Monthly Archives: April 2015

The five things you might not know about VA LOANS

VAloansPromoYLV-650-002As banks tighten lending standards, demand has increased tremendously in recent years for Veterans Affairs mortgages, known as VA loans.

The VA loan remains one of the few mortgage options for borrowers who don’t have down payments. Available to more than 22 million veterans and active military members, VA loans are somewhat easier to qualify for than conventional mortgages.

The U.S. Department of Veterans Affairs is not a direct lender. The loan is made through a private lender and partially guaranteed by the VA, as long as guidelines are met.

The VA has guaranteed nearly 500,000 loans this year, says John Bell, assistant director of loan policy at the VA. That’s 30 percent more than the number of VA loans issued last year and nearly three times the number of VA loans issued in 2008.

If you think you may be eligible for a VA loan, here are some must-knows about the program.


Most members of the military, veterans, reservists and National Guard members are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability may also apply.

Active-duty members generally qualify after about six months of service. Reservists and members of the National Guard must wait six years to apply, but if they are called to active duty before that, they gain eligibility after 181 days of service.

“Most reservists are qualifying under active duty,” says Michael Frueh, loan guaranty director for the Department of Veterans Affairs.

Reservists, members of the National Guard and active-duty members generally are eligible after 90 days of service during war periods.

“If you were on any type of foreign soil, more than likely you are eligible,” says Grant Moon, a veteran and president of VA Loan Captain Inc., a loan referral company.

Potential borrowers must obtain a certificate of eligibility before applying for a loan. The form can be submitted online.

Advantages of a VA loan

The days of no-down-payment mortgages are long gone, but not for veterans. Loans guaranteed by the VA can be obtained without any down payment.

Another plus: A VA loan doesn’t require mortgage insurance, as do Federal Housing Administration and conventional loans with less than 20 percent down payment. The benefit translates into significant monthly savings for VA borrowers. For instance, a borrower who takes a $200,000 FHA-insured mortgage pays more than $200 a month for mortgage insurance alone.


Although the costs of getting a VA loan are generally lower than other types of low down payment mortgages, they still carry a one-time funding fee that varies, depending on the amount of the down payment and the type of veteran.

A borrower in the armed forces getting a VA loan for the first time, with zero down payment, would pay a fee of 2.15 percent of the loan amount, Frueh says. The fee is reduced to 1.25 percent of the loan amount if the borrower makes a 10 percent down payment. Reservists and National Guard members normally pay about a quarter of a percentage point more in fees than active-duty members pay.

Those using the VA loan program for the second time, without a down payment, would pay 3.3 percent of the total loan amount.

“And if you receive disability compensation, the fee is waived,” Frueh says.

Underwriting requirements

Veterans Affairs does not require a minimum credit score for a VA loan, but lenders generally have their own internal requirements. Most lenders ask for a credit score of 620 or higher, Moon says.

“There are players that would go lower, but they would probably charge a higher interest rate,” he says.

Borrowers must show sufficient income to repay the loan and shouldn’t have excessive debt, but the guidelines are usually more flexible than for conventional loans.

“We always tell underwriters to do their due diligence, but this is a benefits program, so there is some flexibility,” Frueh says.

 VA guidelines allow veterans to use their home-loan benefits a year or two after bankruptcy or foreclosure.

“We look at the whole credit picture, what was the reason for the credit bankruptcy and where the borrower is now,” Bell says.

VA loans are available only to finance a primary home. A VA loan cannot be used to purchase or refinance vacation and investment homes.

The limit on VA loans vary by county, but it’s $417,000 in most parts of the country and up to $1,094,625 in high-cost areas.

What if I stop paying the mortgage?

Another advantage of a VA loan is the assistance offered to struggling borrowers. If the borrower of a VA loan can’t make payments on the mortgage, the VA can negotiate with the lender on behalf of the borrower.

“We have dedicated staff nationwide committed to helping veterans who are experiencing financial difficulty,” Bell says.

VA’s financial counselors can help borrowers negotiate repayment plans, loan modifications and other alternatives to foreclosure, he says.

Last year, the VA helped about 73,000 veterans avoid foreclosure, he says.

Source: by Polyana da Costa

Need help with a your VA Loan? One of our Loan Officer is ready to help you.



How to finance a fixer-upper

CouplekitchenIf you’re buying a home that needs a little TLC, a typical fixed-rate mortgage isn’t going to help you pay for repairs.

Your lender, for instance, isn’t going to approve a $300,000 loan to buy a home that’s only worth $250,000. And, while homeowners sometimes use home equity loans to remodel, you can’t get a home equity loan when you have no equity.

This can be a big obstacle for buyers who don’t have extra cash to make needed renovations or repairs before moving in.

But there are two loan programs that can make your dream of rehabbing a fixer-upper a reality: the Federal Housing Administration’s 203(k) mortgage and Fannie Mae’s HomeStyle Renovation mortgage.

