Real Estate Professionals Selling to Veterans

• St. Petersburg Regional Loan Center

Agenda♦ Overview and History of VA Home Loan Program♦ Understanding VA Home Loan Entitlement♦ Occupancy Requirements♦ Qualifying for a VA Home Loan♦ Allowable Fees and Charges♦ Seller Concessions♦ VA Assumptions♦ Compromise Sales♦ VA Appraisals

St Petersburg RLCLoan Production

Call 727-319-7500

Sharon Glanton-Davis, LPOFrances Marston, SupervisorSteven Roberts, Lead Loan Specialist

Overview and History

History of VA Home Loan Program

The VA Home Loan Program was created under the GI Bill in 1944 as a way for the United States to say ““Thank youThank you”” to the Armed Forces men and women who have served their country

Potential Customers

♦More than 29 million29 million veterans and service personnel are eligible for VA financing

♦ Although many veterans have used their loan benefits, it’s often possible for them to purchase a home again using remaining or restored loan entitlement

Dispelling Myths about VA Loans

Myths:Myths:• Interest rates for a VA loan are muchmuchhigher than a conventional loan• VA loans involve tootoo much paperwork and government ““red tapered tape””• VA appraisals take way tootoo long• VA loans are ““notnot”” assumable

New Automation of VA Loan Guaranty

• VIP-Veterans Information Portal• TAS - The Appraisal System• Web LGY

• ACE - Automated Certificate of Eligibility System

• WBLS - Web Based Loan Summary Sheet

• VAFFS - VA Funding Fee System

The VIP Portal

• https://www.vip.vba.gov• VBA Links without password requirements

– Home page– Feedback– Forms– Manuals– Other

The VIP Portal (cont’d)

• VBA links with password requirements– ACE– TAS

Loan Purposes

• Purchase or construct a home • Refinance

- IRRRL (streamline or rollover) - Cash-Out Refinance

• Install Energy-related features

Prior Approval Loan TypesLoans that must be sent into VA for Prior Loans that must be sent into VA for Prior

ApprovalApproval• See Lender’s Handbook chapter 5

- Loans from Prior Approval Lenders- Joint Loans- Vets receiving non-service

connected pensions- Veterans rated incompetent by VA- IRRRLs that are delinquent- Supplemental loans

Benefits of a VA Loan• No down paymentNo down payment is required • The application process is similar to any other mortgage loan• Majority of loans are processed by lender without VA approval• NoNo PMIPMI is required• Interest rates are competitive• Loan maximum may be up to 100% of reasonable value

VA Loan GuarantyFor Information

• Visit www.homeloans.va.govwww.homeloans.va.gov• See VA Pamphlet 26-7, Lender’s Handbook• Or call 1 800-827-1000 X 7500 or local

727-319- 7500• Additional links can be found on our

website

Loan Requirements

• Occupancy Certification•Funding Fee must be paid unless vet is exempt • Loan limit cannot exceed reasonable value, plus energy efficiency items, plus the VA funding fee

Loan Requirements (cont’d)• Maximum Maturity

• Amortized loans: 30 years, 32 days• Non-amortized loans: 5 years

• Loans must be amortized if more than 5 years until maturity

• Assumption of VA loans made on or after March 1, 1988, requires VA approval

Understanding VA Home Loan Entitlement

Entitlement Overview

• A veteran’s basic entitlement is $36,000• For loans greater than $144,000 the Maximum Guaranty amount is 25% of the loan amount, up to $104,250

Loan Amount

• Lenders generally limit VA Loans to $417,000 due to secondary market requirements• As the Freddie Mac conforming loan limit increases, so will VA’s• For loans up to this amount, it’s possible for qualified veterans to obtain no down-payment financing

Eligibility Requirements

• A veteran is eligible if he/she served on Active Duty and was discharged under conditions other than dishonorable.

