VA (Veteran's Administration):  VA insured guaranteed home loans are made by private lenders, such as banks, savings & loans, or mortgage brokers to eligible veterans for purchasing or refinancing a home.  

The guaranty protects the lender against the borrower defaulting on the loan. 

Available VA mortgages are, fully amortized fixed-rate 10, 15, 20, 25, or 30 year loans and 3 year minimum Hybrid ARM's based on HUD guidelines (see below).  The home must be in the United States and initially be the primary residence of borrower.
 

Latest VA News:

Congress Increases VA Loan Guarantee
Friday Nov 19, 2004 01:40 PM ET

The U.S. House of Representatives, on Tuesday, passed three bills aimed at helping active duty and retired military. Two of the bills, HR 3936 and HR 2484 were concerned with increasing assistance to homeless veterans, establishing new Department of Veterans Affairs research centers to develop new treatments for combat wounds, increasing access to hospice care and counseling programs, and efforts to increase the Department’s competitive stance when recruiting personnel.

The third bill, HR 2486, addresses several aspects of housing for active duty military and veterans. One provision seeks to end loopholes that prevent personnel from canceling residential and vehicle leases when they are called to active duty or deployed away from their home bases. The most far reaching change however is to the Department of Veterans’ Affairs’ home loan guarantee program.

Part of the “GI Bill” passed in 1944; the home loan program has provided homeowner opportunities to millions of war and peace-time era military veterans. Under existing legislation, the VA can guarantee a 25% of a qualified veteran’s mortgage loan of up to $240,000 (a maximum guaranty of $60,000). A veteran can purchase a home up to that amount with no down payment and can buy a home of greater value, as long as he/she has funds for a down payment to cover the difference. The program encourages banks, credit unions, and mortgage companies to lend to military personnel and gives veterans leverage to negotiate interest rates with the lender, allows them to hold down closing costs, and to avoid private mortgage insurance which is usually required when a down payment is less than 20% of the purchase price.

While the $240,000 maximum is sufficient for vets to purchase homes in many parts of the country, it severely restricts home-buying ability in hot real estate markets, particularly those on both coasts.

The new legislation, which has already passed the Senate and is expected to be signed by President Bush, will raise the maximum guarantee to $83,245, allowing a mortgage of up to $333,700. It will also index the guarantee to allow for future annual adjustments.

The National Association of Realtors estimates that some 29 million past and present military personnel are eligible for veterans’ loans and that the new legislation will increase this amount by about 90,000.

http://www.homeloans.va.gov/lgyinfo.htm
http://www.homeloans.va.gov/faqpreln.htm
http://www.homeloans.va.gov/elig.htm

VA quick facts concerning purchase transactions:

1. VA does not have a maximum loan amount. However, lenders do sell loans on the secondary mortgage market, so they will generally limit loans to $240,000 with no down payment With a down payment, loans may exceed $240,000.

2. The veteran does have to qualify income and credit wise.
3. The veteran does have to occupy the home as their primary residence.
4. The veteran does not have to be a first time home buyer and may reuse benefit.
5. The lender, not VA, sets the interest rate and discount points (vary amoung lenders).
6. There is no private mortgage insurance, but VA does charge an up front VA funding fee, which may be financed into the mortgage.  

NOTE: Veterans with service connected disabilities, are exempt from payment of a VA Funding Fee on all loan transactions.

7. The seller can pay for closing costs. There is a requirement that seller concessions do not exceed 4%, but only certain items are considered as part of the concession; ie. payment of pre-paid's, VA funding fee, payoff of credit balances or judgments on behalf of the veteran, funds for temporary buy-downs (not discount points).

8. The veteran is not allowed to pay for the wood destroying insect (termite) report; it is generally paid by the seller.

9. VA does not approve the majority of loans. The majority of transactions are handled directly by the lender with little VA intervention.

VA basic home purchase entitlement
Qualifications are based on borrower credit history, and income, as well as a property appraisal for the asking price.   

No veteran may have more than one VA home loan at any one time
If an existing home was purchased with a VA loan, it must be repaid in full before purchasing a new home using VA home loan benefits.  

Having more than one home is acceptable when financed by means other than VA, such as, FHA and Conventional (this also applies to 2nd mortgages).

