va loan notes

V.A. Loans From Sean D. Cohen; Prosperity Mortgage Consultant … Cell 757-404-3387 What are V.A. Loans? V.A. loans are home loans for currently enlisted military personnel or previously enlisted, whether retired or honorably discharged. The reason V.A. loan rates are very low is that the Government backs lenders up to 25% of the loan amount, meaning lenders are safer to lend at good rates knowing the Government will reimburse them if the borrower goes into foreclosure and the home experiences a loss of value. Loan-to-Value and Closing Costs: Also, V.A. lends up to 100% of the purchase price/appraised value of a home, enabling these borrowers to buy a home with no money down. Although the borrower cannot “finance” the closing costs on top of the loan, if the contract is written to say that the sellers will give the buyers closing cost assistance, then the loan actually can include the buyer’s closing costs and prepaids, up to 6% of the purchase price. In this case, the buyer will get credits for closing costs at the closing table, and may not have to bring any money to the closing at all. (They still pay out of pocket for the appraisal, earnest money, and a home inspection, which usually totals around $1200). Qualifying for a V.A. Loan: The great part of qualifying for a V.A. loan is that the borrower(s) don’t have to have established a strong credit history to get the loan, which can be as large as $428,750. V.A. looks for stable job history, usually two years, and no “bad” credit over the past two years. Bad credit referring to late payments on car loans and credit cards, and collections, judgments, and/or liens, like tax liens. Any bad credit over the last two years may be enough to prevent someone from obtaining a V.A. loan; however, several “cases” have been made for borrowers to explain any problems they’ve had in writing, and to show they have alternative good credit, such as paying cell phones, cable bills, utility bills, and rent on time. Rent is the biggest one, and borrowers must prove they’ve paid their rent on time for at least 12 months. You must qualify for a V.A. loan with income, which requires adding up all your monthly debts and dividing by gross monthly income, which must be in the low 40’s percentile to get approved for the loan. The more money someone has in checking, savings, and 401k, the higher the debt ratio can go and still get approved. V.A. loans do not have PMI (private mortgage insurance), which is an added part of the payment when loans allow you to borrow more than 80% of the value of a property. V.A. rates are usually fixed for 30 years, and payments include principal and interest, taxes and insurance (PITI). Here’s a basic chart to show average loan payments with V.A. financing: Purchase price Rate Estimated PITI pymt. $100,000 6.5% $775 $150,000 6.5% $1120 $200,000 6.5% $1500 $300,000 6.5% $2200 $400,000 6.5% $2900 Compared to Conventional loans, V.A. saves the customer on average about $80 per month per $100,000 borrowed, due to Conventional higher rates and PMI. Points: Points are used to “buy down” an interest rate so that over time, the borrower saves money by getting a lower monthly payment. Points, whether called origination or discount, are equal to 1% of the loan amount, so they can get expensive. These are added to the closing costs, so borrowers may or may not be able to use this to their advantage when locking in an interest rate. An interest rate cannot be locked until a borrower has secured a contract on a property, because the rate lock is tied to a specific address and social security number. Also, just as a rate lock protects a customer from rates increasing while getting from application to the closing table, it also protects the bank from rates decreasing during that period, meaning customers can’t simply “relock” if rates improve during that period. Funding Fee: V.A. borrowers can use their eligibility as first time home buyers, and for multiple use. There is a funding fee that increases per multiple use, but that fee can be financed in with the loan.