25% to 3%, dependent upon the length of the veteran’s service and number of VA loans he or she already has. This fee can be lowered if you place a down payment of a minimum of 5%.
• Varying interest rates: Keep in mind that the interest rates may or may not be better than your conventional loan. Indeed, you do have the option of a fixed-interest or variable interest mortgage with a VA loan, but this does not mean that you will obtain a better interest rates. When you are considering the type of mortgage to obtain, make sure you compare your interest rates – as this value will make a significant impact on how much money you will pay in the long-term.
Remember, a VA loan guarantee does not overcome unsatisfactory credit or employment income that will not sufficiently cover your mortgage payments. A VA loan guarantee is not a gift; it is assistance from the government in the form of guaranteeing the lender that should you not repay your loan, the lender will not lose the investment.
The citizens of our nation are grateful to the service personnel who have answered the call to arms in war and in peace. The VA Home Loan Guarantee program is one way to show support for those who have put themselves in harm’s way on our behalf.
26June2008
Posted by VA Loan Pro under: VA loans.
If you qualify for a VA loan, there are several significant advantages VA loans hold over the conventional mortgage.
• No down payment: Because the Department of Veterans Affairs guarantees 100% of the loan, you are not required to place a down payment on the purchase of your home. This can be a great advantage if you do not have significant savings for your down payment, or if you simply want to invest those savings elsewhere. According to statistics provided by the VA, more than 91% of buyers with a VA loan forgo the down payment.
• No closing costs: In many circumstances, the seller of the home will pay the closing costs. This is in stark contrast to a conventional loan, where you would pay for the closing costs, including processing, origination, and underwriting fees.
• No private mortgage insurance: Since the VA backs these loans, there is no need for private mortgage insurance, which traditionally protects the lender against default. This can save you $100 - $200 each month, which is often required with a conventional loan.
• More lenient qualifying terms: Obtaining a VA loan is easier than a conventional loan, as the standards for income and credit score as not as stringent. Even if you have less than perfect credit, if you have paid your bills on time for the last year, you can obtain a loan approval – as well as enjoy the same interest rate as buyers with great credit.
• No pre-payment loan penalties: Whereas most conventional loans will penalize you for paying off your loan before your agreed terms, with VA loans, you can pay off your loan at any time – without suffering from pre-payment penalties.
• VA support if you experience temporary financial distress: If you find yourself undergoing temporary financial difficulties, you can obtain support from the VA, which may avoid your home going into default or foreclosure.
• Ability to transfer your mortgage: Another great advantage is your ability to transfer your VA loan to another individual. Therefore, you can transfer your mortgage to your home’s buyer – which can make your home much more attractive in the buyer’s eyes, especially if your VA loan has a competitively low interest rate.
• Unbiased appraisals: A VA-assigned appraiser will evaluate your home for its value, and these appraisers are chosen at random. In contrast, with a conventional home loan, your lender will select the appraiser – which can lead to a biased, inflated appraisal of your home to benefit the lender.
18June2008
Posted by VA Loan Pro under: VA loans.
For those veterans who already have a mortgage and are looking to refinance with the VA there are options to consider. What are you refinancing for? Do you want a lower interest rate, or cash out of the equity you have in your home?The VA offers both Interest Rate Reduction Refinancing Loans (IRRRL) and Cash Out refinancing loans. If you are considering refinancing with the VA you should know the difference between these two types of loans. Here are some difference you should consider:
• An IRRRL is used for veterans who want to refinance an already existing VA loan in order to get a lower interest rate, and a Cash Out is used to pay off any debts or take money out of equity for whatever your needs.
• With an IRRRL the interest rate must be lower than the mortgage loan you have now unless you are refinancing into an ARM or for energy efficient home improvements, and with a Cash Out you can refinance into any interest rate.
