Jun 11, 2013
The U.S. Department of Veterans Affairs guarantees mortgage loans for qualifying active and retired members of the military and their family members. Las Vegas area Realtor® Brook Geisendorf identifies the key requirements and benefits for our nation’s service personnel.
“The VA loan program was established in 1944 as part of the Servicemen’s Readjustment Act. An eligible borrower may use a VA home loan to purchase various types of property including a house, condo, manufactured home or farmland.
Military ServiceAccording to the U.S. Department of Veterans Affairs, an individual must have served in active duty in any branch of the U.S. military for a minimum of 90 days before applying for a VA home loan. Exceptions apply for individuals who received an early discharge due to a disability. Non-active duty personnel, such as individuals in the Army Reserves or National Guard, may apply for a VA backed mortgage provided they have completed six years of service. The spouses of deceased or missing military members are also eligible if they have not remarried. Borrowers who received a dishonorable discharge from any military branch are not eligible.
Funding FeeThe federal government doesn’t require eligible borrowers to pay a down payment on a VA loan, nor does it allow the mortgage lender to charge the veteran private mortgage insurance. It does, however, require the borrower to pay a one-time funding fee on their purchase. A borrower can choose to pay the fee up front or finance it into the total cost of the loan.
The funding fee for regular military members is 2.15 percent of the loan while reservists pay a fee of 2.40 percent. Should a member of the military or a qualifying family member make a down payment of 5 percent, the funding fee drops to 1.5 percent. It drops further to 1.25 percent if the applicant’s down payment increases to 10 percent or more.
Credit HistoryLike other types of mortgage loans, your credit history plays a role in your eligibility for a VA home loan. Lack of a credit history, however, doesn’t necessarily bar you from qualifying. The U.S. Department of Veterans Affairs understands that military members, especially those stationed overseas, may not have the same credit-building opportunities as other individuals. Because of this, records of timely payments to utility companies and landlords can be used in lieu of a valid credit history.
Jun 10, 2013
For decades, lenders used a Good Faith Estimate to explain closing costs to a home buyer. These estimates, called GFEs, contained recurring and non-recurring closing costs. Since the lender was not required to stand behind those numbers, they could be misleading and were inconsistent from lender to lender. In an effort to provide more disclosure to borrowers, effective January 1, 2010, the government standardized the Good Faith Estimates and added more pages. Now, every lender is required to disclose accurate numbers.
While the recurring and non-recurring closing costs are clearly defined in the new GFE, some of the other things a borrower would like to know are not. For example, nowhere on the GFE does it spell out the borrower's monthly PITI mortgage payment. But that's the government for you.
Definition of Closing CostsSome home buyers are shocked when they discover it costs more than the price of a home to buy it. When you buy a car, for example, dealers don't tack on fees and charge extra (except for sales tax) when buyers finance that vehicle. But buying a home is different.
While a buyer doesn't pay sales tax on a single-family residence or condo, a buyer does incur additional fees to get the loan and for processing the paperwork to buy a home. The closing costs run about 3% of the sales price when the home is priced over $200,000, and a higher percentage applies when the price of a home is less than $200,000.
- Impound / Escrow Accounts
Lenders may require that a buyer establish a reserve account held by the lender for future payment of taxes and insurance.
- Lawyers / Closing Agents
The individuals who prepare the closing documents and deed charge a fee.
- Title Policies
Title companies charge to issue title insurance that protects the borrower and the lender.
Definition of Non-Recurring Closing CostsFees that are paid once and never again are called non-recurring. These fees are one-time charges for such items as:
By Elizabeth Weintraub, About.com Guide
May 21, 2013
Although every situation is unique, it is not uncommon for homebuyers to qualify for a mortgage on a new home while still living in their primary residence.
Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer? Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:
So, Do I Have To Sell?
Yes. No. Maybe. It depends.
Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…and all of them may be right.
If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is No!
Qualifying based on your Debt-to-Income Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.
This scenario presents the “maybe” and the “it depends” answers to the question.
If you’re not quite qualified to carry both mortgages, you may have to rent the other property in order to offset the mortgage payment.
In that scenario, the lender will typically only count 75% of the monthly rent you are proposing to receive.
So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios.
Another detail that can present a huge hurdle is the reserve requirement and equity ratio most lenders have. In some cases, if you are going to rent out your current home, you will need to have at least 25% equity in order to offset your payment with the proposed rent you will receive.
Without that hefty amount of equity, you will have to qualify to afford BOTH mortgage payments. You will also need some significant cash in the bank.
Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.
For example, if you have a $1500 payment on your old house and are buying a home with a $2000 monthly payment, you will need over $21,000 in the bank.
Keep in mind, this reserve requirement is incremental to your down payment on the new property.
What If I Can’t Qualify Based On Both Mortgage Payments?
This answer is pretty straightforward, and doesn’t require a financial calculator to figure out.
If you are in this situation, then you will have to sell your current home before buying a new one.
If you aren’t sure of the value of the home or how your local market is performing, give us a ring and we’ll happily refer you to a great real estate agent that is in tune with property values in your neighborhood.
…..As you can tell, purchasing one home while living in another can be a very complicated transaction. Please feel free to contact us anytime so we can review your specific situation and suggest the proper action plan.
Article by Alan Godfrey
Related Articles – Mortgage Approval Process:
- Basic Mortgage Terms
- How Much Can I Afford?
- Common Documents Required For A Mortgage Pre-Approval
- Top 8 Questions To Ask Your Lender During Application Process
- What’s The Difference Between An Investment Property, Second Home and Primary Residence?
- Seven Items Real Estate Agents Need To Know About Your Mortgage Approval