VA Loan Pro's and Con's

[Chancy949]

Can anyone tell me what they are?

We tried to use it last summer but our credit wasn't good enough. I think our credit is ok now.

What would make it so we couldnt' use it?

[tripeclipse]

The VA Loans are special because of the fact most lenders do not require a down payment to purchase. Also, 60% of the loan is guaranteed by VA, up to $36,000. So you are assured of no losses if the market value of your house fall is less than $36,000

[Chancy949]

do you know about credit issues and using the VA?

[tripeclipse]

From my understanding,

you would need at least a 620 mid-FICO to qualify for most VA programs.

Also depending on what area you are purchasing in, you may be able to get more of a guaranteed percentage.

[Chancy949]

the mortgage lady said something about you couldn't have collection accounts.

or no lates in the last 2 years.

any idea if this is true?

[tripeclipse]

the mortgage lates make sense. The collections... well that doesn't make so much sense, however, some programs may not allow collection accounts. I know that any serious derogs on your credit report hampers your chances of getting a good rate on a good loan. Too bad my brokerage doesn't deal with VA loans otherwise I would be shopping one for you right now.

[Chancy949]

we dont have any mortgage lates.

the mortgage lady we talked to last summer said something about having a late payment in the last two years.

Not sure.

[Chancy949]

Actually this will be our first time buying a home.

[tripeclipse]

so basically it sounds like you are having problems with lenders assessing your credit risk. Some lenders will be more "tight", while others may not be. I would definately shop around with 3-4 brokers to get the the best you can.

[Chancy949]

she said it was the VA not the lender....that had the rules. thats why i asked the question.

thanks for your help.

[Chancy949]

she said it was the VA not the lender....that had the rules. thats why i asked the question.

thanks for your help.

[tripeclipse]

try this site. It might list some other lenders in your area.

http://www.vba.va.gov/ro/Roanoke/rlc/E-Lenders.htm

I'm sorry I couldn't help more.

I'm looking at the VA website now to see if there is anything about credit qualifications.

http://www.va.gov

[Chancy949]

Thanks. I have a lender I think I'm going to work with. I just wanted to see if she's going to give me the same answers that I get from the board. I know with the VA they can't charge some fee's, and I'm wondering if she's trying to stear us away from it so she can make more fees.

Just a though.

THANK YOU so much for your help!!

[firstsource]

There are some upfront fees that non-government loans don't have, so sometimes it is cheaper upfront to go non-goverment, on the initial costs.

What you should do depends more on your credit scores. Rule of thumb is that as long as you don't have any collections/judgments/charge offs, and your scores are still low, you can do much better with government (VA-FHA)

It is when your scores are ok, and you have collections, that sub-prime comes into the picture.

Rates are finally starting to go up on sub-prime, most of the ones I work with went up between .1 and .15 Monday, that is not much, but if it is a trend rates will be and important consideration.

The government/s control the indexes that the sub-prime and ARM markets are based on, the market controls the long term, either conventional or goverment type loans.

Charles

[amortgageman]

Thanks. I have a lender I think I'm going to work with. I just wanted to see if she's going to give me the same answers that I get from the board. I know with the VA they can't charge some fee's, and I'm wondering if she's trying to stear us away from it so she can make more fees.

Just a though.

THANK YOU so much for your help!!

I would certainly hope that you get different answers than what has been given you so far. (Except Charles')

VA guarantees 25% of the loan amount, not 60%. It does not require a 620 credit score either! (VA does not have a credit score minimum)

VA credit requirements are very similar to qualifying for an FHA mortgage. You should have a good rental history with no lates in the previous twelve months. All your credit obligations should be current. If there is a past history within the past twelve months, and they are minimal, then you should prepare yourself to have a "letter of explanation," as to why you were late, what you have done to correct the situation to prevent the late payments fromm happening again. It is not set in stone, that your credit has to be spotless for two years prior.

Unpaid collections, judgments, and chargeoffs would be the biggest obstacle to obtaining a VA loan. If you are clear of these and have no defaulted government debt, then approval should be obtainable. As long as you have made payment arrangements and have been paying on a collection or judgment, and can show proof, you are still in the clear. Again, if any of these things are on your crdit report within the last two years, you may have to supply a letter of explanation.

Charles mentioned that there is an "Upfront VA Funding Fee," which is true. This fee may be financed into the loan amount. There is no monthly fee assessed on VA loans (There is with FHA). VA will also allow for the seller to pay all closing costs, and will lend to 100% of the value on the home purchase price. VA funding fee canstill financed on top of the 100% loan to value. Short of having a twenty percent down payment, and good credit scores, you will almost always come out ahead utilizing your VA benefits.

One of the other reqirements of a VA purchase, is the VA appraisal itself. It is a little more stringent than other appraisals. If there are foundation defects, or broken windows, or a host of other defiencies in the home, it will not pass the VA appraisal process, without an agreement to repair from the current homeowners.

VA (and FHA) also have some special provisions that "safeguard" your home in the event that you fall behind, due to unfortunate circumstances in the future (which is one of the reasons I recommend using them). There is nothing more shocking than receiving a letter in the mail from some of the subprime servicers on the 31st day, of a notice to accelerate and foreclosure warning notices. Both FHA and VA have clauses that allow the consumer to work out of life's little jams. I have witnessed a borrower that was actually nine months down on his mortagage and still was able to prevent foreclosure with an FHA loan. The lender was forced to place the default amount to the end of the loan and refinance to a new mortgage (Required).

[tripeclipse]

I would certainly hope that you get different answers than what has been given you so far. (Except Charles')

VA guarantees 25% of the loan amount, not 60%. It does not require a 620 credit score either! (VA does not have a credit score minimum)

Barron's California Real Estate Exams- By J. Bruce Lindeman, Ph.d. and Jack P. Friedman, Ph.D. CPA, MAI - Copyright 1995 - Part.I Pg. 18, "GI Loan / Home loans guaranteed by the U.S. Veterans Administration (VA) under the Servicemen's Readjustment Act of 1944 and later; also known as the VA loan. The VA guarantees restitution to the lender in the event of default. Importance: The VA guaratees 60 percent of the loan, up to $36,000. Lenders are assured of no losses, provided the property's market value decline is less than $36,000; consequently, most lenders do not require a down payment."

The 620 FICO score is a quote from another Loan Officer that acutally has had a VA Loan.

If I am still wrong, then I am just wrong from what I read.

[Chancy949]

Thank YOU!!

We have a perfect two year rental history NO LATES!! and a few small collection accounts that we medical 85, 56 208. One charge off from Providian but it says purchased by another lender.

No judgements. no defaulted loans.

[tripeclipse]

amortgageman derived the 25% max from the maximum amount guaranteed divided by the maximum Loan Amount.

Which is $89,912/$359,650=25%

It really depends on what your loan amount is.

[bf9868539]

I closed on a VA loan this past September.

From my experience I think it worked well. Here is what I learned:

On a VA loan the lender only pulled EQ

-As long as you have no open collections or judgements etc. and have had a good payment history for the last 12 months you qualify.

I had a BK in 2002 and had got 5.38% mortgage rate, I really could not complain. It seems it was easier to qualify, since I did not have 20% down to do a 1st and 2nd or pay mortgage insurance. I felt the VA funding fee was acceptable as it, was cheaper than monthly mortgage insurance payments. Overall I think it is a GREAT program

[Chancy949]

THANK YOU!! That answered my question! Who was the lender can I ask? My mortage lady keeps pulling all three.

[bf5169698]

I used discover mortgage in Vancouver, Washington the guys name was Floyd

[amortgageman]

Barron's California Real Estate Exams- By J. Bruce Lindeman, Ph.d. and Jack P. Friedman, Ph.D. CPA, MAI - Copyright 1995 - Part.I Pg. 18, "GI Loan / Home loans guaranteed by the U.S. Veterans Administration (VA) under the Servicemen's Readjustment Act of 1944 and later; also known as the VA loan. The VA guarantees restitution to the lender in the event of default. Importance: The VA guaratees 60 percent of the loan, up to $36,000. Lenders are assured of no losses, provided the property's market value decline is less than $36,000; consequently, most lenders do not require a down payment."

