by Tim Storm on April 1, 2010
Orange County VA loan borrowers need to understand the difference between Seller Concessions and a Seller Credit for Closing Costs. Most loan programs will allow for the seller to pay some or of buyers closing costs, but VA goes a step further. VA allows for Seller Concessions.
What is a Seller Concession?
According to the VA, a Seller Concession is anything of value added to a transaction by the seller or builder for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide. Below are several examples of Seller Concessions.
- Payment of the buyer’s VA Funding Fee – this can be large for Orange County VA home buyers
- Prepayment of the buyer’s property taxes and insurance. These are items included in “prepaid” expenses.
- Gifts such as a television set or microwave.
- Payment of extra points to provide permanent buydown of the interest rate. For example, if it is customary to pay 1 Origination and 1 Discount for a 5% rate, but the seller pay 2 additional Discount points to buy the rate down to 4.5%, that would be a Seller Concession.
- Provision of escrowed funds to provide temporary interest rate buydowns – like a 2-1 Buydown program.
- Payoff of credit balances or judgements on behalf of the buyer.
Seller concessions do not include:
- Payment of the buyer’s non-recurring closing costs
- Payment of points which are typical for the market
Imagine that. If an Orange County Veteran wants to purchase a home but first needs to pay off credit card debt, he or she could negotiate to have the seller pay off the debt as part of the purchase.
There cannot be more than 4% in Seller Concessions. But remember, you will not need to include normal discount points or buyer’s closing costs as part of the 4% limit.
Talking With an Orange County VA Loan Expert is the First Step
The first step is always to talk with a local Orange County VA loan officer. Your VA loan officer should be able to answer most questions, prepare detailed loan scenarios, and walk you through the VA loan PreApproval process.
Authored by Tim Storm, an Orange County, CA VA Loan Officer – Please contact my office at Trust One Mortgage Corporation for more information about an Orange County, CA home loan. 877-786-4243 x 7.
www.OCFHALoans.com
Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.
877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com
*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829
by Tim Storm on February 10, 2010
While other loan programs continue to go though multiple guideline changes, the VA loan program has been mostly unchanged for Orange County VA home loan borrowers. FHA and Fannie Mae have recently tightened their guidelines. VA has not.
FHA and Fannie Mae Tighten Condo Financing Guidelines
FHA and Fannie Mae recently tightened their guidelines for financing on condominiums. FHA, which has an extensive approved condo list in Orange County, recently started requiring that projects on the list be “recertified”, a costly and time consuming process. Also, projects that were not previously on the list will need to go through a full review and approval process, which will take even more time and more cost. Plus, there is no guaranty that a project will be financeable. Even Fannie Mae is requiring a much more thorough look at condo projects. Each lender has their own approved condo list for Conventional loans, making lending on condo’s very tricky. VA is the only program that continues to have a valid project approval list. This is a big advantage for Orange County VA home home buyers interested in a condo. If they specifically look at VA approved condo projects, they will have an advantage over FHA and Fannie Mae home buyers. The key is to know how to find Orange County condo projects on the VA approved list.
Fannie Mae Lowers the Debt to Income Ratios
In December 2009 Fannie Mae decreased the debt to income ratios used to qualify borrowers. Although the “guideline” ratios rae still 28/36, it was possible to get a home buyer approved with a debt ratio of 60% in some cases. Now, Fannie Mae will not allow ratios over 45%, unless there are strong compensating factors. In ases with strong compensating factors, they will allow a ratio of 50%. This dramatically effected the amount borrowers can qualify for. VA guidelines remain unchanged, with some borrowers getting approval with debt ratios as high as 60%.
FHA Increases the Upfront Mortgage Insurance Premium
FHA increased the Upfront Mortgage Insurance Premium to 2.25%. The UFMIP is similar to the VA Funding Fee, which on a typical transaction is 2.15%. The great thing about VA loans is there is no a Monthly Mortgage Insurance, which FHA has. Fannie Mae also requires Mortggae Insurance if the down payment is less than 20% of the property value. There is talk that FHA may increase the Monthly Mortgage Insurance beyond the current .55%. (versus VA, which is 0%).