• With a Cash Out refinance there is no monthly payment minimum or maximum requirements, and with an IRRRL the new payment needs to be lower than the old payment unless you are refinancing from an ARM to a fixed interest rate or are financing the cots of energy efficient home improvements.
• With an IRRRL you can only refinance the existing loan plus fees and the cost of energy efficient home improvements, but with a Cash Out refinance you can take out cash from your equity as long as it does not go over 90% of the appraised value of the home.
• With a Cash Out refinance you are guaranteed $36,000 to be insured by the VA on your new loan, and with an IRRRL you are guaranteed 25% of your loan amount.
• An IRRRL can have points on the loan but only 2 points are allowed to be financed into the new mortgage. With a Cash Out refinance you are allowed to have any amount of negotiated points in your loan as long as you stay below the 90% home value limit.
Both of these VA refinancing options are available to veterans who have their entitlement intact. If you have a current loan that is not guaranteed by the VA then you should consider refinancing with a VA loan in order to possibly get a better interest rate and more favorable terms. Be sure to consider the attributes and guidelines of each type of refinancing option before you choose which one to use.
10June2008
Posted by VA Loan Pro under: General; VA loans.
There are a lot of loan choices for people today. One major problem is that people who are interested in purchasing a home often jump into a loan without knowing what type of loan it is or how the terms of the loan will affect them in the long run. Many people are blinded by the dream of buying their dream home and will take any deal that is put on the table as long as it allows them to get the home they want.
Don’t be one of those people. The U.S. is currently in a foreclosure crisis because of poor and predatory lending practices. Many people are losing their homes because they were taken advantage of by lenders who allowed these people to get mortgages with terms that they knew they could not afford in the future. Luckily for veterans, the VA offers housing counseling to avoid such problems.
To avoid this, or if you fell victim to these predatory practices in the past, you need to become educated on the different types of mortgages available and what they mean. This is not a substitute for housing counseling, which the VA requires for people who want to use the VA Home Loan Guarantee Program to purchase a home. The following is just a list of mortgage types that the VA allows and information for potential homebuyers and people wishing to refinance to become educated so that you know which mortgage is the best for your needs.
• Adjustable rate mortgages. These are sometimes useful, but were responsible for a lot of foreclosures recently. ARM loans offer an introductory low fixed interest rate that is usually around three years. Then after the three years is over the interest rate can increase a lot. It can cause the mortgage payment to double. This type of loan is only good for people who know they are only going to own their home for a short period of time and then sell, or for people who can definitely refinance before their adjustable rate kicks in and their monthly mortgage payment begins to increase. Many people lost their homes due to the low introductory rate being very affordable to their budget, and then when their payments began to increase they could no longer afford their home.
• Fixed rate mortgages. Fixed rate mortgage account for the majority of home loans and are the safest and most reliable mortgage loans. With a fixed rate loan your monthly mortgage payment never changes. If your homeowner’s insurance and property taxes are included in your payment then the payment can only increase if these premiums or taxes increase, but the amount that goes towards your home itself will never change. These loans allow people to see what they can really afford and understand that once they budget their mortgage payment into their monthly finances it will never change and this makes it easier to keep a home and avoid foreclosure. This loan is definitely a good choice for people who are planning to purchase a home to live in for a long time.
• Balloon mortgages. These mortgages are becoming rare and are not good for the average homeowner. This is when you make monthly payments for a set amount of time, like 8 years, and then at the end of that time the entire amount of the mortgage loan comes due in one large lump sum. This is only good if you plan to sell the home before the date the balloon is due, or plan to refinance. Otherwise, do not consider a balloon mortgage. Also remember that things do not always go as planned, and even if you plan to sell the home, it may not sell and you should have a plan B just in case.
• Hybrid mortgages. A hybrid mortgage is the same as an adjustable mortgage, but has a longer fixed rate term. Again, these loans are not good for people who plan to live in their homes for a long period of time.
