mortgage

VA Loan FAQs

April 26, 2017 By Chris

Tampa is the home to MacDill Air Force Base, which hosts operations for Central Command (CENTCOM). With such a large current and former military presence in the area the question of using a VA loan comes up quite often. We’ve gathered up the most frequently asked questions related to VA loans and provided you with the answers you want and need.

What is a VA loan and do I qualify?

A VA loan is a loan guaranteed by the Department of Veterans Affairs and financed through an approved lender. It can be used for the purchase a property intended to be used as a primary residence.

To qualify for a VA loan, you must meet basic service requirement in active duty, National Guard, or Reserves. The Department of Veterans Affairs determines each individual’s eligibility but some of the basic requirements include one or more of the following:

90 days or more of active, consecutive service during wartime;
181 days or more of active, consecutive service during peacetime;
6 years or more of service in the National Guard or Reserves;
you are the surviving spouse of a service member who died in the line of duty or due to a service related injury.

If you are eligible, the VA will provide you with a Certificate of Eligibility (COE) that will certified to a participating lender that you are eligible to receive the VA loan benefit.

VA Loan FAQs

Who can give me a VA loan?

Not every lender is certified or willing to finance a VA loan. While there is no complete list of VA approved lenders, to determine if your lender is able to assist you, you can ask three questions:

Do you offer a VA loan product?
Do you underwriter locally or do you have a third party underwrite?
Are you LAPP (Lender Appraisal Process) approved?

Any lender who offers VA loan products should be able to underwrite their loan within their organization and utilize the LAPP system, which helps expedite your appraisal process and general loan processing.

Your Realtor or attorney are good sources of VA lenders.

Why should I use the VA loan instead of FHA or a conventional loan?

As an eligible service member, you should use your VA loan because it is a benefit that you earned through your military service. To not use it would be to a lose a hard earned benefit.

Similar to FHA guaranteed loans, the VA loan benefit helps buyers by requiring little to no money for a down payment. Unlike FHA and conventional loans, a VA loan does not require PMI; this helps keep the monthly mortgage payment at an affordable amount. The VA loan program allows borrowers to purchase a home up to $424,100¹.

I heard Sellers don’t like Buyers who intend to finance with a VA loan?

There is a stigma with VA loans being difficult to process and close but recent updates to the process have made many of those issues a thing of the past. The VA does require any noted repairs on the home inspection be made prior to final approval. Sellers can feel like they are being “nit picked” but the VA is insuring the loan and wants the best possible asset for its borrowers. The VA requires the appraisal to be completed by their appraiser. Just like any other purchase, if the appraised value does not match or exceed the sales price, the price needs to be decreased or the Buyers must make up the difference in cash. Closing timelines are comparable to other loan products.

Will I have to bring money to closing with a VA loan?

Yes, you will need to bring money to the closing table. There are “allowable” and “non-allowable” costs that the Buyer is obligated to pay at closing. For “non-allowable” charges, another party must pay the amount due. There is no prescribe responsible party, it can be the Seller, the agents, or the lender. What the Buyers are responsible for at closing in addition to the allowable charges is the funding fee. The VA requires every borrower to pay a 2.15 percent of the total loan amount if the down payment is less than 10% and 1.15 percent of the total loan mount if the down payment is 10% or more.

Can I reuse my VA loan benefit?

Yes, you can. If you payoff a VA loan in full, you regain your full entitlement and can purchase another home with the benefit. If you don’t use your full entitlement on a property and find yourself needing to move, you can rent out the first property and use your remaining entitlement to help finance your next home. It should be noted that after the first closing, any additional closing require a funding fee of 3.3 percent of the total loan amount.

We hope we’ve shed some light on the VA loan benefit and process. If you have specific questions please reach out to us and we’ll be happy to help.

¹ This figure is as of 2017 and may be higher in some high value areas.

