FHA/USDA/VA and Conventional Mortgage Loan News

Archive for the ‘100% Financing’ Category

Recently I have seen examples of USDA Rural Guaranteed Mortgage Loans that were turned down by USDA for reasons that have not been an issue previously to my knowledge. What this points out is that with the increased interest in USDA Rural Guaranteed Mortgage Loans as one of the very few 100% financing options out there, the review process is getting stricter. So, if you are looking for a no money down loan, you should be prepared for the extra scrutiny during the process. 

One of them had to do with an outbuilding on the property. It was a detached garage/shop of over 1000 square feet and the USDA underwriter did not like it since garages are “typically about 400 square feet.” This was a surprise to me, since I thought that outbuildings were normal on “rural” properties. However, USDA’s attitude has to do with the potential of using the property as income generating and a shop of this size could be used that way. So, a property with any type of outbuilding will be looked at very closely. Also, acreage is very closely watched. It is a rural program, but designed for rural communities, not necessarily small acreage parcels.

 The other issue has to do with debt ratios. We have an automated system called “GUS” that underwrites the USDA loans and in the past if we got an “Accept” from GUS, the ratios were acceptable, even if higher than standard. Now, it appears we are being more closely monitored and a housing ratio over 35% will probably be denied. This is not a hard and fast rule, but could be an issue.

The unfortunate part of this is that it is taking 30 days to get the denial back from USDA currently, but we are hearing rumors that their turn times in this area could be improving. We certainly hope so. If you have questions about USDA Rural Guaranteed Mortgage Loans, or would like to proceed with an application, contact me today at 541-342-7576/541-221-3455 cell or e-mail me. You can also come into the office, Alpine Mortgage Planning, 1200 Executive Pkwy., Ste. 100, Eugene OR 97401. I am here to help you in the process. The program is great for Cottage Grove, Creswell, Junction City, Veneta, Florence, Oakridge, Westfir and Harrisburg.

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USDA and VA Loans

USDA Rural and VA Guaranteed Home Loans are still your best bets for 100% financing in today’s mortgage environment. Both programs have qualification requirements. USDA has maximum income and property location requirements and VA has military service requirements but both have no down payment requirements under $417,000 loan amount, although it would be doubtful you could qualify for a $417,000 loan amount given the USDA maximum income requirements.

USDA NO Money Down

To find out if you qualify within the maximum income requirements for as USDA loan, take a look at this link. In much of Oregon and Lane County specifically, a family of 1-4 people can make an annual income of up to $73,600. and a family of 5-8 can make up to $97,150. Even if you are over the income limit, there are some adjustments to income that may bring you inline. To find out what they are for Lane County, check out this link. Here is a partial map for Lane County (the dark area is not eligible):

You can check out this USDA Property link to find out where in Oregon you should be looking for a USDA qualified property. You can also use this link to find out if a specific property qualifies for the program. There is also a link on that site for some areas that normally wouldn’t qualify that are special for the program, like disaster areas.

VA NO Money Down

VA, like USDA does not make the loans for these programs, they offer a guarantee. That guarantee for VA will allow you to purchase (if you qualify) up the a $417,000 home in our area with no down payment. You can purchase a larger loan with down payment, but less down payment than normally required with a conventional loan. To be eligible for a VA loan, you must have completed a minimum of three month’s of active duty  military service or six years of reserve duty. To find out the specific requirements, check out this link.

No Mortgage Insurance

Neither program requires mortgage insurance, however both do have a “financed” funding fee. This fee is waived for VA borrowers with a 10% or greater service connected disability.

Call Today

To find out if you qualify for either program or to get started on the road to homeownership, give me a call today at 541-342-7576/541-221-3455 cell or e-mail me. I am a Vietnam era veteran and specialize in government loans. Purchase or refinance, VA, USDA, FHA or conventional, I am your Loan Guy. Let’s get together and get you started.

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In my continuing endeavor to answer peoples questions about loans and lending, today, I have picked a question that has several things involved with it, a cash out refinance of a VA Guaranteed Home Loan. Again, the question comes from My FHA Mortgage Blog and hopefully will answer questions for several people facing the same issue.

I Need Some Information From Someone Who Has Used A Va Home Loan….?

November 19, 2009

I’m not sure that I am understanding how it works…. what I am looking at is: I have a mortgage of 62,000 my home is valued at around 110,000 … I would like to refinance 95,000 (figuring 3000.00 in paperwork fees and 30,000 cash out)……. so how would a va loan work in that instance???? What would I be looking at payment wise???

 

In response to this question, I am going to answer part of it, but not the part about payment since this will be determined by what loan he/she actually gets. To begin with, a loan of $95,000 on a property worth $110,000 is well within the 90% loan to value that most lenders have adopted for VA cash out refinances, however, thinking that the loan will only have $3,000 in fees is probably not right. Depending on where the property is located and how much taxes are and the interest rate chosen, this number could be a lot closer to $4,000 – $5,000 in total closing costs.

