VA HOME LOAN ELIGIBILITY Part 1

VA Mortgage Advice

VETERANS are the most targeted consumer audience, especially for mortgages. Some real estate professionals targeting veterans tend to use:

• Misleading advertisements 

• Misinformation about VA mortgages 

• Bait & Switch marketing on TV and in your mailbox 

• Using banks/lenders who don’t know and maybe don’t offer VA mortgages 

• False advocates of veterans, publicly promoting false “support” 

Then... WHO DO VETERANS TRUST?

You or other veterans probably get these all the time...“Refinance” letters, offering some fake low rate just to get you to call them. Maybe the letter looks like it’s from an official government entity (which is illegal), OR from someone who just want to exploit the VA loan to make money. 

Then there’s social media ads that operate with the same tactics BUT the difference online is now people can comment. 

WHAT’S THE PROBLEM WITH COMMENTS?

Most of the comments contain WRONG information about VA mortgages, such as: 

·        Credit requirements

·        Down payments

·        Usage of VA entitlement

·        Fees

·        And more! 

WHAT CAN BE DONE ABOUT IT?

Simple -- start getting and sharing ACCURATE information that most real estate professionals aren’t even clear or aware of (including many national VA lenders we THINK are VA experts). 

VETERANS TAKE FULL ADVANTAGE OF THEIR BENEFITS

The problem is not a lack of information, but in in the lack of acquiring accurate information. Veterans are often misled, mistreated, & misinformed. 

At the Weems Property Group the priority is ALWAYS veterans and our intentions are to arm as many veterans as possible with real VA mortgage knowledge for themselves and to share with their brothers/sisters in arms. 

This VA Mortgage Advice is free and is for you to use as you wish. These informative emails will include accurate content, illustrated videos, and (sometimes) important attachments for you to save or share. 

What is a VA Loan?

The VA Loan is a mortgage loan issued by approved lenders and guaranteed by the U.S. Department of Veterans Affairs (VA), to help returning service members purchase homes without needing a down payment or excellent credit. The VA loan is a right earned by each person that honorably serves their country.

0% Down

VA Loans are among the last 0% down home loans available on the market today, whereas conventional loans generally require down payments that can reach up to 20% to secure a home loan. 

NO PMI

Since VA Loans are government backed, banks do not require you to buy Private Mortgage Insurance. 

Competitive Interest Rates

The VA guaranty gives lenders more safety and flexibility because the lender can be assured that no matter what, the debt will be paid.

Easier to Qualify

Because the loan is backed by the government, banks assume less risk and have less stringent qualification standards for VA Loans, making them easier to obtain. 

Regulations and Fees

Although the VA Loan is a federal program, the government generally does not make direct loans to veterans. Instead, private lenders including Absolute Mortgage finance the loan while the Department of Veterans Affairs offers a guaranty. 

This guaranty, which protects the lender against total loss should the buyer default, provides incentive for private lenders to offer loans with better terms. 

Loan Limits

In most parts of the country, veterans who qualify for the VA Loan can purchase a home worth up to $453,100 without putting any money down; however, with the 2017 VA Loan Limits, borrowers in high-cost counties may be able to purchase homes far exceeding that amount without a down payment. 

Funding Fees

The VA Funding Fee goes directly to the VA to ensure the program keeps running for future generations of military homebuyers by removing any additional burdens off tax payers and veterans. The fee varies depending on the borrower's circumstances and does not apply for veterans with service-connected disabilities. 

VA borrowers can roll the funding fee into their overall loan amount. The VA also limits closing costs for veterans and allows sellers to pay most or all of those expenses. Many of our borrowers purchase a home with no money due at closing. 

The VA Loan Advantage

The VA Loan program is the most powerful home loan program on the market for many veterans, service members and military families. These flexible, government-backed loans come with significant benefits that open the doors of homeownership to veterans who might otherwise struggle to obtain financing. 

VA loans require no down payment or private mortgage insurance. They feature competitive rates and terms and allow qualified borrowers to purchase a home with little to no money out of pocket. 

The increasing popularity has stemmed from the loan program's signature benefits, which include: 

1. No Down Payment 

2. No Private Mortgage Insurance 

3. Competitive Interest Rates 

4. Additional Benefits 

Ø  Basic Allowance for Housing 

Basic Allowance for Housing (BAH) is a significant benefit for qualified active military members. Lenders can count your Basic Allowance for Housing as effective income, which means you can use BAH to pay some or all of your monthly mortgage costs. 

Ø  No Pre-Payment Penalty

The VA Loan allows borrowers to pay off their home loan at any point without having to worry about a pre-payment penalty. With the absence of a pre-payment penalty, borrowers are free to consider future home purchases and refinancing options. 