• Reverse mortgages. For some senior citizens, reverse mortgages can be a lifesaver. These mortgages are for people over the age of 62 who owe little to nothing on their home mortgage. They can get a mortgage loan where they get a lump sum of cash, a monthly income, or a combination to spend on whatever they want. They never have to make a payment and they can continue living in their home. In return, the mortgage lender will add up all of the interest and the principal of the loan over the time you have the loan and once you die, they will take that amount out of the sale price of the home. If you are considering a reverse mortgage, make sure you talk with your family first and consider all of your options before you make a decision.
• Interest only mortgages. These mortgages were also responsible for many foreclosures recently. Interest only mortgages, like ARMs, give a teaser introductory interest rate for a set amount of time and then the interest rate rises and the monthly payments become unaffordable. The difference is that while the homeowner is making payments during the introductory rate they are only paying the interest and not any principal on the amount of money they actually borrowed to purchase the home. This means that when their teaser rate is over, they not only have to pay the increasing interest rate, but also the additional payment amount for the principal. This type of mortgage payment can increase to three times the original payment amount. This type of loan has forced a lot of families into foreclosure because they did not understand the terms of the loan they were getting.
21April2008
Posted by VA Loan Pro under: Uncategorized.
Veterans know that if they plan to use the VA Home Loan Guarantee Program to purchase a home that they are taking advantage of a valuable benefit that they earned from their service. This benefit allows veterans who are eligible to purchase a home with easier qualifying guidelines that traditional lenders.
Some of the reasons it is easier for a veteran to purchase a home through the VA Home Loan Guarantee Program include:
• The VA guarantees the loan. When a lender sees that a portion of the loan is guaranteed by the VA, they know they have a low risk investment. Even if the veteran does not pay the loan, the lender will still get some of their loan money back and the property to sell. This makes the loan more secure that traditional borrower’s loans and is one of the reasons why it makes it easier to qualify for applicants.
• Their eligibility can be determined within minutes. All a veteran needs to do is go into a VA approved lender and they can determine through the ACE system on the computer if the veteran is eligible to use the VA Home Loan Guarantee Program.
• The VA helps veterans who are in jeopardy of losing their homes. Lenders feel more secure knowing that the VA is behind these borrowers because the VA will help find solutions to problems in the case a veteran has financial difficulties. As a result of this, the borrower is less likely to default on their loan and the lender is more confident that they will be repaid by the terms of the mortgage contract.
• If you are still active in the service, then your employment is easily verifiable. One road block many people face is proof of income and employment. If you are an active service member then your income and employment are verified by the Federal Government.
• You are purchasing a home with no down payment, but it is treated as if you have a down payment. Even if you have $0 down, the lender considers the VA guarantee to be similar to a down payment. All a down payment does is ensures the lender that you are invested in the home purchase and will not walk away without paying back the loan. It also allows them to have some equity in your home in the case they need to sell it so that they can make their money back. With the VA guarantee the lender is already certain they will get their money back, so a down payment is not necessary.
If you are a veteran considering a near future home purchase, you should take advantage of the VA Home Loan Guarantee Program in order to have an easier time qualifying for a loan. For more information on the VA Home Loan Guarantee Program go to www.va.gov
14April2008
Posted by VA Loan Pro under: VA loans.
Under certain circumstances you do not have to pay the VA funding fee or can get a discount. The VA Home Loan Guarantee Program is great for veterans who are in the market for a new home. One of the most important questions is: how much do you have to pay to use this benefit? Some people can get a discount, or even have the fee waived entirely depending on your circumstances.
To qualify for a discounted funding fee you must:
• Be a reservist who is eligible for the VA Home Loan Guarantee Program.
• Be currently active. Reservists pay a higher funding fee that active members, and if you are currently active you may be eligible for a discounted fee.
• You must have served the full amount of time that you were called to active duty unless discharged due to a service related injury or disability.
• You can begin using your benefits and discounts after 90 days of active service.