DD214

♦The National Personnel Records Center (NPRC) has provided a website so veterans can request a copy of their DD-214 online.

http://www.archives.gov/veterans/evetrecs/index.html

Eligibility Requirements (cont’d)

Surviving Spouse:Surviving Spouse:• The unmarried surviving spouse of a veteran who died as a result of service or service-connected causes, andand•• The spouse of an active duty member who is listed as missing in action or prisoner of war for at least 90 days

How to Obtain a Certificate

♦Complete a Certificate of Eligibility Application, VA Form 26-1880

♦Visit www.homeloans.va.govwww.homeloans.va.gov and click on the forms link to print out the form

♦Attach verification of service - DD214 or Statement of Service to 26-1880

♦Mail it to the Eligibility Center, PO Box 20729, Winston-Salem, NC 27120

ACE-Automated COEs

Another Option for Lenders

♦ Internet based application♦ Access through http://www.vip.vba.va.govhttp://www.vip.vba.va.gov♦ Utilize the ACE system or submit applications to

eligibility center ♦ COEs generated in seconds

Break Time

Occupancy Requirements

• The veteran borrower must intend to occupy the home as his/her primary residence

• This must be indicated on VA Form 26-1820 at closing

Qualifying for a VA Loan

How to begin Origination Process

• Once it has been determined that the purchaser is a veteran , , the COE/ACE must be obtained, then the lender can begin the application process

• Obtain COE/ACE early - not the day of closing

Loan Processing for the Lender

Easy Steps to Close a VA Loan• Complete all required forms (ch. 5)• Obtain and review credit report (ch. 4)• Obtain VOEs, Underwriting (ch. 4) • Asset verification if needed (ch. 4)• Obtain completed 26-8937 (if exempt)• Obtain appraisal (Notice of Value, ch. 13)• Calculate funding fee (ch. 8, page 21)• Close the loan

Credit and Obligations• The applicant’s past repayment obligations are the

best indicator of his/her willingness to repay future obligations

• A poor credit history alone is basis for disapproving a loan

• Emphasis should be placed on the applicant’s overall payment patterns rather than isolated occurrences

• Determine whether applicant(s) is a satisfactory credit risk based on careful analysis of credit data

Loan Analysis and Compensating Factors

• A debt-income ratio greater than 41% requires closer scrutiny

• If the residual income exceeds the 20% guideline, closer scrutiny is not necessary

Seller Concessions and Allowable Fees and Charges

Seller Concessions• A seller concession is anything of value

added to the sale by the builder or seller for which the buyer pays nothing and and which the seller is not customarily expected to pay

• Seller concessions include:• Payment of buyers funding fee• Prepayment of buyers property taxes and

insurance• Gifts such as TV’s or Microwaves

Seller Concessions (cont’d)

• Escrow funds to provide temporary interest buydowns

• Payoff of credit balances or judgmentsSeller concessions do not include:Seller concessions do not include:• Payment of buyer’s closing costs• Payment of points as appropriate to

market

Seller Concessions (cont’d)

• Some builders or sellers offer concessions as a competitive tool

• In extreme cases, concessions may entice unqualified veterans into mortgages they cannot afford

• Any seller concessions over 4% of property value is considered excessive

Allowable Fees and Charges

• VA Funding Fee, unless exempt• 1% flat charge from lender

VA Funding Fee

• The basis funding fee for a first-time user is 2.15% of the loan amount• For subsequent use, except for IRRRLs the funding fee is 3.5%• The funding fee for an IRRRL and assumption is .50%• The funding fee for Reserves/Guard is 2.4%

Interest Rates and Discount Points

• Rates and Points are negotiable between the veteran and lender• Veterans should investigate rates offered by various lenders

Loan Assumptions• VA loans made after March 1, 1988,

requires VA approval or certain lenders on VA’s behalf

• The legal instruments evidencing the loan must contain the Assumption Approval Clause

•• ““This loan is not assumable without the This loan is not assumable without the approval of the Department of Veterans approval of the Department of Veterans Affairs or its authorized agent.Affairs or its authorized agent.””

Energy Efficient Loans• VA may guarantee loans to eligible veterans

to improve a residence owned and occupied by the veteran through the installation of a solar heating system, cooling system, or through the application of a residential energy conservation measure

• These energy efficient improvement loans can be made in conjunction with any type of VA purchase or refinancing loan

Joint Loans• Joint loans generally refers to a loan for

which a veteran and another person are liable, and a veteran and the other obligor own the security

• The other obligor could be a veteran or non-veteran

• Any joint loan for which the veteran holds title with any person other thanother than the veteran’s spouse requires prior approval

Compromise Sales•• If the veteran is having financial difficulty If the veteran is having financial difficulty

and owes more than the house is worth a and owes more than the house is worth a compromise sale may be possiblecompromise sale may be possible

• If you come across a veteran with this problem, please have them contact VA

• VA offers financial counseling and may be able to prevent a foreclosure sale

•• A compromise sale will benefit the veteran A compromise sale will benefit the veteran and the Realtor!and the Realtor!

Why VA?

Questions?

Thank You!