VA loans category archives

Service members with a Freddie Mac-backed mortgage and who are released from active duty through 2011 have some breathing room in terms of foreclosure.

The government-sponsored mortgage loan purchaser announced Friday that its servicers will stop foreclosures for at least nine months for eligible service members. The goal is to help service members who are struggling to make payments get back on their feet.

“Our military make sacrifices every day to protect our homes and families,” Anthony Renzi, executive vice president of Single Family Portfolio Management at Freddie Mac, said in a news release. “This small act will protect financially troubled service members when they return from active duty by giving them more time to work with their lender to stay in their home.”

The temporary foreclosure stay only applies to military members whose mortgages are owned by Freddie Mac. The company doesn’t issue loans to individual borrowers. Instead, it purchases mortgages on the secondary market.

Service members who are in need of a financial lifeline should contact their mortgage servicer immediately.

The announcement comes on the heels of a mortgage relief measure from Fannie Mae earlier this fall.

Fannie Mae said in September that it would cut back or simply suspend mortgage payments for up to six months for military families hit by financial hardship after the injury or death of a service member.

Service members with VA loans can also contact their nearest regional VA loan center to discuss mortgage relief options.

To learn more, service members can visit Freddie Mac’s page on special options for service members.

If you are some sort of Veteran, VA loans can be an excellent way to purchase your new home.  What is great is that if you are buying a home that could be upgraded in regards to energy savers, you can certainly do this with your VA loan. It is called a VA energy efficient mortgages. Congress started a pilot program in 1992 demonstrating the use of energy efficient mortgages, known as EEM’s. And the Veterans Administration added this to their arsenal of VA loans.

Energy efficient loans can be very effective, unless you are having an energy efficient home built.  If you have an older home, it probably won’t be up to current standards, which could cost you hundreds of dollars monthly.

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Explaining how Energy Efficient Mortgages work for VA loans?

On Va loans, it can be increased up to $6,000 in energy costs without the approval by the VA, as long as the lender thinks the improvements are reasonable. If the costs are over $6,000, it must be supported by an increased valuation in an equal amount.  Here are the different levels of increases.

Directly from the VA handbook, the mortgage may be increased :

• up to $3,000 based solely on the documented costs
• up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs, or
• more than $6,000 subject to a value determination by the VA.

The buyer may wish to contact a person or a firm to show such energy improvements. As I mentioned in my FHA post, you can also contact your local utility company for these services.

Acceptable energy efficient improvements, but are not limited to :

• solar heating and cooling systems
• caulking and weather stripping
• furnace efficiency modifications limited to replacing burners, boilers, or furnaces designed to reduce the firing rate or to achieve a reduction in the amount of fuel consumed as a result of increased combustion efficiency, devices for modifying flue openings which will increase the efficiency of the heating system, and electrical or mechanical furnace ignition systems which replace standing gas pilot lights
• clock thermostats
• new or additional ceiling, attic, wall and floor insulation
• water heater insulation
• storm windows and or doors, including thermal windows and or doors
• heat pumps
• vapor barriers

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Reminder : There are special and certain tax credits both nationally and locally. For tax purposes, there is a $1,500 tax credit until the end of the year. Not sure if the government is going to extend this. There are also state credits and sometimes credits given by your utility companies. Just be careful though, because sometimes you have to use those they recommend when doing the energy inspection report.

Keep in mind, the VA energy efficient loans are a little different than FHA energy efficient loans when calculating what the amount of energy costs that are allowed to be financed. And these EEM’s for VA loans can be used for both purchasing a new home or refinancing your current home.

Please consult Part 1 for the chart, giving you an idea of your monthly savings if you add $6,000 of costs onto your mortgage regarding the energy efficient mortgages.

Energy Efficient Mortgage Series

Energy Efficient Mortgages – EEM loans – Part 1 of 2 – FHA loans going ‘Green’

Energy Efficient Mortgages – EEM loans – Part 2 of 2 – VA loans going ‘Green’

The VA does an amazing job of keeping veterans in their homes.

Nearly three-quarters of the VA borrowers who defaulted in fiscal year 2009 avoided foreclosure thanks to the agency’s policies and procedures.

But the Department of Veterans Affairs also operates a unique program that helps veterans who are trying to sell their homes in a difficult real estate market.

Home values have fallen drastically in some parts of the country, leaving some service members with a significant chasm between what they can sell their home for and what they still owe on their mortgage loan.

The VA’s Compromise Sale program helps veterans who have seen their home values collapse recoup and rebound. Through this program, service members can receive a “compromise claim” from the VA that essentially covers that gap between the sale price and their outstanding loan balance.