VA loans are fully assumable by a buyer who meets all of the minimum credit qualifications required by VA.  If the assuming buyer is a veteran, his/her entitlement may be substituted for the selling veteran resulting in restoration of entitlement.  If the assuming buyer is not a veteran, the entitlement used to purchase the home remains with the home and is not restored.

The VA funding fee is intended to enable the veteran to obtain a VA owned home without the added burden of the (former) traditional 20% down payment while contributing toward the cost of this benefit, and thereby reduce the cost to taxpayers. 

The VA funding fee for second time users who do not make a down payment 
The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also, that prior users have had time to accumulate equity or save money towards a down payment

Second time users who make a down payment of at least 5 percent pay a reduced funding fee.  The effect of the funding fee on a veteran's financial situation is minimized since the fee may be financed in the loan.

VA loan bankruptcy rules applied to new VA real-estate purchases

• If the bankruptcy was discharged more than 2 years ago, it may be disregarded
• If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that you and/or your spouse are a satisfactory credit risk unless both of the following requirements are met:
  • you and/or your spouse have reestablished satisfactory credit, and
  • the bankruptcy was caused by circumstances beyond your and/or your spouses control (such as unemployment, medical bills, etc.)

To apply for a new VA home purchase loan (same as refinancing plus)

• Copies of checking and savings accounts statements for the past six months
• Evidence of any other assets such as bonds, stocks, or money saved in retirement programs (i.e. 401k or 403b program, collectibles, special trade tools, other property, etc...)
• Two months recent paycheck stubs
• W-2 withholding forms or income tax returns for the past two years to verify your income
• Residence history for the past two years
• Sales contract for the purchase of a new home
• Homeowner's association information with contact information if property is a condo or part of a homeowner's association
• COE (Certificate of Eligibility) We usually order
• DD Form 214 is often required

Pre-purchase counseling and why is it helpful for a VA mortgage?
Pre-purchase counseling gives a person information on (1) the process of buying a home, (2) the key players in the home buying process, and (3) debt management. The goal is to create a more well informed home buyer. While VA does not require such counseling, we strongly recommend it. There is usually no charge for the housing counseling.

To locate a housing counseling office call (800)217-6970 or visit HUD's website at www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm. The Department of Housing and Urban Development (HUD) maintains both the phone number and website.

Refinancing VA Home Loan facts

VA Streamline - IRRRL (pronounced Earl) is an Interest Rate Reduction Refinance Loan

The VA funding fee (Financed into IRRRL) applied to the refinancing of an existing VA home loan is only .05 (1/2%). The veteran should be refinancing to get a rate reduction on the loans interest rate or a term reduction. i.e. refi a 30 year term to a 15 year term. 

Veterans can refinance their VA homes for a longer term but the new term must not be greater than the current loan term by no more than 10 years in term (i.e. term may change from a 15 year term to a 20 or 25 year term but not a 30 year term).

If the VA refinance is with cash back it is no longer Streamline. A 3.3% funding fee is then assessed. Other fees may be incurred as well as document ion simi liar to a new purchase.

VA loan bankruptcy rules applied to refinancing

• Bankruptcy must be discharged

Loan Application Documentation needed to Refinance a VA mortgage loan

• Credit report release for VA mortgage score only.  Generally, VA is not concerned with normal debts such as auto loans, and credit cards.  However, bankruptcy, Child support, Student Loans or other Federal Debts will be reviewed
• 2nd mortgages must be re-conveyance/subordinated back into second lien position
• Verification of Social Security Number: Copy of Social Security Card, Military I.D., DD Form 214, payroll receipt, or W2, etc. (Drivers License with SSN is no longer accepted by most lenders)
• Employment verification (present employer only).  VA prefers 2 years or longer employment with current employer
• Residence history for the past two years
• Name and address of nearest living relative
• Title (Deed of Trust) and NOTE
• Homeowner's association information with contact information if property is a condo or part of a homeowner's association (verify external features are adequately insured)
• Homeowners Insurance contact (your agent is faxed new loan number info. for lender coordination)
• DD Form 214 is often required

Other typical or normal costs associated with a VA loan and any home mortgage loan include, but not limited to:

• Appraisal Fee (not usually required for refinance)
• Flood Zone Determination & Certification
• Credit Report Fee ($30 max or a FHLMC $50 fee (Freddie Mac Loan Prospector)
• Lender's Origination Fee (Limited to 1.00%)
• Market Discount Points (Limited to 2.00% if a Refinance)
• Title Insurance Premiums and Attorney or Escrow Agent fees 
• Document Recording and State/local transfer Taxes
• Survey (rarely required for refinance)
• Prepaid charges such as hazard insurance (except Condo and Town-homes), tax escrow and interim interest

No commissions, brokerage or "buyer broker" fees may be charged to a veteran buyer.