Additionally, VA allows cash out refinances of up to 100% loan to value. There are still some wholesale lenders that are offering this product, although not many. As far as how it works, it would be like most any other cash out refinance. There would need to be an appraisal, the customer would need to income and credit qualify for the loan and it would need to close, including a 3 day right of rescission. As a refinance, there are some fees that are not allowed to be paid by the veteran, so they would have to either be absorbed by the lender in rate enhancement or a discount fee would be charged.

Also, since this would be subsequent use of VA entitlements, the funding fee would be higher than with the original purchase (if that was first usage). There would be no funding fee if the borrower has a 10 percent or greater service connected disability.

I hope this answers this question satisfactorily and gives some needed information to anyone contemplating a VA refinance. Beside the cash out refinance, VA also offers a IRRRL (Interest Rate Reduction Refinance Loan), or streamline. In some cases, the streamline no longer is and requires that a new appraisal be performed. Again, this will vary from lender to lender. Again, non allowable fees need to be absorbed in the loan somewhere. Just because VA has determined the fees are “non allowable,” doesn’t mean they don’t exist.

If you have questions about VA loans, please contact me at 541-342-7576/541-221-3455 cell or e-mail me. I am a Vietnam era veteran and have a VA loan myself. I believe it is an excellent benefit for our veterans and active duty military. Call me to see if you will benefit from a VA loan.

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I am going to be answering some questions that are coming up on My FHA Mortgage Blog over the next few weeks either here or on one of my other two blog sites, FHA Loans and Eugeneloanguy. I am hoping that by answering questions posed by the public we can get better information out there than what we have been seeing on the internet. There are a lot of myths and fallacies on the internet, just take a look at this post to see what I am talking about. This particular question has to do with closing costs and a USDA loan. I hope this series helps.

Will It Hurt Me If I Have A Family Member Deposit A Check Into My Bank Account For Closing Costs?

November 18, 2009

I am buying a house and the lender needs proof(bank statement) that I have enough to cover closing costs. A family member is going to help pay closing costs. Will it hurt me when they look at my bank statement and see that the amount to cover closing costs came form a family member? Its a USDA Rural Housing Loan.

A USDA Guaranteed Mortgage, like an FHA loan allows you to receive gifts from family members for down payment and closing costs associated with a loan. The important thing to remember is that the lender will want to see a paper trail for the gift. That means that you will need the deposit slip for the gift, a copy of the check for the gift, and most often a copy of the bank statement from the donor showing the ability to give the gift. There is also a gift letter that will need to be signed by the recipient and the donor. Except in very limited circumstances, cash is not acceptable.

If you have questions about USDA procedures or are ready to start the loan process, give me a call today at 541-342-7576/541-221-3455 cell or e-mail me. I am here to help you through this process.

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Our USDA Guaranteed Home Loans are underwritten by our in-house underwriting staff, but after it is approved through our staff underwriters, the loan then must be forwarded to USDA for their approval of the loan, since they are the ones guaranteeing the loan. This is similar to what happens when a mortgage insurance company requires loans to be submitted to and approved by them prior to insuring the loan.

Because this is an extra step in the process and USDA is currently reporting they are 20 business days out in reviewing the loans, they are not closing on original schedules. 20 business days is what is in a normal month, so it may take up to two months to close a USDA loan, since normal processing time on a loan is about 30 days.

This just means that buyers, sellers and the Realtors involved in a USDA transaction should be prepared for the additional time in process. If you have questions about USDA Guaranteed Loans, or any other loan product for Oregon, Washington or California, give me a call at 541-342-7576/541-221-3455 cell and let’s discuss your process. It is worth waiting a bit longer for one of the only 100 per cent loan to value loans available in today’s market. Processing time in Washington is currently longer than Oregon.

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Since today is Veteran’s Day, I thought I would do a short post about VA Guaranteed Mortgage Loans. We have all heard about the Golden Rule as we were growing up, “Do unto others as you would have them do unto you.” However, when talking about mortgage lending, this time specifically VA Guaranteed Mortgage Loans, the Golden Rule is, “He with the gold makes the rules.”

VA Does Not Make Loans

First of all, let me explain again that VA does not make loans to home buyers, they guarantee a portion of the loan. The loan is made by a “wholesale” lender and often sold to a servicer, sometimes more than once. Sometimes the loan is sold to an investor and the servicing is sold to another “bank.” In all of this VA is the guarantor of a portion of the loan.

Overlays Developed by Lender

That means that the “bank” making the investment in the loan can make their own rules, as long as they are not less stringent than those laid out by VA. These are called “overlays.” This is why that although VA does not require a minimum credit score, many lenders will require a minimum credit score of 620 or 640 or even 660 before they will fund a loan. This is why that although VA does not require an appraisal on a “streamline” or IRRRL refinance, many lenders do.

Overlays Vary Company to Company

These “overlays” can vary widely from company to company. That is one of the reasons that I believe it is best to work with a mortgage loan officer that has some leeway in where they place the loan. If the loan officer can only place the loan with their company, you are stuck with that company’s “overlays.” That is why I think that working with a company like mine, a mortgage bank with the ability to broker to other wholesale lenders, is the best of all worlds. 