There’s an array of conditions that need to be met for service members interested in a compromise sale. Among them:

• Sellers must document financial hardship
• No second liens can exist
• There must be a purchase agreement in place before a compromise application is filed
• The pending sale must be a better deal financially for the government than a foreclosure

Homeowners will need to furnish a current appraisal. They’ll also need to prepare for a reduced entitlement, at least until the VA is reimbursed for the sale.

Veterans can learn more about the Compromise Sale program by contacting the VA at 1-800-933-5499. The agency’s regional loan center in Houston also maintains a helpful page on Compromise Sales.

Image: Eric Beato

The VA Loan Guaranty program has some of the most potent home-buying benefits around, chief among them the ability of qualified service members to purchase with no money down.  But few civilians are aware of a little-publicized program that allows them to purchase VA foreclosure properties using many of the same benefits provided to American service members.

It’s called the Vendee Financing Program. Some of the nation’s veteran-owned homes that wind up in foreclosure enter a pool of properties open to non-veterans through this program.

Civilian borrowers interested in purchasing these properties enjoy the same types of financial benefits as their veteran counterparts. This program has long been a favorite of real estate investors, who can purchase multiple properties using this program. But it’s also a great way for prospective home buyers to maximize their purchasing power.

Here are some of the Vendee Financing Program’s biggest benefits:

• Low and even no down payments on owner-occupied properties
• No private mortgage insurance or mortgage insurance premiums
• Sellers can pay up to 6 percent of the sale price to cover closing costs and other qualified expenses
• No prepayment penalties

Prospective borrowers can secure fixed-rate loans at both 15- and 30-year terms. Just like most VA borrowers, civilians who utilize the Vendee Financing Program are required to pay a Funding Fee to the agency (in this case, it’s currently 2.25 percent of the loan amount). Borrowers in most states will have to put up some earnest money, too.

As far as the VA is concerned, credit scores and appraisals are generally not part of the underwriting process. The VA is typically more interested in verifiable income to help ensure consistent repayment. But lenders who engage in this type of financing will certainly take a closer look when it comes to underwriting — they can apply degrees of scrutiny beyond what the VA mandates.

Consumers can go online to search for Vendee homes in their area.

Image: Eric Beato

Mortgage behemoth Fannie Mae is teaming up with the Armed Forces to provide mortgage relief to military families struggling to pay their bills.

The company announced this week it would reduce or suspend mortgage payments for up to six months in cases where the death or injury of a service member created a financial hardship. Fannie Mae also plans to suspend credit reporting during that span to help curb negative impacts on a borrower’s credit profile.

“The men and women of our Armed Forces have shown extraordinary commitment to our country while facing unique challenges as a result of their service,” Jeff Hayward, senior vice president of Fannie Mae’s National Servicing Organization, said in a news release.  “No family impacted by a death or injury in the line of duty should have to face the additional burden of foreclosure as a result of the hardship.  We want to do all that we can to provide support to these families at a time of need as we honor their sacrifices and service to our country.”

Military families can contact their mortgage company or utilize Fannie Mae’s dedicated Military Support Hotline at 1-877-MIL-4566 to learn more.The Washington-based mortgage company has also built a new online resource for consumers. The site is KnowYourOptions.com.

Fannie Mae also plans to disseminate printed materials about special forbearance programs on military bases across the United States.

Military officials lauded the push to provide mortgage relief to American service members and their families. The plan is open to all borrowers, not just those with VA loans.

“We who serve alongside our military recognize the great sacrifice they and their families make each day,” Katherine Hammack, assistant secretary of the Army (Installations and Environment), said in a news release. “The initiative between Fannie Mae and the lending community recognizes their sacrifice and demonstrates our gratitude for those who face economic hardships as a result of their service.  We are profoundly grateful for this heartwarming response from the lending community as they become partners in designing and implementing this initiative.”

Image: Nieve44/La Luz

A pair of Congressmen have introduced legislation aimed at helping America’s veterans avoid homelessness in the wake of foreclosure.

The “Veterans’ Homelessness Prevention and Early Warning Act of 2010″ would require the Department of Veterans Affairs to contact one of its homelessness case managers within a week of a VA loan going into default. In turn, that case manager would be required to craft a plan to prevent the borrower from winding up on the streets.

VA loans remain the safest loan program on the market, with a default rate well below that of FHA and even prime loans. But foreclosures do occur and, in fact, have risen from 8,113 in 2007 to more than 15,000 in 2009.

“American heroes living on the streets, out of cars and on the couches of family members is a disgrace. These men and women fought for our country and we must do everything we can to address their unique needs, which all too often are a contributing factor in homelessness amongst this population,” U.S Rep. Tim Walz (D-MN), one of the bill’s sponsors, said in a news release. “One way we can begin to rectify this situation is by addressing homelessness before it happens.”

Under this bill, the Veterans Affairs department would have six months to come up with a plan and procedures for implementation. Regulations would have to be in place within a year of the bill’s enactment.