Claim Your Home Mortage Interest Deduction

December 15, 2015 By Chris Leave a Comment

Since 1913, American homeowners have been able to claim a mortgage interest deduction from their federal income taxes. There are limitations however; interest paid on first & second mortgages, lines of credit secured by real estate, and home equity lines of credit valued up to $1,000,000.00 or $500,000.00, if married and filing separately, is able to be deducted. After those limits are reached the remaining interest is not deductible.

Claiming Your Mortgage Interest Deduction

What do I need to do it claim the deduction?

First, fill out IRS Schedule A to determine whether your itemized deductions, including your mortgage interest, exceed your standard deduction. If they do, you’ll need to file the 1040 long form. Second, you’ll need Form 1098, your Mortgage Interest Statement, from your mortgage lender. This details the amount of interest and mortgage-related expenses you paid during the tax year you are filing for. Third, if you bought the property in the year for which you are filing, you’ll need the HUD-1 Settlement Statement form from your lender. This itemizes the fees you paid when you closed your loan.

If you prepare your own taxes, check out IRS Publication 936, the Home Mortgage Interest Deduction, and the instructions for filing Schedule A. If you use an accountant, he or she may simply need Form 1098 and the HUD form, but double check whether any additional documents are necessary.

Who qualifies for the deduction?

In order to qualify you must be legally liable for the loan. In other words, you’re not able to deduct mortgage payments you’ve made for someone else unless you’re legally liable to make the payments. Also, a qualified home, i.e. your primary or second home, must secure the mortgage. And, be sure to double-check that the mortgage interest deduction you claim on Schedule A and the amount on Form 1098 are the same.

Additionally, keep your 1098 Form and any worksheets you use to figure the amount of your deduction along with a copy of your return for as long as is legally necessary. If you need additional information, check the IRS for their guidelines.

Editor’s note: This post was originally published in January 2011. It has been updated with the latest information and edited for cohesiveness.

Most Common Reasons Closing Is Delayed

September 1, 2015 By Chris

You’ve signed your real estate contract that included a specific date for closing. You’ll meet all the parties at the closing table on that date, right? Wrong…maybe. The closing date agreed upon in the real estate contract is tentative until the mortgage company and title company/attorney confirm it. There are times when that date may come and go without an end in sight. Why is that? Below we’ll examine the most common reasons closing is delayed.

The mortgage company hasn’t completed their underwriting. After the mortgage crash in 2008, lenders became much more strict in their underwriting guidelines. Buyers are now required to provide solid proof of employment, cash flow, debt information, and savings. Once the mortgage underwriters receive all of this information they need to complete their own verification process which can take time and if changes in the Buyer’s credit report or bank statements take place it may cause the underwriting process to start all over. The mortgage company will also require an appraisal and most likely a home inspection report. If the appraisal comes back lower that the agreed upon price the mortgage company will require a lower sales price or not the loan. If the home inspection report lists repairs are needed the mortgage company may not agree to lend the money until the repairs are made and reinspected.
There are issues with the chain of title. Running concurrently with the mortgage underwriting process, the title company is underwriting the title to the house. They are responsible for issuing a clear title to the Buyer, which means they need to account for the mortgage(s) being paid off at closing, ensure taxes are current (or will be paid at closing), and the owners listed on title are the same owners attempting to sell the property. Issues arise when a prior mortgage still shows of record, the chain of owners is incomplete or incorrect, the legal description to the property is incorrect, or any other questionable information that is discovered in their research of the public records. Because the contract states that the Seller will provide a clear title to the Buyers at closing, closing cannot take place until all issues are resolved and depending on the issue will dictate how substantial the delay may be.
Communication between all parties is lacking. All of the parties (or their representatives) need to communicate throughout the process. The mortgage company may have a last minute requirements they need the Buyer or title company to fulfill or the title company may not have availability for the closing date or time originally requested. Simple issues can turn into big headaches if communication breaks down.
The Buyer or Seller runs into money troubles. It takes a lot of cash to buy a home and even if the Buyer is mortgaging the property he or she will still need to bring money to the closing table. Many Buyers rely on the funds from the previous home to fund their new home. If the previous home doesn’t close by the time their home is they will most likely won’t have the funds readily available to close. On the flip side, if the Seller was expecting to simply break even on the property they may need to scramble to find available funds to cover any unexpected costs.
The final walk-through uncovers new problems. Sometime within 24 hours of closing, the Buyer and Seller (along with their agents) will complete the walk-through and sometimes it can unveil issues that were either hiding during the showings and inspection (holes in the walls, stains/rips in the carpet or gouges in the flooring) or the Sellers did a less than stellar job when they moved out leaving behind garbage or a house that’s in less than “broom swept” condition. If the Realtors and their clients cannot come to a quick resolution to the issues it can result in a postponed closing.

