Residual Income and how it can affect your VA loan in Orange County

June 18, 2017 by Tim Storm

VA Residual Income is…

A safeguard established by VA to ensure you can afford the new loan payment, with any debt you currently have, and still have enough for food, entertainment and housing expenses (because eating dinner is important). The Veteran’s Administration has dubbed this leftover monthly amount VA Residual Income. In order to qualify a Veteran and their spouse for a VA loan, we must first calculate their gross monthly income. Then federal, state, and social security taxes, determined by the amount of dependents filed on the most recent tax return, are subtracted out. From this we get what is called Net Income, which is the amount taken home each month after taxes. After the net income is determined, the rest of the debts are deducted to reveal the Veteran’s residual income amount. In order below:

New proposed house payment (principle, interest, taxes, insurance, and Home Owners Association payment for Orange County VA approved condos.)
Maintenance of the house – using a factor of .14 cents per square foot of the home
Debts (monthly credit card payments, all installment and revolving accounts)
Child Care
Alimony or Child Support

A mortgage payment can put a significant strain on family finances. So borrowers looking to start the VA loan process must have a minimum amount of residual income depending on where they live and how many people live in the home.

Residual income must be equal to or more than the amount in the chart:

VA Residual Income by Region on all loan amounts $80,000 and higher
Family Size	Northeast	Midwest	South	West
1	$450.00	$441.00	$441.00	$491.00
2	$755.00	$738.00	$738.00	$823.00
3	$909.00	$889.00	$889.00	$990.00
4	$1,025.00	$1,003.00	$1,003.00	$1,117.00
5	$1,062.00	$1,039.00	$1,039.00	$1,158.00
Over 5	Add $80 for each additional member (up to a family of 7)

*For VA loans in Orange County we use the numbers from the West column to determine the Veteran’s residual income for Southern California loans.

How will it influence the loan decision?

Not meeting the residual income requirement should not trigger an automatic denial of a loan, but can be a deal breaker in most cases. This is a non-negotiable requirement that is in place to protect the Veteran from getting into a credit situation they cannot handle. Because each loan candidate’s particulars differ, their entire financial position is reviewed by a VA Direct Endorsed underwriter (the underwriter works for the lender – no VA). Common elements that are methodically reviewed will include your credit score, history and use of credit, employment history, liquid assets and/or down payment (if made, VA Funding Fee may be reduced). All of these areas in addition to the residual income calculation, will either strengthen or weaken the underwriter’s view of the file, and will further impede their decision to extend an approval or denial of the loan.

Truth be told, the bigger the loan amount the lower the chance that residual income will be a factor. And since property values are so high in Orange County, residual income rarely is an issue. A Veteran purchasing a home in Orange County who has a wife and two children will only need $1,117 in Residual Income. In reality, that is not really enough to cover food, clothing, and other potential problems that could arise when owning a home. Still, the Residual Income will always be reviewed to make sure the requirements set by VA are met.

Bottom Line

The Department of Veteran Affairs aims to keep Southern California home buying an affordable experience for all Veterans and their families. By having high 100% financing loan limits, flexible credit and income requirements, and aggressive loan pricing with no monthly mortgage insurance, the VA loan program is the best loan program available for Orange County home buyers. The first step is to talk with a local Orange County VA loan officer who can prepare custom VA loan scenarios and handle VA loan PreApproval.

Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.OrangeCountyVALoans.com. 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.

Filed Under: VA Purchase Loans Tagged With: VA Loan, va purchase, va residual income

Why getting Pre-Approved for a VA Loan should be your first step

January 30, 2017 by Tim Storm

Why is VA Loan Pre-Approval an important step in the home buying process?

