Tag Archives: Va

Veterans Administration Loans for Zero Down Payment borrowers

One of the many benefits available to honorably discharged veterans is the VA Home Loan Benefit.

Basically, it will allow you to buy a home with ZERO DOWN PAYMENT and get a low-interest rate at the same time.  Normally, if you put less money down, you would expect to pay more in rate than someone with a larger down payment but this is not the case with a VA home loan.

Right now, we can get qualified veterans 30 year interest rates in the mid 3 percent range.  This equals $4.49 per thousand borrowed in a monthly payment.  A $100,000 loan would have a payment of $449 per month not including taxes and insurance.  At this rate, buying a home certainly costs less than rent in the Boise area.

How does the Veterans Administration offer this?  First of all, the loan is not from the government but instead its secured by the VA.  The loan is made by lenders to the borrowers according to the VA loan program.

If  XYZ Bank makes a loan to a veteran and later the veteran goes into foreclosure, the bank takes the initial loss.  The VA pays the bank for the defaulted loan, making them whole and takes the house back as collateral for the money lost.

This might seem risky, but the VA loan guidelines are written in such a way as to encourage responsible lending and not letting veterans get over indebted.  Furthermore, Veterans by nature of their service, have demonstrated the ability to follow the rules and generally don’t go into default nearly as much as other home buyers.

How does one qualify for a VA loan?  Its easy, you call your local lender and ask for a VA loan specialist.  If you don’t have one, I can be reached at 861-7579.  They determine quickly if you qualify and can give you an estimate of the payment on the home you are looking at.  You don’t need your original certificate of eligibility, instead, the lender will retrieve it directly from the VA.

 

10 Misconceptions about VA Loans

  1. You can only use them once:  The VA loan program allows subsequent use of the loan program up to the full entitlement.
  2. Only a Veteran can be on the home loan; Spouses can and should be on the loan.  Widows of veterans can qualify in some instances.
  3. You can’t have more than one at a time.  Subject to the limits of your entitlement, you can have more than one VA loan at a time.
  4. You can buy a rental property or vacation home.  Sorry, the VA loan program is for primary residence use only.
  5. The loan is from the Government.  The VA loan program is funded through private lenders but guaranteed by the US Government in the case of default by the homeowner.
  6. You have to have unblemished credit.  The VA loan program allows for bankruptcy and foreclosure after a short waiting period, usually 24 months.
  7. There is mortgage insurance if you don’t have 20% down payment.  The VA loan program does not have a monthly mortgage insurance requirement like the FHA and Conventional loan programs.  It does have a “funding fee” which is added to the loan balance.  This fee ensures the long term viability of the VA loan program
  8. They are an expensive loan-Dave Ramsey says they are but he doesn’t realize that the last few years the rates on Conventional loans have been higher.
  9. The VA does a home inspection; you should hire your own inspector if you have concerns about the property condition.  An appraiser will inspect the property according to the minimum property standards that the loan program requires, but it is not a comprehensive home inspection that a consumer would order.
  10.  I need my original certificate of eligibility or DD214 to qualify; nowadays, we can obtain them online in a very short time.

What is a VA Mortgage?

In many instances, younger people who return home from serving their country would like a home to call their own. Not having built up a vast credit rating in the community, it is quite possible that this would be denied to them. One thing that they can do is to avail themselves of a Veterans Administration home loan, part of the perks attached to being a veteran.

 

A Veterans Administration home loan helps veterans, surviving wives or husbands, or service men and women to become home owners when they may otherwise not be able to do so. The mission of the Veterans Administration and the home loans is to bring home ownership into the hands of those who have served our country. In Idaho a VA mortgage can assist you in gaining access to a home more rapidly.

The VA can help you to buy a home, to repair a home, to retain your home, to adapt a home if necessary in order to make it ready for your personal use. In some cases, as veterans who have been injured come back to the United States they require some adaptation of their homes in order to be able to use them well. The VA mortgage can help with that too.  VA home loans are  home loans which are provided by private lenders but which are guaranteed by the United States government so that the monies are more easily attained by the veteran and the lender can offer terms for your Idaho VA loan which are much more favorable to you.

 

Just finished up my busiest month since May of 2006!

Interest rates moved up around memorial day but my clients who listened to my advice to lock their loans got deals that probably wont come around again.

Right now, if someone was looking for a no cost VA refinance or an FHA streamlined refinance would pay about 1.25% higher than what was available before memorial day.

That doesn’t mean that rates are bad, in fact they are still great, just higher than they were a short time ago.

I keep track of my clients situations and needs and when I see a chance to improve it, I will contact them and let them know what is available. It was those past clients that listened to my advice and had me lock their rates that were successful in getting a no cost refinance in the low 3’s. The clients who didn’t want to lock all thought the rates would drop a little more and missed the opportunity when rates moved up 4 weeks in a row.

While I wish everyone had listened to my advice, most did and that made for a lot of work and long hours getting their loans set up, processed and closed. I did have to skip a few trips to the gym or lunch invites, but it was worth it to take care of my clients.

What is the best loan for someone who has excellent credit and a large down payment?

This might seem silly to ask, but I do see people getting the wrong mortgage for their situation simply because someone told them about a special program.

If you have a decent down payment, say 20% or more, have excellent credit, and you have documentable income and assets, then you want a plain vanilla, Conventional Loan.  These loans are also called Fannie Mae Loans or Freddie Mac loans.