So while all of these changes have taken place, the VA loan program has held steady. Orange County mortgage rates on VA loans are also very low, as are interest rates for most programs. Compared to Fannie Mae, VA is actually very competitive. Fannie Mae has “pricing hits” that begin when the loan to value is over 60% and when the FICO is less than 740. The pricing hits can really add up if the FICO score drops under 660, or if the property is a condo over 75% loan to value. If the loan is a cash out refinance, be prepared to pay extra for a high rate. VA does not have pricing hits and will even allow a VA cash out refinance to 90% of the properties value. Imagine the following scenario: cash out to refinance on a condo for a borrower with a 660 FICO score at 80% loan to value. (Fannie Mae won’t even go over 80% on a cash out refi, and FHA won’t allow over 85%.)
The first step an Orange County VA eligible home buyer needs to take is to talk to an Orange County VA lender who can answer questions and prequalify you for a loan before you begin looking at homes.
Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Trust One Mortgage Corporation for more information about an Orange County, CA home loan. 877-786-4243 x 7.
www.OCFHALoans.com
Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.
877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com
*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829
by Tim Storm on December 22, 2009
The Veterans Administration recently announced the VA 100% financing loan limits for Orange County, and the limit was reduced. In 2009 an Orange County VA eligible home buyer could purchase a home with $0 down up to a price of $737,500. In 2010 the limit has been reduced to $593,750.
The reduction on the loan limit should not have much of an effect for most Orange County VA home buyers. Since they are still eligible to purchase a home of almost $600,000 with no down payment, the decrease will barely be felt by 99% of buyers.
Orange County VA Home Buyers Can Still Get Loan Over $593,750
Although the limit has been reduced, Orange County VA home buyers will still be able to buy homes valued at greater than $593,750 with a VA loan. The high-balance VA Jumbo mortgage program started in 2008. VA eligible home buyers just need to come up with a down payment equal to 25% of the difference between the 100% financing limit and the purhase price of their home.
Example VA eligible Purchase for Placentia, CA
For example, if Mike Smith is looking to purchase a home in Placentia for $693,750 (for this example, $100K over the 100% financing limit), then Mike would need to have a down payment of $25,000. That is not bad. That works out to a 3.6% down payment, plus there is no Monthly Mortgage Insurance.
Example of VA Purchase in Tustin, CA
Just for another example, let’s assume that Jill Monroe, a VA eligible home buyer, is looking to purchase a home in Tustin, CA for $650,000. That is $56,250 over the 100% financing limit. 25% of $56,250 is $14,062. Jill would need to come up with $14,062 for the down payment, only a 2.1% down payment.
Southern California VA Loan Limits for 100% Financing
| County Name |
Single Family Home
($0 DOWN AND UP TO)
|
|
| |
| LOS ANGELES |
$593,750 |
|
| |
| ORANGE |
$593,750 |
|
| |
| RIVERSIDE |
$417,000 |
|
| |
| SAN BERNARDINO |
$417,000 |
|
| |
| SAN DIEGO |
$437,500 |
|
| |
| SANTA BARBARA |
$417,000 |
|
| |
| VENTURA |
$486,250 |
|
The first thing to do is check with an Orange County VA Expert Loan Officer who can put together multiple loan scenarios based on your goals and qualifications. Orange County VA loan PreApproval is very important, especially prior to making an offer.
Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Trust One Mortgage Corporation for more information about an Orange County, CA home loan. 877-786-4243 x 7.
www.OCFHALoans.com
Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.
877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com
*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829
by Tim Storm on December 13, 2009
Orange County homeowners with a VA loan are finding there are big advantages to the VA Cashout refinance program. This program actually does not require the loan being refinanced to be a VA loan, as long as the borrower is eligible for a VA loan. The biggest advantage of this program over most other cashout refinance programs is that the borrower can borrow money up to 90% of the properties value, while a Conventional loan allows cashout up to 80% loan to value, and FHA allows cashout up to 85% loan to value.