Markets across the country, and undeniably in Southern California, report that the number of buyers on the hunt for a home largely out number the amount of homes currently for sale. In our highly competitive Orange County real estate market we find ourselves in today, getting pre-approved for a VA loan has become an essential component of making an offer on a home. Buying a home in Orange County is not an unobtainable dream for Veterans, but something special is needed to separate them from other house hunters. Being pre-approved by an Orange County VA lender has the power to separate your offer from any others submitted. It’s important to demonstrate to the seller that you are serious about buying, and have been thoroughly vetted to show that you are a responsible candidate. This is an essential step that must be completed prior to shopping for a home. Pre-Approval not only qualifies you for a VA mortgage, but approves you for the highest loan amount you can acquire with the lender. This gives you a legitimate handle on what you can reasonably afford while simultaneously instilling the confidence needed to stand out and win in the home buying process.

How does getting Pre-Approved work?

To begin the VA loan pre-approval process you’ll need to select an Orange County Loan Officer who specializes in VA financing that you trust to give you a fair deal. Once you’ve found the right fit, you’ll need to complete their loan application and provide them with what Freddie Mac calls the 4 C’s that will assist in the analysis of your situation:

Capacity: Your current and future ability to make your payments (income, job history, employment verification)
Capital or Cash Reserves: the money, savings and/or investments you have that can be sold quickly for cash (bank statements)
Collateral: The home, or type of home, that you would like to purchase (where you would like to buy, in proportion to what is in your price range)
Credit: Your history of paying bills and other debts on time (credit pulled, debts considered, lates’ recorded, ect.)

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”-Freddie Mac’s “My Home” section of website

Once the information is received and reviewed, your VA Loan pre-approval letter will be issued. The letter will show the highest VA loan amount you have been approved to receive from the lender. Your real estate agent can use this to show you homes at or below the amount then use it further when submitting an offer.

Bottom Line

Many potential home buyers who are Veterans overestimate the down payment ($0 down to $679,650) and credit scores needed to qualify for a mortgage today. Getting Pre-Approved will give you peace of mind and a clear path to buy the home of your dreams!

Authored by Tim Storm, an Orange County, CA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation NMLS #2289. My direct line is 714-478-3049. I will prepare custom VA loan scenarios that will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Filed Under: VA Purchase Loans Tagged With: pre-approval, pre-approval va loan, VA Loan

2017 Orange County VA Loan Limit Increase

January 20, 2017 by Tim Storm

VA has announced the increase of the 2017 VA loan limits.

What is the “VA loan limit“?

The Veterans Administration (VA) sets a limit of what a qualified Veteran buyer, with full entitlement, can borrow within each county without making a down payment. They calculate this limit based on the average price a home is selling for in that county. That means that in places like Orange County, CA the limit will be significantly higher than in a county with lower housing prices like Riverside County. This does not mean that you cannot purchase a home at a higher sales price (that would be a Jumbo VA Loan), just that you as the buyer, will be responsible for coming in with 25% of the difference between the loan limit and the purchase price. And if you think about it, that is a very favorable formula for those Veterans who want to purchase a home for a price higher than $636,150. Jumbo VA loans in Orange County, CA are fairly common.

“VA does not set a cap on how much you can borrow to finance your home. However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you.” -Department of Veterans Affairs website

What the loan limit increase means for Orange County and Los Angeles County VA Buyers

This is an encouraging change for many prospective VA qualified buyers that have the income, satisfactory credit, appropriate debt-to-income ratios but may not have the savings for a conventional or FHA loan program. The VA loan limit for Orange and Los Angeles Counties is now at $636,150. That is up $10,650 from last years limit of $625,500. As housing prices increase in this popular area it is a welcome opportunity.

Let’s look at the highest purchase price for the new loan limit, showing a Veteran using benefits for the first time w/ 100% financing:

Purchase Price: $636,150 (<–Anything higher than this, the buyer will need a down payment equal to 25% of the difference between the loan limit and purchase price = Jumbo VA Loan)

Down Payment 0%

Base Loan Amt: $636,150

VA Funding Fee 2.15%: $13,677 – (assuming this is first time use for Regular Military with no Disability waiver)

Total VA LA: $649,827

We see that with the VA loan limit increase this year buying in Orange County or Los Angeles county now becomes a tangible option for more borrowers that are ready to take the leap into homeownership.

