by Tim Storm | May 29, 2014 | Blog, VA Loan PreApproval
How important is it to have your California VA mortgage financing figured out before you have an offer to buy a home accepted? I would say it is Super Important. There are a lot of moving parts when it comes to buying a home, especially with regards to the financing. If the financing does not work out then the deal will fall apart, resulting in a loss of time and money for all parties involved in the home purchase. Which is why getting PreApproved for a VA home loan prior to even beginning to make purchase offers is critical if you intend to have a smooth transaction. This is just as important for California first time home buyers as it is for the move up home buyers.
A California Veteran Home Buyer Should Know These Things Before Shopping for a Home
- What makes up a “mortgage” payment? Many mortgage calculators found on websites only list the principal and interest portion of the payment. But what about the property taxes, home owners insurance, mortgage insurance (if needed), home owners association dues, etc. A home buyer trying to getting an estimate of the mortgage on a $400,000 VA loan at 4.25% ($400,000 purchase price) may just see a payment of $1,967. But using a typical factor of 1.25% for property taxes, the monthly taxes will be $416. And home owners insurance, using a factor of .3%, would be $100 per month. And with a VA loan, an impound account for taxes and insurance is required, meaning the actual monthly mortgage payment, including principal, interest, taxes, and insurance would be $2,484. That extra $500 in payment could be a real if the home buyer already had an accepted offer.
- What mortgage payment are they truly comfortable with? The home buyer should create a budget in order to make sure they can truly afford the mortgage payment. And they should also think about things that are outside of the mortgage payment, especially in the first year of their home purchase. Things like new furnishings, appliances, paint, etc. Also, there are maintenance costs for a home that should be considered in the budget.
- How much money will be needed to close escrow? Sometimes California Veterans using the VA home loan program automatically assume that since they will not need a down payment then they won;t need any funds to buy a home. While it is possible to buy a home with VA financing and not need any funds for closing, commonly referred to as a VA No No, this is not something that is automatic. There are still closing costs that need to be dealt with. A California VA Loan officer can provide custom detailed loan scenarios which will give a complete breakdown of the estimated closing costs and prepaid expenses that would either need to be paid by the buyer, seller, or through a lender credit (if going for a VA No No).
- What comprises the closing costs and what are “prepaid expenses”? Closing costs are made up of costs involved in the purchase of the home and are one time items. There lender fees, inspections, the appraisal, escrow closing fees, notary, county recording fees, title charges, home owners association transfer fees, credit report fees, etc. It is important to get an accurate estimate of these costs during the planning stages of buying a home. As a home buyer, finding out you are short to close by $3,000 is not a good feeling when you are already in escrow to buy a home. And what about “prepaid expenses?” These are “recurring” items, including mortgage interest (prepaid interest), property taxes, and insurance. An impound account will need to be set up on a VA home loan for taxes and insurance. The number of months of property taxes that will be initially deposited into the impound account depends on what month the loan is to close. At certain times of the year it may be just 2 or 3 months. But at other times of the year it could be 8 or 9 months. On a $400,000 purchase, this could be a difference in funds to close of over $2,000.
VA Loan PreApproval Answers Questions the Buyer Needs to Know
By working with a California VA loan officer at the very beginning of the home shopping process the Veteran will get the answers to questions that they need to know. And learn things that they didn’t even realize they needed to know. And of course in the current real estate market, most sellers and their listing agents will not even entertain an offer from a buyer who doesn’t have a VA loan PreApproval letter in hand. Some lenders will charge a fee for PreApproval, but there are plenty of reputable VA lenders who will do a PreApproval for free. And depending on the complexity of the loan package, PreApproval can be completed anywhere from 24 hours to a week. The first step is a quick email or call to an experienced California VA loan officer.
Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.
by Tim Storm | May 20, 2014 | Blog
If you are using VA financing to purchase a condo in California then you need to make sure the condo project is approved through VA. All too often an offer to purchase a condo is made and then accepted, only to find out later that the condo project is not on the VA approved condo list. And getting a condo project approved does not happen overnight. It can easily take 90 days to get project approval, if the project is even approve-able. So how does a buyer (or their real estate agent) make sure that they are making offers on condos that are VA approved?