The programs achieve the same goal — providing homeowners with a mortgage and access to money to make necessary improvements — but come with different requirements and best serve different types of buyers.

FHA 203(k) mortgage

This type of financing is ideal for borrowers who either have little money for a down payment or who have an average or slightly below average credit score, says Bruce Ailion, a broker with RE/MAX Town and Country serving greater Atlanta.

There are three types of 203(k) loans.

The regular 203(k) loan is for almost any kind of repair or improvement — even the reconstruction of a demolished home, as long as the original foundation remains.

You can borrow more than the home is worth, as long as the repairs will increase its appraised value.

The most you can borrow is 110% of what an appraiser estimates it will be worth after renovations, or the cost of the home plus the estimated renovation cost, whichever is less. At least $5,000 of what you borrow has to go toward renovations.

The maximum also must fall below the FHA mortgage limit for the area — $271,050 for single-family homes in most parts of the country and up to $625,500 in high-cost areas.

The Streamlined 203(k) mortgage is for projects that don’t require plans, consultants, engineers or architects — in other words, no structural modifications such as adding rooms.

You can use one of these loans to repair or replace:

Roofs, gutters and downspouts.

Decks, patios and porches.

Heating and cooling systems.

Windows, doors and exterior siding.

Plumbing and electrical systems.


It can also be used to remodel your kitchen and get new appliances, to finish your basement, to paint your home and to add insulation and weather-stripping.

You can borrow the purchase price plus up to $35,000 for repairs, improvements and upgrades. There is no minimum repair amount.

The PowerSaver Pilot 203(k) mortgage is for adding energy-saving home upgrades.

You can do everything with a PowerSaver Pilot loan that you can with the other two 203(k) loans.

The main benefit of choosing this option is that the Department of Housing and Urban Development, which oversees the 203(k) program, offers grants to reduce closing costs.

Like the Streamline loan, you can borrow up to $35,000 for repairs, improvements and upgrades, plus the home’s purchase price, with the PowerSaver Pilot loan.

Unlike the Streamline loan, which has no minimum repair amount, you must use the PowerSaver Pilot loan to complete at least $3,500 in energy upgrades.

The remaining upgrades under the $35,000 cap can be cosmetic or structural and do not have to be energy-related.

There are only five approved lenders for PowerSaver Pilot loan nationwide, and the program is currently set to expire on May 4, 2015.

You’ll have the broadest choice of lenders if you live in Arizona or California. There are no approved lenders in Georgia or Massachusetts.

All the usual FHA requirements apply to these loans.

You can search for an FHA 203(k) lender by going to Housing and Urban Development’s online search tool and checking the 203(k) box at the bottom of the page.

The Office of the Comptroller of the Currency says the 203(k) loan market has more than 275 participating lenders, including large and small national banks and independent mortgage companies.

Our test searches came up with few results even in major metropolitan areas like Los Angeles (four lenders), New York (two lenders), Chicago (five lenders) and Houston (eight lenders), so you may have trouble finding a participating lender.

The main problem with the 203(k) loan, however, is the cost of the mortgage insurance, says Joe Parsons, senior loan officer with PFS Funding in Dublin, California, and author of The Mortgage Insider blog.

You’ll pay up-front mortgage insurance of 1.75% of the loan amount and 0.85% annually on the principal balance for the life of the loan.

“The insurance cannot be removed, even when there is more equity in the property,” Parsons says.

You can drop private mortgage insurance on a conventional loan when equity in the home reaches 20%.

Fannie Mae HomeStyle Renovation mortgage

This type of financing requires a down payment of just 5% if you’re buying a single-family home with a fixed-rate mortgage.

You’ll have 12 months to complete all of the work, and there’s no minimum amount you must devote to repairs.

The most you can borrow on the home is the lesser of:

An appraiser’s estimate of the market value after improvements.

The purchase price plus renovation costs, or “cost basis” value of the home.

With a HomeStyle loan, the total cost of the work can be as much as 50% of what the property is expected to appraise for once the work is complete, but the mortgage amount still must fall within the above guidelines.

Suppose you want to purchase a home that costs $190,000.

The appraiser looks at your plans, scope of work and comps, and determines the property’s after-renovation value to be $250,000.

Fannie Mae says you can borrow up to 50% of that, or $125,000, for repairs.

The purchase price of $190,000 plus $125,000 for repairs equals $315,000. Subtract your 5% down payment, and you can theoretically borrow $299,250.

However, in this case, the cost basis of $315,000 is higher than the after-renovation value of $250,000, and you can only borrow based on the lower of the two.

So with 5% down, the most you could borrow would be $237,500. Subtracting the $190,000 purchase price, you’d need to limit your repair costs to $47,500.