The bipartisan legislation was co-sponsored by U.S. Rep. John Boozman (R-AR).

Image: respres

Did you know that you can get a VA Home Loan over the $417,000 limit? With Mortgage Insurance rates for jumbo loans being so high, a “VA Jumbo Loan” might be the most affordable option!

VA Home Loans require that the Veteran make a down payment equal to 25% of the Balance over $417,000. This means that if the Sales Price on a property is $550,000 the calculation looks like this:

$550,000 – $417,000 = $33,250  That means you are making about a 6% down payment!  In addition to this, there’s no monthly PMI. On a Jumbo Conforming loan (where you made a 10% downpayment) your mortgage insurance premium could be $317.00 a MONTH!

With a VA Home Loan, the funding fee would be 1.5%.  This means on our $550,000 sales price, with a loan amount of $516,750 the Funding Fee adds less than $45.00 a month to your payments!! WOW!

Every situation is different – but if you qualify we would strongly suggest that you consider a VA home loan for your next purchase!

Since the bursting of the housing bubble, we’ve seen the mortgage industry flood to government-backed mortgages as a source for home lending, and it makes sense.

Government backed mortgages were created during the Great Depression to help the housing market.  Lenders didn’t have money to lend, the housing market was in decline and nobody trusted the banks that were holding their deposits.  Sound familiar?

FHA loans were the first government backed mortgage introduced in 1934 as one of the many government solutions to the Great Depression.  It is the only government backed mortgage that is available to the entire marketplace (VA loans are for qualified military veterans while USDA loans have an income limit and are for designated “Rural” areas only).  FHA has seen a 500%+ increase in market share from 2006 to 2010 from 3.77% to 19.73%.  The funding for these programs have become more limited, with FHA announcing problems with funding in late 2009 and USDA mortgage funds reported low funds before the end for the first quarter (funds are now available).

The government knows the importance of these loan programs.  Their very existence of FHA was to help the housing market during the worst economy in our country’s history.

Read the rest of this entry »

Today’s Mortgage Definition is: VA Loan Certificate of Eligibility

VA Loan Certificate of Eligibility — A Simple Definition:

The VA Loan Certificate of Eligibility is a key ingredient to getting a VA loan which is very popular with people who are Military Active Duty, Reservists, Veterans, and their immediate families.  Simply put – if you can’t get a VA Certificate of Eligibility, you can’t get a VA loan.

VA Loan Certificate of Eligibility — An Expanded Definition:

There is a long list of potential people who could get a VA loan – but rather than break those out, I can offer a simple rule of thumb:

If you are in the military or have served in the military, or you are a spouse or a dependent of someone who was or is in the military you may be eligible for a VA loan and a Certificate of Eligibility.

You can visit the Dept of VA website to check military service requirements for VA loan eligibility.

From a more technical standpoint, the VA loan eligibility certificate is called Form 26-1880 and you can get it directly from any VA regional center, or you can get it online at the Veterans Information Portal.

Most VA lenders can also help you with getting your certificate if needed.

The certificate does not say that you are qualified for a VA loan, it simply means that you are eligible for a VA loan.

To qualify for a VA loan you will have to apply and qualify for it with a VA lender. It is during the application process where you will need to prove your eligibility for a VA loan with your certificate.

Lastly, the Certificate of Eligibility informs your VA lender what loan amount you are eligible to get which is based on your level of military service. In general, full eligibility without a down payment will get you up to a mortgage amount of $417,000. If you are eligible for the full amount and you don’t borrow all of the $417,000 in one mortgage, it is possible to get another mortgage on another property if you meet certain qualification requirements.

For more specific details on this, or other items relating to the VA Loan Certificate of Eligibility, you can speak to your loan officer.

It’s getting a little tougher to secure a VA loan these days.

These government-backed loans remain one of the most flexible lending options on the market. But the underwriting scrutiny that’s swept across the conventional landscape has certainly hit home among VA lenders.

Veterans and active duty service members with a credit score below 610 are finding it increasingly difficult obtain financing. On top of that, military borrowers are encountering some big changes when it comes to the VA’s no-frills refinancing option, the Interest Rate Reduction Refinancing Loan, better known as a VA Streamline.

VA Streamlines have long been a favorite of veterans because of their simplicity. The VA doesn’t require credit checks, underwriting or appraisals on these, which exist solely to help veterans refinance into lower interest rates. But what the VA requires and what lenders demand are now two very different things.

Today most lenders are scrutinizing credit scores and other financial data for Streamlines. Veterans are now paying for appraisals. Lenders are casting aside borrowers whose loan amount exceeds their appraised value, according to a recent New York Times story.

It’s a tough time for military borrowers with borderline credit. Keeping a close eye on spending, debt and credit usage is increasingly important for veterans and their families.

Image: Antonin Remond