Posts Tagged VA
Here’s an idea to help the economy and homeowners at the same time, especially the underwater ones:
Streamline refinancing of any mortgage loan, regardless of type.
A streamline refinance generally refers to one that does not require credit or property qualifying, so in short, credit scores are not looked at, only payment history on the mortgage being refinanced, and an appraisal is not needed. Streamline refinances usually have to benefit the borrower by either a shorter term or at least a 5% reduction in payment.
Currently, only FHA and VA have streamline programs with FHA’s Streamline refinance and VA’s Interest Rate Reduction Refinance Loan or IRRRL.
But, what if we were to apply the same concept to all types of mortgage loans? Why would a bank balk at reducing a borrower’s payment by a couple hundred a month and thus strengthening their financial position and reducing the chance of default? Okay, well other than the investors who like the returns on that borrower’s higher interest rate. But in the grand scheme of things, isn’t it better to keep the home occupied and money flowing on that loan than to have it go into default and get 60 cents on the dollar in a foreclosure sale two years from now?
An added benefit would also be that freeing-up a couple of hundred dollars a month for a homeowner would give them some extra pocket cash which they may spend on going out to dinner, home improvement, a new TV, new furniture, etc.
In short, they’d spend it, and by spending it there would be an increased demand for products, production, employment, etc.
A good example of this is former President Bush’s tax credit. People got a mid-year refund check and it did create a momentary positive spike in sales and the economy. But unlike the one-time tax credit the benefits to a homeowner of a lower mortgage payment would create an on-going positive affect on the economy.
Just kind of thinking out loud here. Are you listening Washington?
Salt Lake City, UT
Typically real estate agents will negotiate for the seller of a home to contribute up to 3% of the purchase price of the home towards the buyer’s closing costs. What many don’t know though is that this really is the minimum amount that can be contributed. This is especially important when purchasing a home under $150,000 because closing costs can many times exceed the 3% and the buyer will have to come to the closing table with money above their down payment.
The reason this happens is that there are both fixed and variable closing costs. Some fees are fixed regardless of the loan amount (such as underwriting, processing, tax fees, appraisal, etc.) and others are based on a percentage of the loan amount or purchase price (origination fee, points paid to buy down the rate, title insurance, property taxes, per diem interest, etc.). Those fixed costs represent a larger percentage of a smaller loan than they do a larger loan.
So to that end, here are the guidelines for allowable seller contributions toward closing costs:
- Primary residence
- 3% for LTV/CLTV > 90%
- 6% for LTV/CLTV > 75% to 89.99%
- 9% for LTV/CLTV < 74.99%
- Investment properties
- Seller can pay 100% of discount points and borrower’s non-recurring closing costs.
- Seller can provide an additional amount not to exceed 4% of the estimated reasonable value to assist the borrower’s payment of buydown points, prepaid expenses and funding fee.
Be sure your Realtor talks with your loan officer prior to putting an offer on a house. You want to make sure that enough seller concessions are negotiated to cover all your closing costs so that you don’t have to pay anything more than your down payment.
I’ve get asked (all to often) what the guidelines are for buying a new home after a short sale, foreclosure or bankruptcy, so here is a quick reference guide:
|Derogatory Event||Waiting Period Requirements||Waiting Period with Extenuating Circumstances|
|Bankruptcy – Chapter 7 or 11||4 years||2 years|
|Bankruptcy — Chapter 13||• 2 years from discharge date
• 4 years from dismissal dat
|• 2 years from discharge date
• 2 years from dismissal date
|Multiple Bankruptcy Filings||5 years if more than one filing within the past 7 years||3 years from the most recent discharge or dismissal date|
|Foreclosure||7 years||3 years Additional requirements after 3 years up to 7 years:
• 90% maximum LTV ratios
• Purchase, principal residence
• Limited cash-out refinance, all occupancy types
|Deed-in-Lieu of Foreclosure and Preforeclosure Sale||• 2 years — 80% maximum LTV ratios
• 4 years — 90% maximum LTV ratios
• 7 years — LTV ratios per the Eligibility Matrix
|2 years — 90% maximum LTV ratios|
FHA Insured Loans
Chapter 7 Bankruptcy:
- Two (2) years since discharge and good credit has been reestablished.
- Bankruptcies less than two (2) years (but not less than 1 year) may be allowed provided the reason for the bankruptcy was due to extenuating circumstances.
- A borrower whose bankruptcy has been discharged less than one (1) year is not eligible except for non-credit qualifying Streamline Refinances when the loan has been reaffirmed in the bankruptcy.
Chapter 13 Bankruptcy:
Borrower is eligible for an FHA loan one (1) year from when the payout period began period provided all payments to the bankruptcy trustee have been made in a satisfactory manner and the borrower receives court approval to enter into the new mortgage transaction.
Consumer Credit Counseling:
Participation in a consumer credit counseling payment program does not disqualify a borrower from obtaining an FHA-insured mortgage provided that one (1) year of the pay-out period has elapsed under the plan and the borrower’s payment performance has been satisfactory (i.e., all required payments made on time). In addition, the borrower must receive written permission from the counseling agency to enter into the mortgage transaction.
Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to
- take advantage of declining market conditions, and
- purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.
Borrowers are considered eligible for a new FHA-insured mortgage if
- they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and
- the proceeds from the short sale serve as payment in full.
Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are generally not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale.
VA Guaranteed Loans
Chapter 7 Bankruptcy:
If the borrower or the borrower’s spouse has had a Chapter 7 bankruptcy, they are not eligible for a VA loan for two (2) years from the date of discharge, not the date of filing.
Chapter 13 Bankruptcy:
Borrower is eligible for an VA loan one (1) year from when the payout period began period provided all payments to the bankruptcy trustee have been made in a satisfactory manner and the borrower receives court approval to enter into the new mortgage transaction.
A borrower may not be eligible for a VA guaranteed loan for two (2) years after foreclosure or deed-in-lieu of foreclosure. If the foreclosure was on a VA guaranteed mortgage the borrower may not be eligible for full entitlement for a new loan.
Collections and Judgments:
If a collection is minor in nature it usually does not need to be paid off, however judgments must be paid in full prior to closing. A borrower is not eligible for a VA loan if they are delinquent on any federal debt such as tax liens, student loans, etc. If payment arrangements are made that would bring the borrower up to date they may be considered for VA loan approval.
Consumer Credit Counseling:
Participation in a consumer credit counseling payment program does not disqualify a borrower from obtaining a VA guaranteed mortgage provided that one (1) year of the pay-out period has elapsed under the plan and the borrower’s payment performance has been satisfactory (i.e., all required payments made on time). In addition, the borrower must receive written permission from the counseling agency to enter into the mortgage transaction.