This year’s Tax Day was not the homebuyer tax credit’s deadline for everybody.

Qualified service members of the Armed Forces, Foreign Service and intelligence community get an extra year to put the tax credit to use if they are on official extended duty abroad. April 30, 2011 is the last day for them to sign a binding sales contract that they must close by July 30, 2011. The maximum return is $8,000 and $6,500 for new and repeat homebuyers, respectively. Even on starter homes at $150,000, the return can account for more than 5 percent of the value.

Military members can apply the tax credit to a loan guaranteed by the Department of Veterans Affairs. VA loans carry myriad upsides, such as no money down and no private monthly mortgage insurance. The VA Home Loan Guaranty program caps interest rates for active-duty military members.

As with any tax credit program, there are some general prerequisites. The maximum purchase price of a home cannot exceed $800,000. To be considered first-time homebuyers, qualified members and their spouses cannot have owned a home in the last three years. Individuals with an annual income of $125,000 and married couples with that of $250,000 do not qualify for the tax credit. For repeat buyers, the only additional requirement is that they occupied their home for five of the last eight years.

Qualified members who have to move or sell the tax credit home within three years because of official extended duty, the recapture rule does not apply.

Today’s low interest rates do not automatically cause the market to favor homebuyers. Lenders everywhere are tightening their credit and income requirements, which makes it more difficult for borrowers to get these near-record low interest rates on their loan. Even if buyers qualify, the down payment on conventional loans may soar as high as 20 percent and closing costs won’t be covered by the seller.

But for honorably-discharged veterans and qualifying active-duty military members, VA loans eliminate a number of these financial constraints common to conventional loans. Qualifying homebuyers won’t need to bring as much money to close a VA loan as they would on a conventional loan. Not only are VA loans one of the last no-money-down options, they’re loaded with benefits to make home buying easier for our nation’s heroes. Because the VA insures up to one-quarter of a loan’s amount, thus reducing lenders’ risk, lenders are likely to lower borrowers’ interest rates.

All loans fall into one of two categories: conforming and non-conforming. Two government-sponsored enterprises, Fannie Mae and Freddie Mac, issue guidelines. Loans that meet these guidelines are conforming and usually are loans valued up to $417,000. All loans with terms outside the GSE’s parameters are non-conforming, or jumbo, loans.

Homebuyers also have to decide whether they want a fixed rate mortgage or adjustable rate mortgage. VA and conventional loans come in both forms. Homebuyers need to know how long they plan to live in the home and how much money they expect to have during the life of the loan to figure out which type of rate is ideal. In addition to knowing these basic concepts, borrowers should know the difference between VA loans and conventional loans.

First of all, not every veteran qualifies for the Veterans Affairs Home Loan Guaranty program. Military members who served 90 days during war time or 181 during peace time and who spent 6 years in the National Guard or Reserves may be eligible, as may spouses of those killed in the line of duty. Members who served fewer than 90 days but were discharged because of a duty-related disability may be eligible.

Once members establish their eligibility, they can capitalize on the home loan program. Qualifying for a VA loan is far easier than getting a conventional one. In fact, about 80 percent of veterans who qualified for a VA loan could not get a conventional loan. The VA has no credit or income requirement for borrowers. However, VA-certified lenders expect to see a score of at least 620. That’s not much different than conventional loans where scores above 740 often land the most favorable terms, and anything below 620 tend to have interest rates.

-Borrowers with a history of bankruptcy can still qualify for VA loans. After chapter 13 and chapter 7 bankruptcy borrowers need to wait one year and two years after the date of discharge, respectively. Full explanations of the bankruptcy need to be provided. Proof of payments on chapter 13 bankruptcies and written approval from the court is necessary too. Compared to conventional loans that often require longer waiting periods post-discharge, href=”http://valoans.vamortgagecenter.com”>VA loans have more lenient qualification terms. Even veterans with a history of foreclosure may be eligible.

-On top of that, VA loans curb the initial financial headache for qualifying borrowers. Up to 6 percent of closing and concession costs may be covered by the seller. Conventional loans’ appraisal fees and origination costs add to the up-front costs, and require borrowers to empty their pockets when they close the deal. They might have the option to lump some of these costs into the mortgage, but that will likely inflate interest rates.

-Often, borrowers get lower interest rates with VA loans because of the VA’s insurance against the borrowers’ default. Active-duty military members have the added perk of caps on interest rates. To shrink monthly costs even further, VA loans do not have private monthly mortgage insurance fees. As long as borrowers put down 15 to 20 percent of a conventional loan, they won’t pay mortgage insurance. Otherwise, this cost adds up every month.

-When VA loan borrowers pre-pay, the will not get penalized. Most conventional financing deals include prepayment penalty clauses. The penalty is charged against the borrower who is trying to pay off the mortgage ahead of schedule. Agreeing to such a term with a prime lender may get the borrower a lower interest rate, or avoid this penalty clause altogether. Subprime lenders aren’t likely to let borrowers off so easy. Regardless, prepayment penalties disappear after the first three to five years of the loan’s life. Even so, lenders will usually accept prepayments of up to 20 percent of the balance in a year before levying the penalty.

-Processing a VA loan may take longer than finishing conventional financing. The latter gets done in about two to three weeks, while VA loans might take one or two months to process.