So what should you do if you’re closing is subject to a delay? First, stay calm. What’s done is done, there’s no point focusing on what should have been done only what can be done now. Try to respond to any requests from the lender or title company immediately and keep in touch with your Realtor and/or attorney throughout the entire process. If a situation arises that requires additional negotiation for a repair or credit at closing attempt to find some middle ground with the other party that will resolve the issue quickly and keep the ball rolling towards the goal of a closed and completed transaction.

Prepare For Home Ownership

December 16, 2014 By Chris

It’s part of the American dream to own your own home but it may not always appear so simple to obtain that goal. Like any big undertaking, it takes planning and preparation to be successful. If home ownership is your goal for the new year, we have the steps you need to take that will help you prepare for that dream to become a reality.

Fine tune your credit. Analyze your credit report from each of the three major bureaus (TransUnion, Equifax, and Experian) for accuracy and areas that need resolution. If you have judgments or liens against your name, pay them in full or establish a payment plan with the creditor before you seek out a mortgage. If you find a error on your credit report, open disputes with the bureau(s) reporting the error and follow up to make sure the error is resolved. On average, lenders will want to see a credit score of at least 650. If your score is below this, make an extra effort to pay down outstanding debt on time, focusing on paying off debt with the highest interest rate first and close lines of credit you don’t use.
Determine how much house you can afford. Most buyers will need to finance their home purchase. A listing price can’t tell you everything you need to know about what you can afford. Depending on how much money you put down will affect how much money you will need to finance. You should evaluate your current monthly expenses (car payment, credit cards, student loans), then add in the monthly housing payment you want, and finally divide by your monthly gross income. (Example: $300 car + $250 credit card + $200 student loan + $1600 mortgage = $2350 / $5500 = 0.427 or 42.7%) The golden number for most lenders is 43%. This reflects the maximum debt-to-income ratio they’re willing lend to. If the number is at or below 43% you’ve found how much you can afford; if not you’ll need to readjust the amount of money you can afford to finance.
Start saving and continuing saving. Purchasing a home is not an inexpensive feat. In addition to the down payment, you’ll also need funds to pay closing costs. There are a multitude of small expenses, such as hiring movers or a rental truck and purchasing new furnishings, that add up immediately after a home purchase. Having a healthy savings account will help ease the burden on your daily living funds. You should make saving a priority by employing the “pay yourself first” rule and put a predetermined amount of money into savings every paycheck before any other bills are paid. If you’ve paid off a debt, such as a credit card, take the money you would have paid the credit card company and pay your savings account instead.
Play house. You’ve calculated out how much you can afford for a monthly mortgage payment but before you meet with a Realtor you should put your plans into action and live on the budget you’ve determined for three to four months. Doing so will allow you to get comfortable with the debt you’re about to undertake or show you where your budget needs adjusting before it’s too late.

Once you’ve prepared your financial house for an actual house, research and contact a lender to pre-qualify you and then begin working with a licensed Realtor who will help you find the house that will make all your preparations pay off.

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