The VA Approved Condo List
VA has a website that lists condos that are approved for financing. While not every condo project in California is on the list, there are definitely more approved VA condo projects than FHA approved condo projects. To go to the VA Approved Condo search, click here. Of course once at the VA site it is still not easy to search. But there are a few tips that will help. First, if you already have found a condo and you want to see if its on the list then knowing the project name may not be enough. And searching by condo name will likely not get the result you are looking for either. This is because much of the VA list is mentioned only by “Tract Number”. So it’s important to find out not only the project name but also the Tract Number for the project. Your real estate agent should have easy access to the tract number in MLS. Quite often the Tract Number can also be found by doing an online search of the property address, and then click on the results.
Example of Approved Condo Search
Figure 1.
For example, let’s say a Veteran has found a condo in Orange, CA. The address is 5722 E Stillwater Ave, Orange, CA. The Veteran knows that the name of the project is Canyon Glen. But after doing a search that is specific to the name “Canyon Glen”, gets no results. This is where knowing the Tract Number is important. By doing a search of the address, several results come up for that project address. Clicking on the Redfin.com result and then scrolling down to the Property Details section, and then under the “Utilities, Location Details & Listing Information” you will find the “Legal Tract” number to be #10507. Figure 1 is a screenshot of the Property Details for this condo. Now, with the Tract Number in hand, it’s time to go back to the VA site for the search. In most cases, the best way to search for a condo in a particular city it to just search for all approved condos in the city. Do not try to limit the search. Follow these steps:
- Click on “summary” button. You do not need the Details at this point.
- Leave the “Retrieve only approved Condo’s” button unchecked. It’s better to at least find the project, even if it’s not approved, than to not find it at all and wonder if you searched correctly.
- Do not enter anything in the “Enter the Condo name or ID” fields. Unless you know exactly how it is spelled on the VA site, then you will not get a result. Remember, we are not trying to limit our search at this point.
- Choose the closest “Regional Office” in the drop down. In the case of this condo in Orange, the closest Regional VA Office is Los Angeles.
- For Condo location, type in Orange in the “City” field (since the condo is in the city of Orange). In the State drop down, choose California. Leave the “County” field blank.
- Click “Submit”.
Figure 2.
As of the this update on May 4, 2017 there are 64 results. Of those 64 results only 18 are listed by project name, which is why knowing the Tract Number is so important. Scrolling down through the results we find the Tract 10507 listed as an Approved Condo, which means you should be clear for buying a condo in that project with VA financing. Figure 2 shows a screenshot of the the results, which Tract 10507 highlighted.
The Best Way to Find VA Approved Condos
Most Veterans or their real estate agents will search for condos and then try to figure out if the condo is VA approved. This is backwards and a waste of time. The best way is to do a search in MLS ( the real estate agent will need to do this) of projects that are approved. By limiting the search to projects that are on the VA list, time is not wasted looking at condo’s that are not approved. In many cases, a California VA loan officer experienced with VA loans on condos can help with providing the list of Tract Numbers.
Website for Finding Orange County VA Approved Condos
For those Veterans who are searching for a condo in Orange County there is a great website which keeps a current list of VA Approved Orange County condo’s. The website, which links directly to the MLS using an “IDX” feed, makes is very easy for Orange County Veterans to finds VA approved homes for sale.
Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.
by Tim Storm | May 13, 2014 | Blog
Many Veterans don’t realize that the VA home loan program can be used more than once. Not only is the VA loan great for first time home buyers but it’s also great for move up buyers, especially in high cost California counties like Orange County, Los Angeles, San Francisco, Marin, Contra Costa, Alameda and San Mateo, where the VA loan limits are high. Which leads to a common question, “How do I restore my Entitlement so that I can use VA financing on my next home?”
