Are you using VA loans properly in your real estate brokerage business? Most agents don’t fully understand them and their customers are suffering because of it.
Here are four myths, truths and action items, about VA home loans, that could help you serve your home buying customers better:
LOAN MYTH 1: You have to be on active duty, in the military service, to use a VA home loan.
FACT: Eligibility is determined by current and past service. Essentially, if a veteran served for at least six months, from 1964 to today, they most likely have VA home loan eligibility. There are 15 million veterans under the age of 65 today; most of them should be eligible.
ACTION ITEM: Ask every new homebuyer, regardless of their age if they served. Don’t rule out the gals; about 10% of those vets are women.
LOAN MYTH 2: Sellers have to pay for the veteran’s closing costs.
FACT: The VA doesn’t allow for certain loan-related fees to be paid by the veteran. Those fees are usually about $1,200. The loan originator or REALTOR can pay those fees. THE VA allows the seller to contribute up to 4$ of the selling price towards ANY loan-related costs but the seller does NOT have “mandatory” fees.
ACTION ITEM: Write “seller not responsible for any allowable or non-allowable VA loan-related costs” and call the listing agent to explain this when presenting an offer.
LOAN MYTH 3: VA loan limits aren’t high enough for my market.
FACT: VA loan limits are $417,000 and in some areas as much as $1,094,000, for ZERO-DOWN loans. Down payment requirements are 25% OF THE DIFFERENCE between the zero-down loan limit and the actual purchase price.
ACTION ITEM: Compare jumbo loan financing with a VA home loan for this home in Pleasanton, CA, near the HomeGain headquarters. Assume a $1,400,000 purchase price.
75% conventional loan, at 6.5%, $350,000 down payment.
VA loan at 5.5%. Minimum down payment equals $1,400,000 MINUS the VA loan limit for Alameda County ($1,094,000) TIMES .25%= $76,500 down payment.
LOAN MYTH 4: The VA charges an expensive funding fee.
FACT: That funding fee is less expensive than the PMI it replaces. The funding fee for a 100% loan is 2.15% (financed on the loan) for first-time users, 3.15% (financed on the loan) for repeat users. For all 5% down loans, the funding fee drops to 1.5%. For 10% down loans, the funding fee drops to 1.25%
ACTION ITEM: Compare a 10% down conventioanl loan, with PMI, to its VA alternative:
$300,000 90% conventional loan requires $156.25 in PMI monthly.
$300,000 90% VA loan has no monthly PMI but adds $3750 to the loan. That savings is recouped in 24 months. The VA loan then, is less costsly if your customer plans to live in the home for two years or more.
Next Wednesday, March 11, 2009, at 7:30PM-8:30PM (P.S.T.), I’ll teach you about these loans.
I’ll host a webinar and explain:
- The zero-down loan limits for California counties
- How a purchase price, above the VA loan limit, might not require a 20-30% down payment
- Why returning Iraq and Afghanistan veterans are buzzing about the fact that they can buy a home
- How residual income analysis is used instead of debt-to-income ratios for underwriting purposes
- How to assuage the fear associated with a VA offer
- Why VA underwriters hardly ever challenge the VA appraisal
- How VA home loans can be a less costly alternative to jumbo and FHA jumbo financing
- Why the VA home loans are a better alternative than Cal-Vet loans
- How to verify that a condominium complex is VA-approved
- How to secure a VA approval for a condominium complex
The webinar will be hosted at MeetBrianBrady.com and the call in line will be:
- Phone Number: (724) 444-7444
- Call ID: 81328
- PIN: 858-699-4590