Key Points for VA Loans

veterans 1More Veterans are using their Veterans Benefits to buy homes today with VA Loans.  The problem many of them encounter is this: Mortgage Loan Originators (MLO) don’t have sufficient experience with VA Loans.  This can make for some troublesome times when a Veteran is buying a home.  You definitely want to work with an experienced MLO, someone with at least 15 years experience.   Take some time when shopping for your VA Loan to interview the MLO before you make a decision.

Some key points for you to know when you interview a Licensed Mortgage Loan Originator (MLO) for your VA Loan:

VA Funding Fee is 2.15% of the Loan Amount (and is always financed) for Active Duty Veterans with at least 180 Days active duty. No Funding Fee for Disabled Veterans.

The Funding Fee is different for other service types/periods, including Reservists.

A Veteran can finance 100% of the purchase price of the home.modern home 191

A Seller can pay all of a Veteran’s Closing Costs, and more.

There’s a lot of misinformation out there about VA Loans and your MLO will need to be available to explain and reassure the Seller and the real estate agents of the VA process. For example, many Sellers and/or real estate agents believe that VA Loans take “a LONG TIME” to approve and close. Not true. (My average closing time on VA loans is about 6-8 weeks compared to 3-4 weeks for FHA). They also believe that VA Appraisals ALWAYS slash the value of the house. Not true. I’ve only seen one VA Appraisal come in slightly less than purchase price in the last couple of years, and, in that case, both the Listing Agent and I suspected the value might be tight before. Bottom Line: your MLO has to have clear communication to make it easier for you to negotiate with Sellers when competing against other Buyers with different financing terms.

If your MLO asks you for your DD-214 right away, then you know you’re dealing with someone with experience. You don’t need the Certificate of Eligibility or COE as we MLO’s can obtain that directly from VA on your behalf.

thank you veteransFor a New York Purchase you’ll need some cash for your “Good Faith Deposit” when you sign the contract of sale. It’s the rare Seller who will sign a contract with a Buyer who doesn’t at least put $10,000 on the contract (refundable to the Veteran at closing due to the 100% financing). Not that it’s impossible (I’m working with 3 Veterans right now who have less than $5,000 to put down), but it will require serious negotiating on the part of your MLO, real estate agent, and Attorney.

VA Condos: few and far between because the VA just doesn’t approve enough Condos, so focus on Single Family Homes. Find VA Approved Condos

Two Family Homes: unless you have experience in property management (and can prove it), you’ll have to qualify with your own INCOME for the purchase; rental income will be excluded from the qualifications.

You’ll need a Termite Report but YOU CANNOT PAY FOR IT, the Seller must pay.

We qualify Veterans’ Income two ways: a percentage of monthly gross income, or “Debt to Income Ratio” AND a residual income method which is similar to doing a family budget, so it’s a pretty cool way to qualify you. idyll

 

Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

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Appraisal came in SHORT. WHAT NOW?

In the end, the motivations of all parties to make the deal happen and close the transaction rule the day. Those motivations drive everyone to find a solution and get the deal closed. Or not.

Wow, 27+ years as a Mortgage Banker! I have seen the occasional short appraisal! I started in November 1989 because I wanted to become a Homeowner so I chose a path which would get me there: Mortgage Professional.

Times were tough back in that market.  Interest rates were high and property values had dropped dramatically.  The employment picture for many Americans wasn’t very promising.  There were a lot of foreclosures and homeowners had a hard time refinancing their mortgages due to lost equity.  Sounds very similar to our recent post-meltdown market with the exception of the interest rates (11% in 1989!!!).

I received a valuable part of my education early on in my career as I dealt with purchase transactions where the appraisal came in for less than the purchase price.  Buyers, Sellers and their respective Realtors are all “IN IT TO WIN IT” and make the deal happen.

How you see your house!

I carry that education with me to this day when my HomeBuyer clients ask me at application time, “What happens if the appraisal comes in for less than the Purchase Price?”   I know many HomeBuyers may think it’s a NO-BRAINER: the Seller will automatically reduce the price.  But that is NOT the case right out of the gate.  Here’s what I learned all those years ago about appraisals that come in short:

How the Appraiser sees your house

When the bank appraisal comes in for less than the contract price

there are FOUR ways to proceed with the transaction.