HomeStyle loans are also subject to the usual conventional mortgage limits, which are $417,000 for one-unit, single-family homes in most areas, up to $625,500 in certain high-cost areas and $938,250 in Alaska, Guam, Hawaii and the U.S. Virgin Islands.

With less than 20% down, you’ll also have to pay private mortgage insurance or PMI, which is based on the as-completed value, not the purchase price.

One final advantage is that HomeStyle loans are available to investors with a 15% down payment. Investors cannot take out 203(k) mortgages.

Fannie Mae does not offer a publicly available search tool to find a HomeStyle renovation lender, so you’ll have to do a Google search, contact lenders in your area or get a referral from a local real estate agent.

Common features of home renovation loans

Before the appraisal, you’ll need to draw up a budget based on contractors’ estimates for your proposed scope of work.

The appraiser will use this information to estimate an after-improved value for the home you want to buy, which determines how much you can borrow.

You’ll be able to choose your own contractor, but the lender will have to approve them, so pick someone who is qualified, licensed and bonded.

HomeStyle and 203(k) loans allow for the possibility of some DIY work.

Loan fees, such as the origination fee and the appraisal fee, may be higher since renovation loans are more complex than a typical mortgage. For the same reason, closing may take 60 to 90 days instead of the typical 30 to 45 days.

Interest rates for renovation loans are usually one-eighth to one-quarter of a percentage point higher than they are for a conventional mortgage because these loans are riskier for the lender.

Both loans let you finance up to six months’ worth of mortgage payments if you can’t occupy the home during renovations. Source: by Amy Fontinelle

Your Loan in the Valley

¿Puedo comprar una casa con mal crédito?

ID-100106601El mal crédito puede hacer que calificar para cualquier préstamo sea un proceso difícil y desafiante. Conseguir una hipoteca para comprar una casa es posible con mal crédito dependiendo de las circunstancias. Tu mal crédito dará lugar a un tipo de interés más alto, que, alternadamente, te costará más que si la pagaras teniendo un buen crédito. Cuanto más puedas mejorar tu crédito antes de comprar un casa, mayor será el dinero que puedas ahorrar sobre el curso del préstamo.


  1. Ahorra tanto dinero como puedas para el pago inicial. El mal crédito requerirá un pago inicial mayor. Esfuérzate para alcanzar un mínimo del 20% del precio de compra como pago inicial.
  1. Realiza todos los pagos a tiempo. Los pagos tardíos afectan tu puntaje de crédito y no puedes permitirte tener algún pago tardío.
  1. Ordena y revisa tu reporte de crédito de los tres burós crediticios: Equifax, TransUnion y Experian. Puedes conseguir una copia gratuita visitando el sitio web Discute cualquier artículo en tu reporte de crédito que sientas que está equivocado. Al momento de recibir la disputa, el buró de crédito iniciará una investigación. Si pasan 30 días y el acreedor falla en actualizar, corregir o verificar la cuenta, ésta se deberá borrar por completo de tu reporte de crédito. Las instrucciones de disputa serán mencionadas en el reporte de crédito.
  1. Señala cualquier cuenta médica. Las cuentas médicas, negativas y actuales, frecuentemente no se consideran al solicitar una hipoteca. No pagues por ninguna o manejes esas cuentas hasta que hayas hablado con el prestamista hipotecario.
  1. Encierra en un circulo todas las cuentas de cobros en tu reporte de crédito. ¿Se ha pagado por cada una? Ponte en contacto con los acreedores para cada cuenta de cobro que no se ha pagado para llegar a un acuerdo. No externes que estás comprando una casa, ya que el acreedor sabrá que no puedes adquirirla con cualesquiera cobros pendientes. Declara que quieres resolver la deuda y ofrece arreglar del 25 a 50% de la cantidad original. Consigue que cualquier acuerdo sea escrito antes de enviar el pago. Envía el pago con un cheque certificado como evidencia de pago y guarda el recibo. Guarda la carta de acuerdo. Necesitarás mostrar estos documentos al prestamista hipotecario.
  1. Salda cualesquiera pagos de tarjeta de crédito que tengas para adquirir el equilibrio de entre 1 al 20% de la línea de crédito. La baja de tu equilibrio incrementará tu puntaje de crédito.
  1. Haz una lista de cada anotación negativa en tu reporte de crédito. Esta lista necesita incluir cada pago tardío inclusive si se trata de la misma cuenta. Explica porque sucedió la anotación negativa. Para obtener una hipoteca, necesitarás proporcionar una explicación al prestamista hipotecario.
  1. Reúnete con el prestamista hipotecario. Explica que te encuentras queriendo comprar una casa pero que tienes problemas crediticios. Él sacará una copia de tus reportes de crédito, observará tus ingresos y egresos y te aconsejará sobre cualquier paso adicional que necesites. Si no tienes ningún cobro sin pagar y no cuentas con un pago inicial, estás en la posición de calificar para un préstamo. Source:

Your Loan in the Valley