VA Loan Eligibility Requirements

To be eligible for a VA Loan, veterans, active duty service members, National Guard members and reservists must meet the basic service requirements set forth by the Department of Veterans Affairs. Spouses of military members who died while on active duty or as a result of a service-connected disability may also be eligible. 

You may be eligible for a VA Home Loan if you meet one or more of the following conditions: 

• You have served 90 consecutive days of active service during wartime, OR 

• You have served 181 days of active service during peacetime, OR 

• You have more than 6 years of service in the National Guard or Reserves, OR 

• You are the spouse of a service member who has died in the line of duty or as a result of a service- related disability.

How to Apply for a VA Loan Certificate of Eligibility (COE)

While you don't need your VA Certificate of Eligibility in hand to start the loan process with Veterans United, this certificate is a very important part of your loan application. Your COE verifies that your length and character of service make you eligible to use the VA home loan benefit. 

You can apply for a COE in four ways: 

• Apply through a VA approved lender 

• Apply online through the VA’s eBenefits portal 

• Apply by mail with VA Form 26-1880 

• Contact the Veterans Administration directly and fill out a Certificate of Eligibility (VA Form 26-1880).

VA Loan Income Requirements

Borrowers are expected to have stable, reliable income that will cover monthly expenses – including their new mortgage payment. 

Additionally, the VA requires that borrowers maintain a certain amount of income left over each month or after all major expenses are paid. The excess is meant to cover typical family needs, such as food, transportation and so forth and is referred to as residual income. Residual income is a large reason why the VA Loan maintains one of the lowest foreclosure rates of all major lending options. 

Additional Eligibility Requirements

Although the VA determines the guidelines for those who are eligible for the VA Loan benefit, private lenders who finance the home purchases have an additional set of criteria a potential borrower must satisfy, including debt, income and credit requirements. 

A veteran applying for a VA Loan must not have been discharged under dishonorable conditions. 

How to Apply for a VA Loan

The VA loan process typically takes 30 to 45 days once you’re under contract on a home, although every buyer’s situation is different. Applying for a VA loan doesn’t obligate you in any way to a particular lender or to moving forward with the home buying process. 

Evidence Needed for Purchasing Your First Home 

Purchasing a first home is an exciting milestone in any person's life. For some, the process may also seem very intimidating. That's why we are available 24/7 to help guide homebuyers and answer any questions they may have. 

How Much Home Can I Afford?

Typically, the first question would-be homebuyers ask themselves is, "What can I afford?" Many factors determine what a reasonable mortgage payment should be for an individual, including annual income, existing debt payments, down payment (if any), as well as additional costs like homeowners insurance and housing association fees.

What Type of Loan Should I Get? 

Each financing opinion has their own unique advantages. For most veteran and active duty military members, we highly recommend the federally-backed VA Loan due to its distinct benefits over traditional loans. 

Advantages of a VA Loan:

• No Down Payment Necessary. 

• Less Stringent Qualifications. 

• Lower Monthly Payments. 

In addition to the VA Loan, there are several other financing options for homebuyers; including FHA loans, and traditional mortgages. 

Getting Pre-Approved

The first step toward securing your loan is getting pre-approved. This involves a pre-qualification process, where a loan officer assesses your financial situation and determines what you qualify for. 

When using a VA Loan, it's important to find a real estate agent that not only knows the intricacies of the VA Benefit Program, but also understands the specific needs of veterans and active duty military members. 

Find An Agent

Ron T. Weems Jr., the head of the WPG is a  Marine Corps Veteran and has used VA loans for all of his personal transactions, based off of his experiences, our company can help you navigate this difficult time.

Home Financing Options for Veterans and Military Families

When it comes to purchasing a home, Veterans are given many financing options, each with their own unique characteristics. For most veteran and active duty military members, we recommend the federally-backed VA Loan for its distinct advantages over traditional loans. 

VA Loans

VA Loans are available exclusively to those who have served our country and select military spouses. 

Due to its competitive rates and no down payment requirement, the VA Loan is the optimal choice for many military families. VA Loans are available for veterans and active duty service members who meet the basic service requirements. 

Not only is the VA Loan a great option for home purchasing, but it can also be used for refinancing. Learn more about refinancing with a VA Loan in our next section. 

USDA Loans 

USDA Loans are administered by the U.S. Department of Agriculture for citizens, including veterans, with lower incomes to purchase homes and land in rural areas. To qualify, the property must be in a predefined eligibility zone. To see if a USDA Loan may be right for you, contact your loan officer to discuss the pros and cons of this loan type. 