I have seen people seeking a VA loan because they are a Veteran and they feel they need to use their VA benefit.  VA loans are ideal for the Veteran who doesn’t have a down payment, as they can go up to 100% loan to value.  The down side is that VA charges the Veteran a funding fee that ranges from 2.35%-3.3% on top of the mortgage balance.

The same applied to FHA or USDA loans.  Yes, they are good for some people, ie first time home buyers, someone who needs help with the down payment, or some other situation.  FHA loans have Mortgage Insurance Premiums that are added to the loan balance and have a month fee as well.

Don’t get fooled by the difference in rates.  Right now the Conventional loans are about .25% higher than VA, FHA, or USDA loans.  They don’t have funding fees or Mortgage Insurance Premiums added to the loan balance or payment.

Any ethical mortgage loan officer will look at all options and make a recommendation based on your situation.  Every body’s mortgage needs are unique.

Is your lender collecting too much?

I recently had this happen with a lender who I have done a lot of business with in the past.  A number of my past clients were refinancing their VA home loans and paying off this lender with my new VA home loan from a different lender.

The old lender was trying to collect extra interest until the end of the month when we are paying them off between the first and the 14th of this month.  The correct way is to do a daily proration of the interest until the day the old lender receives the payoff.  They are not due any interest from the client as per the note they signed.

When the first of the VA loan clients were paying off their loan, the numbers didn’t add up to what we had set up.  I got to digging into the closing numbers and noticed the payoff amount was several hundred dollars higher.  After checking with the Escrow Officer to see it that is what she had been given, she said the lender stated they don’t do daily prorations of interest.  I immediately called the lender for an answer as to why they are over charging my clients.  It took several phone calls and voice mails, but I got an after hours call back.

The lender’s representative stated first that their systems didn’t calculate daily interest.  I stated there is nothing in the note that says a client is responsible for a whole months interest when they payoff before the end of the month.  After reviewing the clients note, the lender’s agent said she would manually calculate a payoff for the expected date of funding.  She also said that the loan had been placed with Ginnie Mae, a buyer of government insured notes and that GNMA demanded a full month’s interest on any note paid off.

That is their problem, not my clients.  The client didn’t take the loan with the understanding they would be charged for a full month.  It would have been different if it was a term agreed to upfront, but it wasn’t.  The lender has to pay this, not my client!

Now, there are loans that this is disclosed on, FHA loans are not daily prorated for interest due.  As a result, we try to close those towards the end of the month to best benefit the client.

I have a feeling that this lender knew what they are doing is not allowed, but doing it anyway to avoid paying out the extra interest.  They got caught, and I telling my fellow Loan Officers and Realtors about this.  I can’t imagine how many home owners have been overcharged in the past.

 

The lowest rate is usually not the best loan!

This might make some of you say “what has he been smoking?” but there is an important reason for this.  I see many people get sucked in to a “my rate is the lowest so I must have gotten the best deal” mentality.

You can’t go online without being bombarded with get a mortgage with a 2.25% rate(APR 2.78%) or other such message.  This is one of the most outrageous offers I have seen.  I can’t think of anyone who would be served by this offer. FYI, it was 3 yr. adjustable rate VA Loan with 1% discount and 1% origination plus all the other third party fees.

I know why online lenders offer it, to make the phones ring.  They later pull a bait and switch and get the borrower into a more realistic loan that their local bank or broker could have gotten them.  For most people, that would have been a 30 yr. fixed rate in the 3’s with either a no points/no origination fee structure.

Lenders offer a wide range of rates and terms for clients so they can select the best mortgage for their situation.  For some, they are never going to move and it might make sense to pay a discount point, origination fees, and closing costs.  On a 30 yr. fixed rate mortgage, it takes about 7 years to recoup the cost of a 1% discount point.  If you are sure you will live there for longer than 7  years, then you would come out ahead.  If you think  you might move in a few years, then don’t pay closing costs or even a 1% origination fee.  The no points/no origination fee option is a much better mortgage for your situation.

There is even an option called the No Cost Refinance that is very popular.  For the record, I call it Lender Paid Closing Cost Refinance as that is more accurate but the slang term is No Cost Refinance.

Here is how it works:  Say a lender offers 3.25% on a VA streamline refinance with no points, just third party  plus your escrow account set up.  That can be about 1.5-2% in most areas.  At 3.75%, that same lender may offer a lender credit of 2% that gets credited to the borrower to offset your closing costs and new escrow account set up.  This means you are not rolling any costs into the loan.  Yes, the rate is higher, but you didn’t pay anything upfront to get it.  The difference in payment might only be 25 dollars more and that would take 10-11 years to recoup if you rolled the closing costs into the new loan.

What I like to do with all my clients is to find out what their reasons are for getting the loan, their goals for the home, and sometimes even their retirement planning goals so that I can help them select the right loan for their situation.  This is why my past clients call me to help them finance their next home or to send a family member to me for help.

The shady gimickmeisters are coming out again

Its only a matter of time when an industry is growing before the slick gimickmeisters come out and try to get into what is percieved as easy money.

I get calls almost weekly from past clients and friends saying they a got a call or a mailer from a company offering a rate of 2.5% on a loan.

In most every case, the offer has been something they didnt think it was, ie a 10 yr fixed rate at 2.75% or a 2.25% VA loan that actually turns out to be a 3 yr adjustable rate with 1% origination and 1% discount points.  Compare that to a regualr 30 yr fixed rate VA loan in the 3.5% range with zero origination points and zero discount points.

My advice is to deal only with a local, trusted advisor, never someone over the phone.  If you don’t have one, I would love to help you.  I’m in Meridian, Idaho.  I can be reached at 861-7579.

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