By Paul Chandler
With all of the news about changing programs, disappearing programs, a new emphasis on FHA and more stringent underwriting guidelines, little has been said about the VA program. And that is because few changes have affected it. Some lenders may use a pricing adjustment for those with credit scores below 600. However, little else has changed. There is still no down payment required. The seller can pay the closing costs and the pre-paid expenses. Fixed rates account for the vast majority of VA loans issued. And they take no longer to process than any other type of mortgage.
VA still assigns the appraisers on a rotational basis. There are two types of appraisals. One is the traditional appraisal which is sent to the Department of Veterans Affairs to issue a Notice of Value which is then forwarded to the lender. The second is one that is sent directly to the lender which has underwriting authority for the appraisal. These are known as LAPP lenders and up to a week can be shaved off the processing time if you are working with a LAPP lender.
Manufactured homes are allowed under the program, but not all lenders will do loans secured by them. If you are considering purchasing one, you should make sure your loan officer is aware of the property type right away. The last thing you want to have happen is an appraiser asking the lender if they knew the property had manufactured housing on it.
A one time VA funding fee is paid in lieu of monthly PMI on most VA loans. Only those exempted from it by virtue of receipt of service-connected disability will not need to pay it. It can be financed into the loan. Often the total monthly payment is less with VA, even without the down payment. Repeat uses are allowed, but the fee is higher for the repeat use. This is a benefit extended to veterans & their spouses. Non-married parties must also have eligibility to avoid the need to put a 12 ½ % down payment into the transaction.
VA actually has a family support requirement as a part of the dual qualifying used in the loan approval process. This is a great feature as it protects the veteran from getting overextended. If the family support requirement is not met, it does not matter what the ratios are in qualifying. Income taxes, child care, social security taxes and utility and maintenance costs are all considered.
For those with a VA loan in place already, the Interest Rate Reduction Refinancing Loan is a great way to save money when rates are dropping. If the loan is current, no appraisal is required and re-qualifying is not needed. Closing costs can be rolled into the loan. A two week closing period is not unheard of with this type of loan. You should save at least 1% on the note rate WITHOUT PAYING POINTS OR ORIGINATION FEE in order to make this worthwhile.
The VA home loan program is a benefit that has been around since the 1940s. It is often forgotten. But it has helped many veterans to purchase a home. And it could help YOU.
Paul Chandler, Certified Mortgage Professional, is the Newport Branch Manager for Universal Mortgage Corporation. He graduated from the University of Maine’s business school in 1979 and has been in the financial services industry ever since. Since 1991, he has exclusively been involved in mortgage lending, moving to the Newport area in 1993. He also authors a blog at http://www.misterva.typepad.com. He also has been a contributor to Mortgage Originator Magazine. If you have a mortgage related question, please call 334-1999.