FHA Loans 

Federal Housing Administration loans can be used by a variety of citizens, including veterans, for purchasing and improving "fixer uppers." Other FHA loans are offered specifically for senior citizens, first-time homebuyers, or those looking to purchase a home and make energy efficiency improvements. 

A FHA loan does not offer the no-down payment mortgage option and comes with a form of mortgage insurance that borrowers pay both up front and monthly. A loan officer can help you decide if this loan product is right for you. 

Conventional Loans 

Conventional loans come without any kind of government guarantee. They typically require a minimum down payment and may carry private mortgage insurance. Credit score requirements are even higher for conventional loans than for government-backed mortgages. 

Not only is the VA Loan a great option for home purchasing, but it can also be used for refinancing, which we will be covered in a later section.

VA Loan Assumptions

You may have heard of a VA mortgage assumption, but my guess is this is an unfamiliar term for most buyers. An assumption is generally defined as a purchase transaction where the buyer takes over the liability of an existing mortgage from the seller. 

In a typical purchase transaction, the buyer is released of all liability upon sale. At closing, the buyer’s existing mortgage is paid in full and the seller obtains a new mortgage through their lender. The seller can also restore his VA mortgage entitlement upon sale. 

This isn’t the case with an assumption. Instead of paying off the loan and closing out the seller’s mortgage, the buyer takes it over (assumes the mortgage) and continues to make the payments. Even though the buyer isn’t obtaining a new mortgage the current mortgage servicer has to approve the assumption. Not all lenders and servicer allow an assumption. 

The important takeaway here is that it’s all the same mortgage and this results in the buyer being on the hook for the loan if payments aren’t made, unless a release of liability in writing is received from the loan servicer. 

Additionally, the seller’s VA mortgage entitlement may also remain tied to the mortgage. 

Assumptions are beneficial to a buyer if: 

• The current mortgage has an interest rate lower than the rates available at the time of sale, the buyer can continue to pay at the lower interest rate. 

• The parties can avoid settlement charges. 

• The buyer can pay cash for the difference between the agreed sales price and the balance of the current mortgage (instead of taking out a second mortgage at a higher rate).

 Can I Use My VA Entitlement After an Assumption? 

The short answer is yes, you can likely use your remaining VA entitlement after an assumption. If the person assuming the loan also has VA entitlement, they can look to substitute their entitlement for that of the seller’s. A substitution of entitlement can free up the seller’s entitlement for use on another home. 

Otherwise, the seller will have to look into using his/her second-tier entitlement or any remaining portions of the initial entitlement. If you’re able to move forward with a VA loan assumption and your entitlement remains tied to the property, you can talk with your VA mortgage specialist to determine what entitlement you have remaining. 

VA Loan Contract Guidelines

The journey to homeownership can often be emotional — from excitement to nervousness and everything in between. Once under contract, it is important to remember the process is not over and there is still work to be done before celebrating. 

Although rare, some homebuyers can lose focus once they are under contract. This can result in some delays to the financing process or even result in losing the opportunity to secure a loan. Your Home Loan Specialist will instruct you on important things to maintain once you are under contract. 

While Under Contract: 

• Avoid taking on new debt, such as buying a car 

• Consider putting off job changes 

• Don't move money around or change banks 

• Keep on top of your bills and don't miss a mortgage payment 

• Be mindful of credit card limits 

The journey to homeownership is one of the most rewarding milestones in life. 

FIND OUT IF YOU QUALIFY

WASHINGTON                                 

ARIZONA

How to Apply for Benefits

VA Loan Process

Buying a house is one of the most exciting purchases we make in our lives, and to some, a symbol of achievement. Homeownership is more than just a financial investment — it is an investment in home, in family, and in the future. 

Equipping yourself with all available resources will help you prepare to move forward in the home buying process. Although the nature of any home purchase can cause a certain level of anxiety, we strive to make the process as easy as possible. After all, it's not every day that you buy a home. You should enjoy the experience. 

Your path to homeownership: 

1.Prequalify 

Prequalifying is important because it gives you an estimate of how much home you can afford while laying a foundation for the financing process moving forward. VA Loan specialists or other loan officers will be able to tell you immediately whether the VA Loan is a right fit for you at this time or not. 

Getting started is as simple as having a conversation. If you aren’t sure to contact, let me know, I can get you in touch with VA Loan lenders.  Even if you aren't sure of your credit, don't worry, lenders have the resources in place to guide you on your path to financing your home. 

2. Get Pre-Approved 

At this stage, you'll receive a pre-approval package of documents that contains everything you need to obtain a VA home loan. 