All fees (including Discount and Origination less VA funding fee) may not exceed 5%.

VA Mortgage Loan Benefits For Refinancing: 
Refinancing a VA loan is allowed with the intention of obtaining a lower rate or term reduction.

• No out of pocket expenses in most cases
• Loan maximum may be up to 100 percent of the VA-established reasonable value of the property
• No monthly mortgage insurance premium to pay
• No prepayment penalty
• VA loans are assumable (subject to VA approval of the assumer's credit)
• Credit history normally, looks at the last 2 years of mortgage payments - not the rest (unless it is a "cash-out" refi)
• There is a limitation on closing costs

  http://www.va.gov/

Other VA Facts

Requirements For VA Loan Approval

. The applicant must be an eligible veteran who has available entitlement;

. The loan must be for an eligible purpose;

. The veteran must occupy the property as a home within a reasonable period after closing the loan;

. The veteran must be a satisfactory credit risk; and

. The income of the veteran and spouse, if any, must be shown to be stable and sufficient to meet the mortgage payments, cover the cost of owning a home, take care of other obligations and expenses and have enough left over for family support.

VA Loan Types Requiring Prior Approval
(Reference: VA Lender's Handbook, paragraph 5.04.)

All lenders, with automatic authority or not, must submit the following types of loans to VA for prior approval:

. Joint loans

. Loans to veterans in receipt of VA non service-connected pension

. Loans to veterans rated incompetent by VA

. Interest Rate Reduction Refinancing Loans (IRRRLS) made to refinance a delinquent VA loan

. Manufactured home loans (except when the manufactured home is permanently affixed to a lot and considered real estate under State law) unless the lender has been separately approved for this purpose

. Cooperative loans (Contact VA to discuss)

. Unsecured loans, or loans secured by less than a first lien

VA Joint Loans

A joint loan generally refers to a loan for which:

. A veteran and another person(s) are liable.

. The security is owned by the veteran and the other obligor(s).

A joint loan is made to:

. The veteran and one or more non veterans (not spouse).

. The veteran and one or more veterans (not spouse) who will not be using their entitlement.

. The veteran and the veteran's spouse who is also a veteran, and both entitlements will be used.

. The veteran and one or more other veterans (not spouse), all of whom will use their entitlement.

A loan involving a veteran and his or her spouse will not be treated as a joint loan if the spouse:

. Is not a veteran  OR

. Is a veteran who will not be using his or her entitlement on the loan.

A loan to a veteran and fiancé/fiancée who intend to marry prior to loan closing and take title as veteran and spouse will be treated as a loan to a veteran and spouse (conditioned upon their marriage) and not a joint loan.

Any joint loan for which title to the property will be held by the veteran and any person other than the veteran's spouse must be submitted for prior approval.

Veteran/Non veteran Joint Loan - Guaranty is limited to that portion of the loan allocable to the veteran's interest in the property.

Two Veteran Joint Loan - As with a non-joint loan, potential maximum guaranty on a joint loan is calculated based on the total loan amount and cannot exceed $60,000, even if the available entitlement of the veterans involved adds up to a greater amount.

Occupancy

. Any person using entitlement on a joint loan must certify intent to personally occupy the property as his or her home.

. Any borrower on a joint loan who does not use entitlement for the loan (such as a non veteran), does not have to intend to occupy the property.

(Reference: VA Lender's Handbook, paragraph 7.01.)

Table of Residual Income by Region - For loan amounts of $79,999 and below 

For loan amounts of $80,000 and above 

For loan applications in which the borrower or spouse is active-duty, the residual income figures will be reduced by a minimum of 5 percent if the borrower or spouse will continue to receive the benefits resulting from the use of nearby military-based facilities. This reduction also applies to retired military applicants when the property is located near a military base or installation. (This reduction applies to both of the above tables.)

Mortgage Geographic Regions

See Rent Vs. Own