It is Possible to Have More Than One VA Loan at a Time
Before we get into how to restore VA Entitlement it is important to note that it is possible to carry two VA loans at a time. When a Veteran moves from a home that is financed with a VA loan and wants to keep it as a rental the Veteran can have a lender pull an updated Certificate of Eligibility. The updated COE will show the amount of Entitlement used for the loan on the current property. The lender can then determine if there is Entitlement remaining for the purchase of another home. This is especially possible if the Veteran is moving from a smaller home (small loan) to a more expensive property in a high cost county. To find out if this is possible in your situation contact a VA lender who can check your Certificate of Eligibility and run the numbers based on the county loan limit for the county you plan to move to. In some situations a down payment may be required. But still, the down payment may be less, and with no mortgage insurance, than other types of financing.
Process for Restoring Entitlement
In the a situation where the Veteran plans to sell their home to buy another, the VA needs to be notified once the first home is sold. Even if you sold your home years ago, if VA was not notified properly then your Certificate of Eligibility may show “Paid in full, no restoration”. The first part of that statement, “Paid in Full” just means the lender notified VA that the VA loan was paid off. But this is only half of it, because VA wants to know what happened to the property. If it is still owned, but with non-VA financing or even free and clear, then it could affect the Veterans ability to use VA financing on another home. If the property is still owned, then the Veteran can apply for a “One Time restoration” of Entitlement. But if the Veteran had sold the property then using VA financing again is not a problem. As a matter of fact, there is no limit to how many times a Veteran can restore Entitlement if they always sell the previously VA financed home. In order to prove the disposition of the property is sold a Final HUD, stamped and certified by the closing agent, needs to be provided.
Notification to VA is done by completing and sending in the VA Form 26-1880, or Request for Certificate if Eligibility. Specifically, Section 8 of this form deals with restoring the benefit after the sale and/or pay off of a VA loan. The easiest and quickest way to send this form into VA is with the help of a California VA lender who deals with this every day. VA is surprisingly quick at restoring entitlement, especially in situations of a “concurrent closing”. A concurrent close happens when a Veteran is selling a VA financed home and immediately buying a new home to be financed with a VA loan. From my experience, restoration can take between 24 and 36 hours from the time the 26-1880 form (and Final HUD) is sent to VA.
Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.
by Tim Storm | May 6, 2014 | Blog
It is possible to use VA financing to pull cash out up to 100% of the properties value. And while this may be true according to “VA Guidelines”, it’s not true with most lenders. Most lenders only allow a refinance of a VA loan to 90% of the properties value. First, it’s important to mention that there are different types of refinancing when it comes to VA.
VA Refinancing Types
The most commonly know VA refinance is the “IRRRL”, or Interest Rate Reduction Refinance Loan. The IRRRL is strictly a VA to VA refinance. There is no “cash out”. The program is extremely easy since there is not income documentation or qualifying required and no appraisal. In many cases the VA IRRRL is closed as a “no cost” refinance, lowering the rate and/or payment for the Veteran when rates have improved.
The other type of refinance is a non-VA to VA refinance. In the eye’s of VA, any non-VA to VA refinance is considered a “cashout” refinance, even if the borrower will not receive cash at closing. And although VA allows a non-VA to VA refinance to go as high as 100% of the appraised value, many lenders cap it at 90%. This is where working with a lender who truly specializes in VA can provide better options. There are a few VA lenders who will allow not only a non-VA to VA refinance to go to 100% loan to value, but will even allow “cash out” at 100% loan to value. For a Veteran who is either consolidating debt, or just trying to get enough funds for home improvements, being able to refinance to 100% of the property value can provide 10’s of thousands more dollars.
VA Cashout Refinance
Let’s assume a California Veteran who has a Conventional loan (although is could even be an FHA, CalVet, or other type of loan) of $350,000 on a home worth $400,000 is looking to pull enough cash out to remodel their kitchen and make a few other minor improvements on their home. Most lenders who max out at 90% of the property value would only allow $10,000 cash out. (90% of $400,000 is $360,000, which is only $10,000 higher than what the Veteran already owes. $10,000 cash out also assumes there are no closing costs on the loan.) A lender who allows cash out to 100% of the property value would lend $400,000, resulting in $50,000 cash out.
If you are considering a VA refinance it is important that you work with a VA loan specialist who is very familiar with the VA loan program. The VA loan officer should be able to provide custom loan scenarios showing the new loan amount, payment, closing costs and any potential lender credit to offset the closing costs, the the bottom line estimate of cash going to the borrower at closing.
Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.