While the paperwork may seem overwhelming, you can relax in knowing lenders have already completed the hard work for you. They can issue a pre-approval letter, proving to your real estate agent and sellers you are financially able to purchase a home. 

Meeting Conditions in a Pre-approval Letter 

Receiving your pre-approval letter is an exhilarating step, but there's a little more work to do. Your VA Loan specialist will identify a list of conditions that must be satisfied in order to finalize your VA Loan paperwork. All of the conditions listed in the letter are important and your financing can fall apart if any of them aren't met. 

Examples of documents required in your pre-approval process:

• Pay Stubs 

• Tax Returns and W2s 

• Employment History 

• Bank/Investment Statements 

• Evidence of Real Estate Assets 

3. Find a Realtor and Begin your Home Search. You can reach out to the members of our team at any time. Ron T Weems Jr.is a realtor and veteran. 623-748-7572 Arizona or 425-218-7674 Washington. If you would like to contact me, give me a call at 360-913-4424. It would be our pleasure to help assist a military family with their real estate needs. 

4. Making an Offer 

When you find that perfect home, it's time to make an offer and negotiate a contract with the seller. It's important that your real estate agent know the ins and outs of the VA Loan so they can structure the contract to assure you retain the ability to put no money down if you so choose. 

5. Processing & Closing 

Once you're under contract to purchase a home, your loan documentation will go to an experienced underwriter for review. It is the underwriter's job to ensure that everything is accurate and meets VA guidelines. Once the loan is approved, a closing date will be scheduled. At closing, you'll sign paperwork, finalize your VA Loan and take ownership of your new home. 

Practicing Responsible Homeownership

Homeownership remains at the heart of the American Dream. That's especially true for veterans and the military community, who continue to own homes in greater numbers than their civilian counterparts. 

A home can be a great vehicle to build equity, but above all else it's a significant financial responsibility. It's important for potential homebuyers to take a serious look at whether they're ready to handle that responsibility. 

The VA loan program does a tremendous job helping ensure veterans can truly afford the homes they purchase. In fact, this no-down payment program has had the lowest foreclosure rate of any mortgage on the market for nearly all of the last six years. 

Still, there are no guarantees. Job loss, family changes, and scores of other things can affect your financial health. The mortgage still needs to be paid. 

More than a mortgage payment 

Your monthly mortgage payment will typically cover your principal and interest on the loan, along with a portion of your annual property tax and homeowners insurance bills. You'll often see it expressed as PITI (principal, interest, taxes, insurance). The principal and interest portions won't change on a fixed-rate mortgage. But property taxes and homeowners insurance premiums can adjust annually. 

In addition, you're responsible for regular maintenance and unexpected repairs. To be on the safe side, homeowners often budget about 1 percent of their home's value each year for maintenance and repair costs. That's $2,000 on a $200,000 home. 

Loan Affordability 

Refinancing with a VA Loan

The VA Home Loan program provides qualified homeowners with a simple way to take advantage of lower rates and decrease their monthly mortgage payment. Beyond that, military homeowners can get cash back on a VA refinance and use the proceeds for a variety of needs, such as paying off debt or making home improvements and much more. 

The current economic climate makes now a great time or many military homeowners to take advantage of the numerous benefits found in a VA refinance. 

Two main programs help VA borrowers refinance to a lower rate -- the VA Streamline Refinance, also known as the Interest Rate Reduction Refinance Loan (IRRRL), and the VA Cash-Out Refinance. 

VA Streamline (IRRRL) Refinance 

A Streamline Refinance allows veterans who currently have a VA Loan to refinance into a lower interest rate, reducing monthly mortgage costs. Streamline refinance loans feature little paperwork and often require little-to-no costs out of pocket. Borrowers can roll closing costs into their overall loan amount. Some homeowners can also secure a Streamline refinance without an appraisal. 

Cash-Out Refinance 

A "cash-out" refinance is an option for those with a VA or conventional loan looking to take advantage of their home's equity to access cash for home improvements, emergencies, pay off debt, or any other purpose. 

VA Refinance Eligibility 

Eligibility for a VA Refinance is similar to a home purchase VA Loan. 

It is important to note that in order to receive a VA Streamline refinance, you must hold an existing VA Loan. A VA cash-out is an option regardless of the current loan. 

VA Streamline Refinancing (IRRRL)

The Streamline refinance, or Interest Rate Reduction Refinance Loan (IRRRL), is one of the best options for homeowners who already have a VA Loan and would like to refinance into a lower interest rate and lower their monthly mortgage payment. 

VA Streamline refinance loans are relatively easy and can be completed quickly, due to the fact that homeowners are refinancing from one VA Loan product to another. 