 

  1. The Purchaser comes up with the difference in cash. If the appraisal is less than the Purchase price, the Seller basically assumes the Purchaser wishes to buy the house according to the terms of the contract, including the agreed upon Purchase Price. Therefore, the Seller assumes the Purchaser will come up with the cash necessary to complete the transaction.
  2. The Purchaser and the Seller meet in the middle. The Purchaser comes up with some cash but the Seller also agrees to reduce the price enough to meet the Purchaser somewhere “in the middle.”  Both sides want to complete the transaction and so they work it out.  This is compromise at its best.
  3. The Seller reduces the Purchase Price to equal the Appraised value. This is the least likely scenario, but not an impossible one.  Sellers often want to complete the purchase transaction on the original terms of the contract, including the price. But a determined Purchaser working with a great Realtor, by digging in and working hard to negotiate can often make it happen.
  4. Nothing happens and the deal is cancelled. The Purchaser either cannot or will not come up with the extra cash and the Seller refuses to reduce the price completely or even a little bit to meet the Purchaser.  In this case the transaction is cancelled, the Down Payment is returned, and everyone goes home unhappy.  The Purchaser has to begin all over again and the Seller has to put the house on the market and try to find a new Purchaser.

In the end, the motivations of all parties to make the deal happen and close the transaction rule the day.  Those motivations drive everyone to find a solution and get the deal closed.  Or not.

Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

Check out my Trulia profile HERE

Check out my Zillow profile HERE

Find me on TWITTER: @tcurranmortgage

Happy House Hunting!

5 Steps To Making An Offer To Buy A Home

When you take these formal steps you are demonstrating to everyone involved in the transaction just how serious a Buyer you are. You will set yourself apart from “the crowd” when you follow my method.

There is a deliberate process to making an offer. I include step-by-step instructions on how this works. My instructions will help you get the house you want, even if you are dealing with a difficult Seller, a Bank-Owned property, or if you are competing against another Buyer for the same house.

I have seen these methods work many times over with my clients over my almost 28 year career as a mortgage professional.

My basic methodology here is one of making your Offer a very formal proceeding. When you take these formal steps you are demonstrating to everyone involved in the transaction just how serious a Buyer you are. You will set yourself apart from the crowd. I have seen this method work time and time again for my Homebuyer clients.

5 Steps To Making An Offer:

STEP 1. Always make offers in writing. Yes, it is absolutely true that offers can be presented verbally. Don’t do that. Put your offer in writing every time. Even if you are in a situation where you and the Seller are sending counter offers back and forth, every new offer should be in writing.

When your offer is in writing, you come across to the Seller as serious. Think about it, anyone who is taking the time to go in to the real estate office and sign the form is serious about buying a home.

Include the following into your written offer:

  • * The amount of your “earnest money deposit” or “good faith deposit.” That is the amount of money you’ll put into escrow with the Seller’s attorney upon signing the contract of sale.
  • * The amount of your mortgage financing. Of course you’ll back this up with a prequalification letter, but you must include the amount of your mortgage in the offer.
  • * Items included in the sale. If the appliances and the chandelier in the dining room are to be included in the sale, make sure they are written in to the offer. This shows the homeowner you were paying attention when you inspected the home and asked, “What’s included in the sale?”
  • * Attorney Information: the name and complete contact information for your attorney.
  • * Anticipated contract date. Always make this date within 48 hours of your offer. Present the assumption the Seller will accept your offer and immediately forward a contract to your attorney.

Again, this demonstrates to the Seller how serious you are. You are in effect saying, “I am so serious about buying this home I want to sign the contract immediately!” Imagine how many other Buyers out there are delaying things like signing the contract (and potentially changing their minds).

  • * Anticipated closing date. This is an interesting point for the offer. I always recommend putting the closing date for an offer within thirty days of the contract. The fact is most closings take place within 60 days of contract, and your attorney will most likely change that date in the contract, but if your offer says “thirty days,” once again you demonstrate how serious you are about buying the home.

STEP 2. Prequalification letter. Your mortgage professional should be available to fax a prequalification letter within hours of your making your offer; even on Saturdays or Thursday evenings.

STEP 3. Mortgage pro phone call. I think a phone call from your mortgage professional to the Listing Agent is a home run. When the Listing Agent hears from the mortgage person directly how eminently qualified you are, imagine how that raises your profile in the mind of the agent and the Seller!

STEP 4. Home Inspection ready to go. When you sign your offer, be sure to tell your Realtor that you’ve already spoken with your Home Inspector and you can have the inspection done tomorrow. Whoa, that’s really the mark of a serious Buyer!

STEP 5. Get ready with your counteroffer. If you offered less than the asking price, then you need be prepared with your counter offer if the Seller either declines or counters your opening offer. All of the steps above should be repeated with the new price replacing the original number. Organization and swift responses rule the day! Oh, you may not want to counter offer. That’s okay, too.

Close-up shot of keys in the lock of open door. One key is in lock another hanging on the ring
Unlock the door to homeownership with this method

Do you have questions?  Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

Check out my Trulia profile HERE

Check out my Zillow profile HERE

Find me on TWITTER: @tcurranmortgage

I welcome Comments for all my blog entries.  I will be happy to review and approve all legitimate comments provided by readers of tcurranmortgage.com.  If you wish to Comment on any entry, please do so and I will quickly review and approve.

Good luck and Happy House Hunting!