Call a Vet for your VA Loan

Call me today at 541-342-7576/541-221-3455 cell or e-mail me for more information. I am a Vietnam era veteran and here to help other veterans. So today, take a moment to thank a Vet, it won’t cost you and it will make them feel more appreciated.

Although most home buyers don’t understand the difference between a VA underwriting guideline and a lender overlay, that difference can be huge in determining if they can purchase a home.  There are a lot of very interesting changes in lending happening currently. Many people get confused in exactly what is a VA Guaranteed Home Loan? Basically, it means that VA Guarantees that the loan will perform, it does not mean that VA is loaning the money for the home loan, thus the start of the misunderstanding.

For instance, VA does not have a minimum credit score requirement to be eligible for VA Guaranteed financing. The lender making the loan probably does have a minimum credit score requirement, in fact most of them are set at 620 or higher. This is a prime example of the “Golden Rule,” he with the gold makes the rule. In other words, the lender is using their money for the home loan and therefore they set the rules you must meet to get the loan from them. This is where overlays come in. The lender cannot make their rules any less stringent than VA’s, but the can make them any more stringent as they want.

Another example is manufactured homes. VA allows manufactured home for collateral on home loans, but the majority of lender will not accept manufactured homes no matter the year, condition or value. VA does have some age and foundation requirements that will take some of the homes out of the running, but the ability to get an VA loan on a manufactured home is extremely limited. I recently lost my only wholesale lender for VA manufactured home loans when they stopped doing them today.

Additionally, VA allows for 100% cash out refinancing of a veteran’s personal residence. Most lenders are limited to 90% on a cash out refinance. VA also has an Interest Rate Reduction Refinance Loan (IRRRL) that allows for refinancing without going through an appraisal, however, some wholesale lenders do require an appraisal.

So, where does that leave us today? I do not have a wholesale lender that will accept credit scores below 620 or one that will accept a manufactured home for security. I also only have one remaining lender that will approve 100% cash out refinances for veterans and that could change at any time. Additionally, we have lenders that will do IRRRLs without an appraisal. The market is changing and will continue to change.

Anyone that falls into these categories need to be working with a lender that has their finger on the pulse of the continually changing lending environment.  If you need someone like that, please contact me today and let’s get you going on your new home purchase. As of today, and this hour, I can no longer submit loans for manufactured homes and credit scores below 620 that are VA. Reach me at 541-342-7576/541-221-3455 or by e-mail I am here to help.

Last week, Congress voted to extend the First Time Home Buyer Tax Credit for an additional six months for any service member that served at least 90 days overseas. This is an excellent development for our VA Guaranteed Loan clients, not only can you get a mortgage with no down payment, no mortgage insurance, and expanded credit underwriting, but, if they are a first time home buyer, they also qualify for the up to $8,000 tax credit.

There is still a possibility that the tax credit will be extended for other buyers, but that remains to be seen. This extension is good in that it is very often not possible to close a VA loan within 30 days and we are fast approaching the November 30 deadline for the tax credit. This news report shows the limited time left for the tax credit.

As a former service member myself, I enjoy working with my fellow veterans. If you have questions about VA loans, please contact me at 541-342-7576/541-221-3455 cell or e-mail me.

VA Guaranteed Home Loans are available to veterans with at least three months active, honorable, service or six years of Reserve or National Guard service. They are also available for active duty members under certain circumstances.

VA does not charge for mortgage insurance for taking a loan with less than 20 percent down payment like conventional financing. There is, however, a funding fee charged to the veteran that is, in many ways, similar to up front mortgage insurance charged by FHA. This fee, for 100 percent financing is 2.15% of the loan amount for first use by an regular military service veteran. Subsequent usage is at 3.3%. Reserves are higher at 2.4% for first usage.

Now the interesting thing is that many veterans are never told that if they put a down payment on the home, this funding fee is reduced. For regular military, the funding fee on a 95% loan is only 1.5% and 1.25% on a 90% loan. Reserve members pay 1.75% & 1.5%, respectively.

Additionally, if the member has a 10% or greater service connected disability, they are exempt from paying the funding fee. Even if they are paying the funding fee, it is financed in the loan amount. For more information about VA loans, contact me at 541-342-7576/541-221-3455 Cell or e-mail me. I am a Vietnam era veteran and am proud to help my fellow service members with this outstanding program. Don’t let this benefit pass you buy. You might even be eligible for the first time home buyer tax credit if you haven’t owned a home in the past three years.

It used to be that if you were applying for a 100% USDA Rural Guaranteed Mortgage, you couldn’t have more than $5,000 left over at closing because the main purpose of the loan was to help people purchase homes in “under” served areas with no money down. That restriction has changed for this USDA no money down program.

Now, the determining factor has to do with “IF” the buyer has enough liquid assets to make a 20% down payment and can qualify for a conventional loan. To me, this makes a lot more sense than getting someone into a home and taking all of their cushion away. USDA does not require reserves after closing, but it is nice that there can be some reserves.

Sometimes rules change for the best, instead of for the worst. I think this is one of those times. If you have any questions about qualifying for a USDA Rural Guaranteed Loan, give me a call at 541-342-7576/541-221-3455 Cell or e-mail me.