Benefits 

With an IRRRL, there are several prominent advantages, including no required appraisal in some cases, no need to obtain another Certificate of Eligibility and little to no out-of-pocket costs. 

To avoid out-of-pocket costs, homeowners can choose to roll the closing costs and fees into the balance of the loan. 

Rates 

Today's interest rates are at competitive levels, and with a reduction of just a half of a percent, a borrower could potentially generate tens of thousands in savings over the life of a loan. 

Requirements 

To be eligible for a VA Streamline refinance, the property must currently be financed with a VA Loan. The IRRRL is not available to veterans with non-VA loans. 

Generally, the VA requires the IRRRL to result in a lower principal and interest payment for the veteran homeowner, unless the veteran is: 

- Refinancing an adjustable-rate mortgage into a fixed-rate loan 

- Refinancing into a shorter loan term, or 

- Financing qualified energy efficiency improvements into the new loan 

Lenders may also have guidelines and requirements regarding how long you’ve had your current mortgage, how many payments you’ve made and how long it will take to recoup the costs and fees associated with the new loan. 

Specific guidelines and policies on credit scores, appraisals, loan-to-value ratio and more can vary by lender. 

The IRRRL only requires previous occupancy of the home. You do not need to intend to occupy the property as your primary residence. 

Additionally, the borrower is not allowed to extract cash from their equity using an IRRRL. The VA has a separate loan product for this purpose – the VA Cash-Out refinance. 

VA Streamline Refinance and the VA Funding Fee 

The VA Funding Fee is an upfront fee applied to every purchase and refinance loan. Proceeds from this fee are paid directly to the Department of Veterans Affairs and are used to cover losses on any loans that may go into default. The good news is the VA Funding Fee is lower on IRRRLs than for typical VA purchase loans and for the Cash-Out refinance. Borrowers who are not exempt pay a 0.5 percent funding fee on a Streamline. 

Homeowners who receive compensation for a service-connected disability and qualified surviving spouses are exempt from the funding fee. 

Home Loan Counseling 

VA Cash-Out Refinance 

With the VA Cash-Out refinance, you have the opportunity to turn the equity in your home into cash. This shouldn't be confused with a home equity loan, which is a second loan that runs alongside your current loan. The VA Cash- Out refinance loan replaces your existing mortgage instead of complementing it. 

Qualified homeowners can refinance up to 100 percent of their home's value for mortgage debt in some cases. In others, homeowners can refinance a lower percentage and use the cash to cover debt payments and other needs. 

Whether conventional, FHA or USDA loan, the VA Cash-Out refinance option is available regardless of loan type. 

Quick Facts 

• Please note, due to state regulations, Texas residents are not eligible for cash out refinances. 

• For those refinancing from a conventional or other mortgage program, you are not required to take any cash out. 

• VA Cash-Out Refinance loans follow the standard VA Loan underwriting and credit process. 

• The closing costs and funding fee can be rolled into the entire loan amount. 

• You must certify that you intend to occupy the property being refinanced.

Ways to Use Your Cash Back 

A VA Cash-Out refinance provides access to cash from the equity you've built up in your home — and you're free to use the money for whatever you want: 

• Major Home Repairs 

• Emergency Expenses 

• Upgrade Your Kitchen 

• Remodel the Bathroom 

• Tuition & Books 

• Pay Off Debt 

• And more... 

A Closer Look at the VA Amendment to Contract

Contracts to purchase homes often come with appraisal contingencies. These protect would-be buyers in the event the VA appraisal determines the home is worth less than what they agreed to pay. 

VA loans feature their own unique appraisal contingency known as the VA Amendment to Contract. This key document must be signed by both buyer and seller. 

The Amendment to Contract contingency protects a VA buyer’s earnest money if they walk away from a deal because the appraised value came in below the purchase price. Earnest money is a good-faith deposit buyers typically include when making a purchase offer. 

Unlike with other loan types, VA buyers cannot waive this appraisal contingency. 

Low VA Appraisal Outcomes 

Generally, VA expects the Amendment to Contract to be signed and included with all contract documents at the time of the appraisal. 

In short, this contingency allows prospective buyers to walk away from the contract with their earnest money if the appraisal comes up short. But it also notes buyers may still be able to move forward in these cases. 

Every buyer’s situation is different. Talk with your loan officer if your appraised value ultimately comes in lower than the purchase price. 

Distressed Properties & Amendment to Contract 

Talk with your loan officer if you’re considering purchasing a distressed property owned by a bank or a government agency. 

Depending on the lender and the seller, there may be little point in pursuing certain properties if the seller ultimately refuses to sign the Amendment to Contract. 

Annual Benefits Report