VETERANS ADMINISTRATION (VA) LOANSRE73R11

Jody OBrien ABR,CBR,GRI

CEU Outline

VA Loan is not a loan from the VA

VA Loan is a guarantee for a loan made by a private lender

VA Loans

• Guarantee ▫ Protects the lender from loss Loss usually covered by down payment or PMI

• www.benefits.Va.gov/homeloans

• Regional Center

• Videos

Benefits of a VA Loan

• No down payment• Buyer informed of reasonable value• No PMI• Assumable• No prepayment penalty• New construction warranty• Assistance in financial crisis

Eligibility

• Active Duty – served longer than 181 days

• Honorably Discharged before 1981 – served 90

(wartime) 0r 181 days (peacetime)

• Honorably Discharged after 1981 – completed

24 months of service

• Gulf War on – served 90 days

Eligibility• Selective Reserve or National Guard – served 6

years

• The unmarried surviving spouse of a veteran

who died on active duty or as the result of

a service-connected disability

• The unmarried spouse of a serviceperson MIA or

POW

Eligibility

• Public Health Service officers

• Cadets at the United States Military, Air Force,

or Coast Guard Academy, midshipmen at the

United States Naval Academy

• Officers of National Oceanic & Atmospheric

Administration

Eligibility

• Certificate of Eligibility • Veteran▫ Online at www.va.gv

• Lender ▫ Online using WebLGY

• List of required documents can be found online in the Eligibility FAQ

Property Types

• Single family

• Multi-family

• Condo – if complex is approved

• Manufactured home – on permanent foundation

• New Construction – with builder VA ID number

Loan Products

• Fixed Rate

• Adjustable Rates

• Buy Downs

• Growing Payment/Growing Equity

Entitlement

• $36,000

• Entitlement + down payment = 25% Value

$140,000 Condo

25% of Value equals $35,000

Entitlement available $36,000

Qualifies for No Down payment

$350,000 Condo

25% of Value equals $87,500

$36,000 Entitlement

$51,500 Down Payment (approx.. 15%)

Entitlement

• Restored when loan is paid

▫ Sale

▫ Completion of loan

• Assumed and substituted with qualifying Vet’s

entitlement

• One time paid but not sold property

Qualification

• Residual Income Guidelines –

▫ the amount of net income remaining (after

deduction of debts and obligations and monthly

shelter expenses) to cover family living expenses

such as food, health care, clothing, and gasoline.

Qualification

• Residual Income Guidelines

▫ Minimum Residual Income very important

$400 - $1000 1-5 member family

▫ In conjunction with other credit factors

• Debt to Income Ratio

▫ max 41%

Funding Fee

• Origination Fee• Factors▫ Type of loan▫ First use of entitlement or reuse▫ Disability▫ Active Duty or Reserve

• Disability can be exempt from fee• Surviving spouse may be exempt

Funding Fee

• Range .5% - 3.3%

• Paid in cash or

• Rolled into loan

Closing Cost

• 1% origination fee• Appraisal• Credit report• Title exam and insurance• Recording fee• Prepaid taxes and insurance• Survey• VA funding fee• Flood zone determination

Closing Cost

• Closing cost may be paid by▫ Buyer / Veteran▫ Seller

• Exceptions▫ No prepayment penalties▫ No penalties to discharge seller’s liens charged to

a buyer▫ No RE commission to Buyer

Closing Cost

Sellers may also pay:• gifts such as a personal property• payment of extra points to provide permanent

interest rate buydowns• provision of escrowed funds to provide

temporary interest rate buydowns, and• payoff of credit balances or judgments on behalf

of the buyer.

Closing Cost

• Sellers concessions do not include closing cost or

points

• Seller’s concessions may not exceed 4% of

Reasonable Value

• Example

• Market rate for a loan is 5% with 2 points• Seller agrees to pay 4 points• 2 points are Seller Concession

Appraisal

• Reasonable Valueand• Safe• Sanitary• Structurally Sound

Appraisal

• Qualification

▫ Licensed/certified appraiser

▫ Five years + experience

▫ 2 letters of reference

Appraisal

Ineligible Property• high voltage electric transmission line easement• Manufactured Home NOT on a permanent

foundation• Unapproved Condominium Developments

Appraisal/Inspections

Ineligible Property • New Construction Condominiums with less than

70% UA • Mixed use zoning with less than 30 years of

economic life

Pest InspectionMod – Heavy by Termite Infestation Probability

All of So Shore

Processing Loans

• VA Approved Lenders▫ Supervised Lenders▫ Non Supervised Lenders▫ Automatic Lenders

Types of VA LendersAuthority Supervised Lender Nonsupervised Automatic Lender

To close loans on the automatic basis

No VA approval needed. Must submit application and be authorized by VA to close loans on an automatic basis.

To use certain underwriters

No VA approval needed. Any of the lender’s underwriters may underwrite loans processed on the automatic basis.

Must submit application and obtain VA approval for each person to underwrite VA loans processed on the automatic basis.

To close loans in particular states

No VA approval needed. Lender may close loans in any State.

No VA approval needed. Lender may close loans in any State.

To use agents to process VA loans

Must submit request and obtain VA recognition of each agent with whom the lender has an ongoing relationship.

Must submit request and obtain VA recognition of each agent with whom the lender has an ongoing relationship.

Processing Loans

• Appraisal▫ Reasonable Value▫ May be appealed by lender, buyer or seller

• Title▫ Reviewed by VA

• Lenders Must retain paperwork for two years

VA loans help our Veterans achieve the American Dream of Home Ownership

Jody O’BrienThe RE/Education Company

Committed to Professionalism in Real Estate through Education

Blogwww.reeducator.wordpress.comPresentationwww.slideshare.net/ReEducationCompanySocial Mediawww.twitter.com/reeducatorwww.youtube.com/msreeducatorwww.facebook.com/reeducatorwww.linkedin.com/in/reeductor

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