Do I have to have a VA funding fee? If so, what is it?

The VA Funding Fee is a set percentage, traditionally combined into the final loan amount, that will go directly to VA to help cover any losses accrued by loans going into default. The fee amount will change to accommodate the borrower’s unique circumstances. Some common factors to consider when calculating the amount would be purchase price, the nature of the borrower’s service, if they’ve had a previous VA loan, surviving spouse of a soldier, and if they choose to bring in a down payment. There are some Veteran’s that will not have a VA Funding Fee, if they receive service connected disability benefits from VA making them Exempt from the Funding Fee. Refer to the tables below to see which funding fee that would apply to your buying situation:

VA Funding Fee for Regular Military Borrowers
Down Payment	1st Use Funding Fee	Subsequent Use Funding Fee
None	2.15%	3.30%
5% – 10%	1.50%	1.50%
10% – Higher	1.25%	1.25%

VA Funding Fee for Reserves & The National Gaurd
Down Payment	1st Use Funding Fee	Subsequent Use Funding Fee
None	2.40%	3.30%
5% – 10%	1.75%	1.75%
10% – Higher	1.50%	1.50%

Bottom Line:

VA is certainly staying true to their “I CARE” values as they work to steadily adjust with the economy, and benefit the Veteran and military service members. They will effectively help many families to realize their dream of owning a home with an Orange County zip code this year.

Filed Under: VA Purchase Loans Tagged With: orange county va loans, VA financing, VA Loan, va loan limit

Getting A VA loan after bankruptcy or foreclosure

July 18, 2016 by Tim Storm

Getting a VA loan after bankruptcy or foreclosure is really not that difficult for Veterans in Orange County, CA. But many Veterans do not realize how quickly the VA loan can become a viable option after a major credit event.

Foreclosure and bankruptcy are definite obstacles for many Veterans trying to buy a home, but with the VA mortgage program it is possible to maneuver around these obstacles more quickly than with other types of financing. Bankruptcy’s and foreclosures only require a two year waiting period before qualifying for a VA loan.

Waiting Period After Bankruptcy

There are two primary type of bankruptcy that an individual can file for. A Chapter 7 bankruptcy seizes an individuals assets and liquidates their value to satisfy the necessary debts. All debts are “discharged” through the bankruptcy. The VA program requires a waiting period of two years after a Veteran discharges a Chapter 7 bankruptcy. A Chapter 13 bankruptcy is a court-mandated process that restructures an individual’s debt and sets up a repayment plan. Chapter 13 repayment plans can take anywhere from three years to five years to complete. The VA loan program will allow a Veteran to qualify for VA loan after only a 12 month wait period, starting from from the date of the filing. The Veteran will need to prove that they have been making their Chapter 13 payments on time, but this is still a very opportunity for a Veteran to purchase a home. A potential borrower with Chapter 13 bankruptcy must also get permission from the bankruptcy trustee before taking on an additional monthly payment. It’s also important to note that it is possible to refinance into a VA loan and pay off the Chapter 13 with proceeds from the loan.

FICO Score Requirements for the VA Loan Program

Many VA lenders will look for a credit score of at least 620 when qualifying for a VA loan, but there are lenders who will go down to a 580 FICO score. Still, it is important to begin working on credit restoration immediately after the bankruptcy is discharged. To minimize the damage, it is very important to put a lot of effort into repairing and strengthening your credit score during their waiting period prior to qualifying. And definitely do not have any late payments after the bankruptcy is discharged.

VA Loan After Foreclosure or Short Sale

A foreclosure or short sale are also significant derogatory credit events. Most loan programs require wait periods of up to 7 years before qualifying for a loan. But VA only requires a two year wait period from the date of the foreclosure or short sale. The “clock” can start earlier than the actual recorded date of the foreclosure if the mortgage for the property was included in an already discharged bankruptcy and the Veteran can prove they moved out of the property prior to the bankruptcy discharge date.

Not all lenders underwrite the same. It is beneficial to meet with a local Orange County VA lender to ensure you are on the proper path toward future qualification. The VA loan specialist you consult with should be able to prepare custom loan scenarios that will provide you with the numbers you’ll need to know about before you start the home buying process.

Filed Under: VA Mortgage, VA Purchase Loans Tagged With: bankruptcy, foreclosure, VA Loan

Do You Qualify for a VA Loan in Orange County Right Now?

July 14, 2016 by Tim Storm

Do you qualify for a VA loan right now in Orange County, CA? Do you know what it takes to qualify? Orange County has one of the highest concentrations of military Veterans in the country and yet so many do not realize they are eligible for the VA loan program or even know what it takes to get qualified. First, it is important to understand the basics. What is the Debt to Income ratio and how high can it go? What are the FICO score requirements? What is Residual Income and how does it factor into qualifying for a VA loan? How long do you have to wait after a bankruptcy or foreclosure before qualifying for a VA loan? What are the VA loan limits in Orange County, CA?

Debt to income ratio

The Debt to Income ratio is a calculation that will compare a borrower’s monthly debts to their monthly gross income. The guideline that the Department of Veterans Affairs has set for VA lenders in regards to the Debt to Income ratio is 41%. This means that 41% of the borrowers’ gross monthly income can go towards the total payment (PITI), along with any car payments, installment loan payments, and credit card payments. VA also includes child care in the monthly debt calculation. It’s important to understand that 41% is only a “guideline”. VA does not have a max Debt to Income percentage. It is not unusual for a VA loan to get approved even if the Debt to Income ration is as high as 60%. However, the higher the DTI the more important compensating factors will be. What is more important on a VA loan that the Debt to Income ratio is “Residual Income.”

What is Residual income?

VA loans default at such a low rate partly because of the “Residual Income” requirement. Residual income is the monthly remaining income after a borrower has fulfilled all of their current credit obligations, including the mortgage payments, utility bills, childcare, car payments, etc. The amount of residual income required for a VA loan will vary based on the borrower’s family size and their geographical location. Your Orange County VA lender should take a close look at your Residual Income during the qualifying stage to make sure you qualify for the loan you are applying for.

FICO score requirements

The Veterans Administration is not a lender. The VA acts as an insurer on VA loans and sets the standard guidelines for underwriting a VA loan. How lenders interpret those guidelines varies from lender to lender. Credit score requirements definitely vary from lender to lender. Most lenders have a minimum score benchmark of 620. Some require higher FICO scores on Jumbo VA loans. Some may even lend at a lower score (like 580). The bottom line is if a lender won’t approve your loan request based on your FICO score, it is worth looking at other lenders to see if you can find someone that will approve your request.

How long do I have to wait after a foreclosure/bankruptcy?

Many borrowers think that a foreclosure or bankruptcy will prevent them from being able to get a VA loan, which is not the case. With a little bit of effort put into credit repair after a major derogatory event, a Veteran can qualify for a VA loan only 2 years after a foreclosure or 2 years after a bankruptcy has been discharged. A 2 year wait period makes VA one of the most flexible loan programs available. Even better, there is no waiting period after a short sale.

VA loan limits

VA county loan limits in California vary from county to county and typically follow the limits set by the Federal Housing Finance Agency (FHFA). The VA will guaranty 25% of a VA loan amount for lenders up to the county limit, which helps to reduce the risk of offering Zero Down home financing to Veterans. The VA county loan limit in Orange County is $679,650 (2018 Loan Limit). It is possible to get a VA loan with a loan amount higher than the county loan limit, but a down payment equal to 25% of the difference between the purchase price and the county loan limit will be needed. A VA loan that is above the 100% financing loan limit is known as a Jumbo VA loan. The Jumbo VA loan program makes it possible for Veterans in Orange County to purchase homes priced higher than $679,650 with a lower down payment than other types of financing. For example, if a Veteran in Orange County is purchasing a home for $1,000,000 in Irvine, which is $320,350 over the $0 down loan limit of $679,650, they would need a down payment of $80,087, which is 25% of $320,350. The VA loan would be $919,912. There is not currently another loan program that would allow for a $1,000,000 purchase with 8% down and have no monthly mortgage insurance.

