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.

As a member of the United States Armed Forces, you must be ready to move yourself or your entire family at the drop of hate. PCS orders may come to you and with that you whisk your family away across country to another base. While some families choose to look to purchase a new home at their new station, it may not be in your best interest financially to purchase.

Renting at your new station may be more feasible for you and your family. Why not employ the help of agents who are well versed in the surrounding area to help you locate your military rental. Military rentals could be rental properties by a local property manager or it could be a rental by a military resident who also had to vacate their current station to move to another station.

Nothing is more upsetting then finding the perfect place to rent, signing the lease, and then discovering that the train actually runs through your backyard. Let Military Homes.com agents assist you and give you the sound advice you need. Taking care of the military is our number 1 priority! Check out local Military Rentals on our rental listings page.

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.

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

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.

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.

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.

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.