Of course, if you qualify it makes sense to apply for a VA loan. The VA loan program is designed to abet those who served our country and struggled to develop great credit and savings because of travel or other hardship. However, conventional financing has its place. Prospective homebuyers with stellar credit and enough savings for a hefty down payment may earn those unprecedented interest rates with a conventional loan.

There are only two no down payment mortgage loans available for home buyers in Wisconsin. One is a VA mortgage loan and the other is a Rural Housing Loan.

Minimum down payments have made it more difficult for home buyers to qualify for a mortgage loan. The Rural Housing Program is a mortgage loan that allows a true 100 percent financing loan for any home buyer. You do not have to be a first time home buyer to qualify for this mortgage loan.

This program requires the home to be located in a rural area. Wisconsin home buyers are in a better position to qualify for this loan, because the majority of the state is made up rural areas.

Here are additional details of this program:

* This program is called “Rural”, because there are certain areas that are not eligible for this program. All of Milwaukee county is NOT eligible, but many areas throughout the entire state of Wisconsin are eligible. If you want to know more in details about areas that are eligible, feel free to contact a mortgage broker in Wisconsin.
* Lenders are approving loans with credit scores as low as 580. Typically, a 620 is best, but if there are compensating factors to help offset the risk of a credit score below 620, it’s very possible you will be approved.
* There is absolutely no PMI (private mortgage insurance) included with the total mortgage payment. Yes, no PMI, even though you won’t need a down payment.
* There are income limits and they are based on the county the property is located and how many people will live in the property. If you have child care expenses, these can help to reduce your total income and help with staying under the income limits.
* Maximum financing is allowed up to 102% of the appraised value of the home. So, it’s possible all the closing costs can be financed into the loan and not required out of pocket.

It’s very important home buyers take the time to get pre-approved for a mortgage loan, before looking at homes. Especially, if you are looking to buy a home with no money down, sellers are going to want to work with serious buyers and serious buyer have pre-approval letters.

Educate yourself about no down payment mortgage loans in Wisconsin, so you understand what is available.

Welcome to the July 24, 2009 edition of military blog carnival.

Adam Shields presents
My Life as a U.S. Army Soldier posted at Military Life – My Life in the U.S. Army saying, “Military Life Discussion and Knowledge site posting the experiences of one soldier as he makes the transition from civillian to military life.”

Kurt presents Watch out for military payday loan shops and other loan sharks posted at Military Loan Resourcessaying, “Hi — this article discusses predatory short term loans (such as payday loan shops) that still prey on servicemen and women (despite the cap imposed by the Service member’s relief act several years ago). We hope you consider it.”

YouServed presents Credit Score used for more than Credit posted at YouServed saying, “Your credit score is used for more than credit and includes employment, insurance, and cell phone service.”

That concludes this edition. Submit your blog article to the next edition of
military blog carnivalusing our carnival submission form.
Past posts and future hosts can be found on our
blog carnival index page.

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

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  

If you are a veteran who plans to use your entitlement in the VA Home Loan Guarantee Program or who is currently using this benefit, there are some facts you should know.  Many veterans use their entitlement in the VA Home Loan Guarantee Program without knowing the details of their entitlement and how they can use this valuable government benefit.  Here are some important facts every veteran should know about their VA Home Loan Guarantee benefits:

•           You can re-use your VA loan benefit entitlement.  As long as you adhere to the VA guidelines and rules of entitlement, the VA allows you to use the home loan guarantee benefit as many times as you want.

•           You can not re-use your VA loan benefit entitlement if you allow someone to assume your mortgage.  Once your entitlement is tied into a specific mortgage loan, the entitlement stays with that loan until the balance of the mortgage is paid in full.  This means that you are unable to re-use your home loan benefit until the person or people who assumed your mortgage loan pay off the loan.

•           You are not able to re-use your VA loan benefit if your mortgage loan is foreclosed upon.  Once you have experienced a foreclosure with a mortgage loan that the VA has guaranteed, your entitlement is lost and you can not use the program again.

•           The VA will help you avoid foreclosure.  The VA understands that circumstances can arise that cause people to have difficult financial times.  Loss of employment, divorce, illness, and disability are just a few of the reasons why some veterans may have a problem paying their mortgage loan, and go into loan default.  Before foreclosure occurs, you should contact the VA.  They will help you communicate with your lender and find a solution to the problem in order to avoid foreclosure so that you may be able to keep your home and your entitlement in the VA Home Loan Guarantee Program.

•           The VA also has grant and loan programs for disabled veterans.  If you are having trouble paying your mortgage loan or are in default as a result of a disability, you may be entitled to additional benefits from the VA that will help you keep your home.

If you are a veteran who is considering using the VA Home Loan Guarantee Program you should thoroughly review the VA benefit and entitlement policies before proceeding.  The VA offers buyer counseling for veterans before using the program, and has housing specialists available in case there are any questions about the VA loan process.  A VA approved lender will also be able to give you valuable information about the VA Home Loan Guarantee Program.

For more information on the VA Home Loan Guarantee Program, entitlement, and guidelines go to http://www.homeloans.va.gov/veteran.htm

I use google alerts so that I don’t miss a beat in the mortgage market. If you haven’t used google alerts you should definitely check it out, it’s handy! Anyway, it popped up a few days ago with the press release from the VA Mortgage Center. This video gives a good overview of the benefits of VA loans and it’s really very impressive. If you are in the market I’d recommend watching this video (then come back here to get your loan!). Click here for the VA loan video or watch below: