Basic Military Residential Home Guide

Transcription

1 Basic Military Residential Home Guide A Guide To Owning A Home Through The VA Home Loan Program T.Booker Real Estate Services Tarrant Alexander Booker REALTOR CMRS Office: ext.5215 Cell: Fax: tarrant.booker@kw.com 40 S. Cedar Crest Blvd Allentown, PA Each Office is Independently Owned and Operated

2 Contents 3 - Introduction to CRMS 4 - Meet The CMRS Agent 5 - VA Loan Credit Score Requirements 6 - Why Consider A VA Home Loan First 7 - What is a VA Home Loan Guaranty 9 - Obtaining Your VA Certificate of Eligibility 10 - Why Work With a Local Mortgage Lender 11 - What Is A VA Loan Pre-Approval Letter 12 - Questions to Ask Before Buying Your First Home

3 The objective in offering the Certified Military Residential Specialist Program is to provide a platform whereby Real Estate Professionals can be trained and equipped to handle with excellence the home purchase needs of active duty and former military clients. Why would a real estate professional consider training to provide veterans with a more professional and positive real estate experience? One reason is this is a way to honor the men and women of the United States military and their families, for their service to our nation, and to fulfill the obligation we have to each and every one of these heroes for the freedoms we enjoy. Another reason is that the men and women of the military are often a targeted population with some businesses cheating, scamming, and over billing. Many are young, financially inexperienced, and transient, unaware of dishonest businesses. Some of the challenges faced today by active duty military are: Never has so long a conflict been fought by such a small percentage of Americans. Repeated deployments Higher rate of suicide Higher rate of divorce Higher rate of unemployment Higher rate of homelessness Post-Traumatic Stress Disorder Traumatic Brain Injury Depression The invisible wounds of war This is an opportunity to become a watchdog for the warrior by pursuing excellence in serving the home purchase needs of military clients. Page 3

4 "I will make it my duty to help my fellow soldiers" Rank: E-4 Specialist MOS: 63G Fuel and Electronic System Repairer Certified Mail Clerk Basic Training: Ft. Leonardwood, Missouri AIT: Aberdeen Proving Grounds, Maryland Duty Stations: Cco. 702d Infantry Division, Camp Casey Korea, Toung Do Chun 548th FSB Mountain Division, FT. Drum, NY My duties as a Realtor is to help my clients with the process of home selling and buying and educate them so that they can make the right decisions that will suit their needs, and to provide a service to Military personnel a service from which I was Certified as a Military Residential Specialist. From Soldier to Soldier I will make it my duty to help in the home buying process! Page 4

5 For a qualifying veteran, your VA home loan eligibility is an amazing benefit you should be using! VA offers the best financing option along with the lowest interest rates whether you re a first time home buyer or a home buyer looking to use your VA eligibility once again. If you re concerned about past credit issues and whether or not you will qualify based on VA credit score requirements, let me first tell you to breathe a sigh of relief. VA is very lenient when it comes to your past credit history and offers far more flexibility in regards to a previous bankruptcy or foreclosure. While VA does not have a minimum credit score requirement, most lenders are able to set their own individual guidelines for VA loan requirements. Consequently, you will find that most major banks or lending institutions have set the minimum credit score requirement at 620. In the last several years eligible veterans and military personnel have enjoyed an easier mortgage process than what was available to many home buyers attaining conventional or FHA loans. Unfortunately, the meltdown within the mortgage industry coupled with increased losses due to loan defaults has prompted lenders to make this process a bit more complex. Since early 2010, many lenders in the U.S. have tightened their lending and credit score requirements, making VA loans harder to qualify for. These requirements have also impacted the VA Streamline Refinance program. Previously, borrowers who already had a VA loan were able to refinance into another VA loan without an appraisal. Although this is no longer the case, it still allows veterans to take advantage of lower interest rates while providing significantly less paperwork to the lender. VA loans are one of the last remaining 100% mortgage financing options. The good news in that is this: VA borrowers default significantly less (2.6%) than borrowers in general (3.4%). Even so, according to the Federal Housing Finance Agency, the credit scores of VA insured borrowers are generally lower than other borrowers. All things considered, VA loans remain a terrific opportunity. Veterans and active duty military personnel who qualify can often secure a low mortgage rate and meet the VA loan requirements even if their credit score is less than perfect. In addition, about 25% of applicants such as disabled or retired veterans qualify for an exemption from the funding fee or what is considered a one-time insurance fee. That fee can really add up when you multiply the 0.5% 3.3% by the loan amount. Page 5

6 If you are a veteran considering a home purchase, you may wonder where to begin. Your first step is loan approval. A common misconception is that VA loan approval is done directly through the Veterans Administration. This is not the case. You must qualify through a VA Guaranteed lender such as a bank, mortgage lender, or savings & loan company. Once your VA loan is approved by your lender, VA will guarantee a portion of the loan amount to the lender. The guarantee insures the lender against default. This means that if you were to default and your lender foreclosed against your property, they would be guaranteed against a percentage of that loss. However, there are certain items the VA does not guarantee: You will be asked (not required) to complete a home inspection since VA does not guarantee that the home is defect free. Order a builder to fix defects in your home if you had a house built. Guarantee that a veteran is making a good investment. Provide veterans with legal services. One of the amazing benefits of a VA loan is a VA borrower s ability to qualify with no money down. A VA home loan is one of the last remaining zero down payment loans which means you can purchase a home with little to no money out of your pocket. Additional Benefits of a VA Loan: Any qualified veteran or current military personnel has equal opportunity to be given a VA loan. 100% financing is often available. Buyer is notified of appraised value. VA will assist borrowers in case of default due to financial difficulty. The VA funding fee can be financed into the loan amount. Closing costs comparable (possibly lower) to other financing types. Interest rate can be negotiated. An assumable mortgage. Ability to prepay without being penalized. For houses appraised by the VA during construction, builder-provided warranty and help from the VA in acquiring builder cooperation. No mortgage insurance required. Qualify for a VA Loan Whether you have used your VA eligibility previously or are using your VA benefits for the first time, we would love to help you understand the unique advantages of a VA Home Loan. Start using your VA Benefits and be on your way to owning a home of your own. Page 6

7 WHAT IS A VA GUARANTEED LOAN? A VA-guaranteed loan can be used to: Buy a home, either existing or pre-construction, as a primary residence Refinance an existing loan BENEFITS OF A VA GUARANTEED LOAN: Equal opportunity for all qualified Veterans to obtain a VA loan Reusable No down payment (unless required by the lender or the purchase price is more than the reasonable value of the property) No mortgage insurance One time VA funding fee that can be included in the loan 1 Veterans receiving VA disability compensation are exempt from the VA funding fee VA limits certain closing costs a Veteran can pay Can be assumed by qualified persons Minimum property requirements to ensure the property is safe, sanitary, and sound VA staff dedicated to assisting Veterans who become delinquent on their loan WHO IS ELIGIBLE? Generally, the following people are eligible: Veterans who meet length of service requirements Service members on active duty who have served a minimum period Certain Reservists and National Guard members Certain surviving spouses of deceased Veterans Note: There are other groups of individuals who may be eligible. To determine your eligibility, contact VA Eligibility Center at [Continued] Page 7

8 [Continued] KEY UNDERWRITING CRITERIA: No maximum debt ratio; however lender must provide compensating factors if total debt ratio over 41%. No maximum loan amount; however, VA does limit its guaranty; Veterans can borrow up to $417,000 without a down payment in most of the country. Find out the limit in any county. Published residual income guidelines to ensure Veterans have the capacity to repay their obligations while accounting for all living expenses. No minimum credit score requirement; instead VA requires a lender to review the entire loan profile to make a lending decision. HOW DO I START THE PROCESS? VA provides policy, guidelines and oversight of the program. Lenders provide financing for eligible Veterans. The guaranty allows Veterans to obtain a competitive loan without a down payment. Lenders need a Certificate of Eligibility (COE) to prove your entitlement. Most Veterans can obtain the COE online through ebenefits. Lenders also have the ability to request the COE on your behalf. VA encourages prospective buyers to talk to several lenders to find one that fits their needs, knows the VA loan program, and offers competitive rates and terms. CAN VA HELP IF I M HAVING TROUBLE MAKING PAY- MENTS ON MY EXISTING LOAN? VA Loan Technicians are trained to help Veteran borrowers retain their homes and avoid foreclosure. Please call toll-free to speak to a VA Loan Technician. Note: The VA appraisal is not intended to be an inspection of the property. A Veteran should get expert advice from a qualified residential inspection service before legally committing to a purchase agreement. Veterans are also encouraged to have radon testing performed. Page 8

9 If you ve served in the military and are interested in utilizing your VA Eligibility to purchase a home, your first step to qualifying for a VA Mortgage is to apply for a Certificate of Eligibility or COE as it s frequently referred to. Option 1: Veterans, Activity Duty, Reservists and National Guard Members Who Been on Active Duty For those who belong to one of the above groups, you have three different means to obtaining a COE: Apply Through Mail: Fill out VA Form , which you can find on the official VA website. You will be able to then mail it to the address which is listed on the form. Apply Through A Lender: Your lender may be able to acquire your COE for you online; if this is the case, the process typically only takes a few minutes. Make sure you speak to your lender up front to determine whether or not this is an option. Apply Online: Visit the Veterans Information Portal to request the certificate. If you are unable to print Form it is possible to contact the VA at and ask for a copy be mailed to you. Option 2: Reservists and National Guard Members Who Have Not Been On Active Duty This category enjoys exactly the same options as the first group. See options 1, 2 and 3. Option 3: Spouses of Veterans Who Either Passed Away During Service or As a Result of Service Unfortunately, the options available to both groups above do not pertain to you. You are required to mail your application to the Veterans Administration. Additional Information on How to Obtain Your Certificate of Eligibility If your spouse passed away in the course of service, the procedure is relatively simple and shouldn t take too long. Keep in mind though, if your spouse passed away after service, the VA must first confirm that the death derived from a disability connected to the service. This process usually takes somewhere between 2 to 3 months depending on the existing caseload of the VA. To apply, obtain and fill out VA Form , which you can find on the official VA website. If you have trouble printing the form, you re also able to contact the VA at and request a copy be mailed to you. The address you should mail the form to is: VA Loan Eligibility Center PO Box Winston-Salem, NC If you have trouble printing the form, you re also able to contact the VA at and request a copy be mailed to you. No matter what group you find yourself in, you will be required to provide proof that you are eligible for VA home loan benefits and a COE. Page 9

10 Buying a home with your VA mortgage eligibility is most likely the largest purchase you will make in your lifetime. You will need to qualify for a mortgage. When you begin to research lender options, knowing how to choose can be difficult. What is the difference between a local lender, mortgage lender, mortgage banker or credit union? And what do those variations mean to you as the consumer? Working with a local lender that comes recommended from your real estate agent, friend or next door neighbor carries a lot more weight than one you randomly find online. In fact, a recent study shows that 90% of consumers trust recommendations from people they know, like and trust. 1. You can look them in the eye Sitting across from your lender while they explain the loan process is very different than trying to track someone down that s across the country. How uneasy does it make you feel when you call to ask a question only to find out that the person you re talking to isn t even qualified in your state to answer that question? 2. They can t hide rates or fees When you re sitting face to face with someone, it s very difficult to hide behind a computer screen. Working with a local lender allows you to go through every detail of the loan with a real person, not someone on the other end of a phone line. 3. They should will show up at your closing I can t even count the number of times I ve been asked by a real estate agent or buyer what are you doing here? when I show up at closing. It s my duty to make sure you re taken care of from beginning to end and that includes attending your closing. How can a National Lender answer last minute questions or handle any final needs of your closer when they re half way across the country? 4. The best rates possible Contrary to what national lenders may tell you, a local mortgage lender will be able to offer you the lowest interest rate; lowest fee s and best customer service available. Just because they re smaller doesn t make them less effective. 5. Your best interest is a VA loan Many mortgage companies are filled with loan sales representatives that will sell you a loan product regardless of whether or not it s in your best interest. They are only interested in the numbers game and it has nothing to do with what numbers work best for you. They worry about their bottom line, not which loan program is right for your family. Working with a local lender ensures that they have an established reputation within the community. And if it s not a positive one, well you ll find this out through word of mouth research. Need a great local lender that specializes in Military funding that will work hard for your best interest? Contact me and I will point you in the right direction. Page 10

11 A VA loan pre-approval letter is a document granted by a VA mortgage lender that states that based on preliminary information such as the potential borrower s credit, assets, and income, that they qualify for a VA loan of a specified amount. It is different from a pre-qualification in that some or all of the submitted information is reviewed for accuracy before the letter is issued. Having a pre-approval letter from your VA lender will show home sellers that you are a qualified buyer and may lead to your offer being more seriously considered. Once you have obtained your VA loan pre-approval letter, you will then be able to begin making offers on homes you are interested in purchasing. In order to get your VA loan pre-approval letter, your lender may require the following: At least one month's pay stubs or LES (if still active duty). W 2 s and Tax Returns for the past two years. Two months bank statements for any/all assets. Your DD 214 form (if no longer on active duty). Statement of Service from S1 (if still active duty) Your pay stub is needed to show that you are currently employed, as well as your current income. W-2 statements (for the past two years) then show how much you normally earn in a year. If you are currently still on active duty, your Statement of Service must show a minimum of 12 months remaining on your contract. Finally, your DD 214 form will enable your VA lender to decrease the amount of time necessary for processing your certificate of eligibility. Once again, this is not required, but it is generally a smart idea. The reason why this is a smart idea is that the majority of direct lenders with the VA can put in an order for your certificate of eligibility, which determines whether or not you are eligible for a VA loan. The process can be very quick as long as you turn in all these documents as soon as possible to your loan officer. After your VA loan officer or lender has the described documents, he or she can submit your information in the VA loan analysis software to determine your eligibility. The calculation that will determine your eligibility is: (Monthly Income) (Proposed Mortgage Payment + Insurance + Taxes + Utilities for the house + Monthly Credit Card Payments Due) = Residual Income Residual income is the amount of money that you have after you have paid the sum of your monthly bills. The VA will use their judgment after they have calculated your residual income to decide if you will have a satisfactory amount of money left over after you have paid your bills. The VA has established various requirements for what your minimum residual income will have to be, such as what part of the country you live in, the size of your family, how old your children are, and various other factors. When obtaining VA pre-approval letter, be aware that simply getting the letter does not commit the lender to giving you a loan. It just means the initial information has been reviewed. In order for the mortgage application to be approved additional information and documentation about both the borrower(s) and the property must be reviewed to be sure that all of the guidelines are met. Page 11

12 Buying your first home is an exciting but often overwhelming undertaking. Whether you have been renting or living with friends and family, taking the leap into home ownership requires education and commitment. While buying a home beats renting in most circumstances, it s not right for everyone. Before diving in, be equipped to answer several important questions. The first time home buyer checklist below is designed to assist in answering important financial questions as well as clearly define what qualities in a home are critical to you and your family. Taking the time to devise a step by step action plan will allow you to determine whether or not now is the time for you to buy your first home. First Time Home Buyer Checklist: 1. Are you employed full time? If so, how are you paid? Hourly, Salary or Commission. Commission or 1099 employees income must be calculated based on an average of your last 2 years tax returns. There are many variables that might affect your net or qualifying income. It is important to discuss your income with a mortgage professional prior to writing an offer on a home. All other employees will need to provide your most recent 30 days pay stubs. 2. Have you been employed within the same line of work for the last 2 years? If not, have you recently graduated with a degree within your current field? A 2 year consistent work history will be required. Have you filed your last 2 years tax returns? It is now necessary for lenders to request transcripts directly from the IRS. This quality control verification allows your lender to verify that what you have supplied at loan application is the same documentation filed with the IRS. If you have not filed yet, this will create a major delay within the process. 3. Do you have money in checking or savings that is set aside for the down payment and closing costs? Depending on the type of loan you are qualifying for you may be required to put anywhere from 3.5 5% down. Understand the difference between an FHA and VA loan, two loans used frequently by first time home buyers. Any money used for down payment or closing costs must be verified. You will be required to provide the last 60 days bank or asset statements. 4. Have you checked your credit recently and are you aware of any negative marks that might impact your qualification? You can order a copy of your free credit report at before meeting with a loan professional. 5. Develop a family budget and determine the monthly mortgage payment you can afford. Having a budget clarifies your mortgage payment comfort level instead of someone else determining that for you. Familiarize yourself with common mortgage terms before you buy a home. 6. Be prepared and pull together all of the documents required for mortgage pre-approval before meeting with a loan officer. 7. Work with a Real Estate Agent that understands the your area and is familiar with the particular neighborhood you are interested in. 8. Your final and most important piece in the home buying process is loan pre-approval. Meet with a local mortgage professional and determine eligibility before you set your sights and your heart on your first home. Page 12