Sorry, they gave you the wrong information (both of them).

From the VA lending Guide:

The Veterans Benefits Act of 2004

1. PURPOSE: S. 2486, the Veterans Benefits Act of 2004, was signed by the President on December 10, 2004. A Public Law number has not yet been assigned. This circular explains provisions affecting the Loan Guaranty Program.

2. BENEFIT CHANGES

a. Maximum Guaranty Amount. The law changes the maximum guaranty amount of $60,000, for certain loans in excess of $144,000, to an amount equal to 25 percent of the Freddie Mac conforming loan limit determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for a single family residence, as adjusted for the year involved. To illustrate, the maximum guaranty for 2005 would be $89,912. This is 25 percent of the 2005 Freddie Mac conforming loan limit for a single family residence of $359,650. Under Freddie Mac’s charter, maximum original loan amounts are 50 percent higher for first mortgages on properties in Alaska, Hawaii, Guam and the U.S. Virgin Islands. This higher amount would also apply to VA loans in these areas.

There is no guarantee that the lender cannot lose money, but the Guaranty amount provides for a cushion to 25% of the loan amount. If there were a case where the resale of a foreclosure resulted in an amount of less than 75% of the loan amount, the lender would lose money. (Unlikely, but it could happen.)

Again, minimum credit scores are not required for a VA loan. It is based on overall credit.

Chancy,

You may be required to pay the medical cllections to qualify, but I would wait on an underwriters orders to do so (Sometimes, there is leniancy towards medical collections). The Providian account could also be a problem. Since they sold the account, your credit report should show zero balance (which would be OK). Just be sure that the unpaiid collection account does not show up anywhere else. Paying the $349.00 in medical collections will stil be well worth it to get a good interest rate on your home purchase.

[xena0608]

OK... here is my question... You all know by now that I have crappy credit -- LOL and am trying to get a mortgage. I am currently working with the 3 credit agencies to get it fixed... (actually have increased my scores through equifax/experian from my dispute letters... Transunion doesn't wanna hear a thing... and they haven't removed anything either... so I am in the process of my 2nd letter to them... Anyway... my b/f is a veteran (air force for 8 years)... and his credit is so/so. We currently rent a home in pennsylvania and pay $1200.00 rent... how do we prove this on our credit reports?... Im sure it would help us!

[Chancy949]

you don't. You can get a letter from your landlord saying that you have paid $XX.XX for so many months, and give it to your mortgage broker, but it will NEVER go on your credit report. If you find away I'd LOVE to know. Collection agencies claim that they MUST report your bad debt because it is the only way to show a lender your potential credit risk. and to not report doesn't show the whole picture. this is BS. because let me tell you, You could rent for 2 years and have a perfect pay history. It will NEVER report. If you move, and don't give a 30 day notice, that balance WILL be reported. HOW is that fair? how does that show a true and accurate credit risk? It doesn't. Sorry for the rant, this is just my pet peeve with the credit reporting system.

[firstsource]

Re the comment on "getting a letter from your landlord". If it is being used to satisfy the condition of proving rental history, then it has to be from a "property management" type company. can be

1) An apt complex

2) If the owner of the house has a number of homes, and rents them our "for a living"/"as a business", then normally the lender will want

A) verify that the company is listed in the yellow pages under property management or has a phone book listing

is a realtor company etc.

There are SOME lenders that will allow a "letter" from a private individual, but all of those programs are different. I only deal on the wholesale side, and know that there are different programs available to brokers than to consumers.

I hope that helps, but here is some free advise. Pay your rent by check, and either pay the extra to get your checks back, or bank with someone that has image checks on line. If you depend on other people to keep your records for you, and the office burns down, or company changes hands or .... you might have a major problem

Charles