Orange County borrowers need to keep in mind a few of the differences between the popular IRRRL, or VA Interest Rate Reduction Refinance Loan, and a VA Cashout refinance. The IRRRL program is strictly a “Rate and Term” refinance, and the current loan needs to be a VA loan. Also, income is not verified, and in most situations, there is no appraisal. (Although there have been some changes to the appraisal requirements and some lenders are tightening up this program.) The VA considers any refinance that is not an IRRRL to be a cashout refinance. This means that if an Orange County VA eligible borrower wishes to refinance from a Conventional (Fannie Mae or Freddie Mac) loan, then even if they will not pull cash out, VA still considers it a cashout refinance and it must be underwritten as such.
VA Loans Are Flexible with FICO Scoring
Another big advantage for a VA cashout refinance versus a Conventional cashout refinance is the relative flexibility towards FICO scoring. For VA eligible borrowers with FICO scores under 700, if may make more sense to go with a VA loan even you only plan to pull cash out to 80% loan to value. Fannie Mae and Freddie Mac have instituted pricing “addons” which increase the fees and rate for cashout refinances when the FICO scores drop below 740. If your score FICO drops below 700, the pricing hits really start to add up. With VA, the pricing hits for low FICO’s are minimal.
VA Guidelines Regarding a Cashout Refinance
The actual VA guidelines allow for cashout to 100% loan to value, but finding a lender who will allow this will be difficult. Lenders tend to stay with the 90% rule, although there is some flexibility if the borrower is not actually getting cashout and the loan to value is over 90%. This is something that should be reviewed by an experienced Orange County VA loan officer prior to paying for an appraisal.
Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Trust One Mortgage Corporation for more information about an Orange County, CA home loan. 877-786-4243 x 7.
www.OCFHALoans.com
Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.
877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com
*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829
by Tim Storm on November 11, 2009
Orange County, CA First Time Buyers using VA financing will be pleased to know that the First Time Home Buyer Tax Credit has been extended. For most home buyers, the tax credit has been extended through June 30, 2010, as long as the purchase contract has been signed by April 30, 2010. But for members of the Armed Forces who meet certain criteria, the extension goes out an extra 12 months.
Expanded Rules for Members of the Armed Forces to Benefit Orange County Buyers
For those members of the “Uniformed” services, or members of Foreign Service of the United States, or employees of the Intelligence Community, the following exception will allow for the extended deadline dates. Extended Duty is defined as “Official Orders outside the United States for at least 90 days during the period from 12-21-2009 to May 1, 2009.
First Time Buyer Tax Credit Deadlines for Extended Duty Borrowers
The tax credit dates are extended to include the following:
- Contract must be signed by April 30, 2009
- The transaction must be closed by June 30, 2009
This extension will help a lot of people. The tax credit was set to expire on November 3o, 2009. Now, with the expanded and extended rules, Orange County first time buyers will have plenty of time to find a home and close escrow. The Tax Credit is good for up to $8,000 or 10% of the sales price, whichever is less. Since there aren’t many homes in Orange County priced less than $80,000, most Orange County home buyers will get the full $8,000.
Income Limits Are Increased
The new rules have increased the income limits to $125,000 for Single tax filers and $225,000 for Married tax filers. This is quite a bit higher than the previous limits, and will help those buyers looking in the higher price ranges. The purchase price must be less than $800,000.
Orange County Buyers Should Get PreApproved
Orange County First Time Home Buyers should get PreApproved for a VA loan prior to shopping for a home. It is important to know what you will qualify for before getting too far into the home buying process. Also, sellers will not even accept an offer from a buyer unless the buyer has been PreApproved by a lender. PreApproval is a quick and easy process. The first step is to contact an Orange County Direct VA lender.
Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Trust One Mortgage Corporation for more information about an Orange County, CA home loan. 877-786-4243 x 7.
www.OCFHALoans.com
Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.
877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com
*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829