In order to qualify for having the entire funding fee waived you must:
• Be an eligible veteran and be receiving payments or compensation from the VA due to a service related injury or disability.
• Be an eligible veteran who would be receiving service related disability compensation if you were not retired and receiving retirement benefits.
• Be considered or rated as eligible to receive service related disability compensation, even if the payments have not begun yet.
• Be the spouse of a veteran who died from service related disabilities or in active service.
It is important to know that in order to have the funding fee waived or discounted your lender must take the proper steps. Make sure your lender knows that you qualify for the fee waiver or discount so that they can verify your status and give proof of this status to the VA. If you have paid a funding fee to the VA and feel that it was an error and you should have been exempt, then you should contact the VA and your lender. A correction can be made that could get you some or all of the funding fee refunded to you.
For more information on the possible discount or exemption of VA funding fees for the VA Home Loan Guarantee Program go to http://www.warms.vba.va.gov/admin26/pamphlet/pam26_7/ch08.doc
31March2008
Posted by VA Loan Pro under: Uncategorized.
If you are a veteran who is interested in using your VA Home Loan Guarantee benefit, then you should know that you can purchase a home with no down payment. Not having to wait the years it could take to save money for a down payment on purchasing a home is one of the best benefits of the VA Home Loan Guarantee Program. Even though you do not have to have a down payment to purchase a home through the VA Home Loan Guarantee Program, you do have to follow the rules of the program to use this no down payment benefit. One of the main rules to not needing a down payment is that the purchase price of the home must not be higher that the value of the home. Here are the steps you should take to determine the value of your home and make sure that you do not need a down payment to purchase your home through the VA Home Loan Guarantee Program:
• To determine the value of a property you must have an appraisal which is required by the lender and the VA. An appraisal is required when you are purchasing a home so that the lender is certain that the home is worth the amount of the loan. Since you do not have a down payment you are borrowing the full value of the home. This is only allowed by the lender because the VA guarantees a portion of the loan which is equal to a large down payment and is why you are not required to place your own down payment on the home at the time of purchase.
• An appraisal will estimate the fair market value of the home and the price should be based on this value. The fair market value is determined by an appraiser by looking at the other homes in the same area that have recently sold that are similar to the home you want to purchase. The homes are compared by square footage, attributes, bathrooms, bedrooms, property size, and other amenities, and then the sale prices are compared to determine about how much the home that is being appraised would sell for on the real estate market at that point in time.
• If you have agreed to pay a higher price for the home that its appraised value you should consider re-negotiating the purchase price of the home. Most sellers will accommodate a lower selling price rather than breaking the deal because the lender will not lend you more that the appraised value of the home.
• If the seller is willing to let you walk away from the deal rather than allowing the sale price of the home to drop, then you do have other alternatives. Some sellers believe that they can get more that the appraised value for their home, or they may owe more that the appraised value for the home, and therefore can not sell the home for less.
• You can request a reconsideration of value for the appraisal of the home. To do this you have to notify the VA in writing to the office of jurisdiction. This is whatever VA Home Loan Service Center is in control of the area in which you are in. A re-appraisal may be done, or a reconsideration depending on information that you may give the VA on property amenities that the appraiser may not have been aware of, or new improvements or additions to the home.
The best way to avoid potential problems with the no down payment option of purchasing a home through the VA Home Loan Guarantee Program is to try and inform the appraiser of all the features of the home in order to make sure that the appraisal value of the home meets or exceeds the anticipated purchase price. It is the responsibility of the seller to inform the appraiser of the homes perks, amenities, and recent improvements, but as the buyer you should make sure that the seller understands that the lender will not allow you to borrow any amount over the appraised value which makes it in the seller’s best interests to keep the appraiser well informed in order to make sure the appraisal is successful and meets the needs of all parties involved.
For more information on the VA Home Loan Guarantee Program and how to purchase a home with no down payment go to http://www.homeloans.va.gov/lgyfaq.htm