Filed Under: VA Purchase Loans Tagged With: qualify for va loan

Benefits of the VA Home Loan for Orange County Veterans

June 3, 2016 by Tim Storm

The benefits of the VA Home Loan for Orange County Veterans are numerous. The VA loan program is an amazing mortgage program that has less restrictive guidelines and underwriting flexibility compared to any other loan program. Some of these benefits include no down payment, no monthly mortgage insurance and competitive fixed interest rates.

VA Loan Benefits

https://www.youtube.com/watch?v=kwzuRd7vdLQ

No Down Payment Required

One of the biggest and most noticeable benefits to the VA loan program is that there is no down payment up to county loan limit. For example, in Orange County the VA loan limit is $679,650, which means a veteran is able to get a VA loan with zero down payment up to a $679,650 purchase price (2018 loan limit). Veterans are able to get a VA loan above the limit, but they would then have a down payment as a result. A loan above the Zero Down limit is called a Jumbo VA Loan and is also fairly common in Orange County due the the high cost of homes.

Competitive Fixed Interest Rates on VA Loans

VA Loans tend to have lower fixed rates than other types of loan programs. VA interest rates are typically .25% or more lower than comparable rates for Conventional financing. These lower rates also make it easier for the lender to offer a lender credit to help cover closing costs. By adjusting the interest rate slightly higher, a lender credit can save the Orange County Veteran thousands of dollars in out of pocket expenses when purchasing a home. Also, the VA loan does not have a prepayment penalty, making it easy to take advantage of the VA Interest Rate Reduction Refinance Loan (VA IRRRL) if rates drop.

The VA loan program is also one of the only programs that allows for loans to be assumable when purchasing a home. This means that when a home is purchased, the buyer can take over the sellers mortgage under the same terms. Besides FHA, no other loan program provides this benefit.

No Monthly Mortgage Insurance

No monthly mortgage insurance is one of the best benefits of a VA loan. For other types of financing, including FHA and Conventional loans, when the down payment is less than 20% of the purchase price there will be some form of mortgage insurance. With FHA, no matter what the down payment is there will be monthly mortgage insurance. for example, an Orange County home buyer purchasing a home for $600,000 would need a 3.5% down payment with FHA. That is a $21,000 down payment. VA would have No Down payment. On the FHA loan the mortgage insurance would be calculated using a factor of .85% of the loan amount divided by 12. The monthly mortgage insurance would be approximately $417, paid every month. An Orange County Veteran purchasing the same home would have no monthly mortgage insurance, saving $417 per month versus the FHA loan.

Underwriting and Credit Flexibility

The VA loan program is also the most flexible home loan program when it comes to credit and debt to income ratios. Many lenders will close VA loans for borrowers with FICO scores as low as 580. Also, VA financing is allowed only 2 years after a bankruptcy or foreclosure. FHA requires 2 years after a bankruptcy and 3 years after a foreclosure. Conventional loans require a 4 year wait after a bankruptcy and 7 years after a foreclosure.

Cash Out Refinance using the VA Loan

A great benefit of the VA loan is as a washout refinance. VA allows cash out up to 100% of the property value. For an Orange County Veteran looking to do home improvements, being able to pull cash out to 100% of the new appraised value means the home improvements can be completed much sooner than someone in another type of loan program. FHA allows cashout to 85% of the property value, and conventional financing only goes to 80%.

Understanding your loan options is important. A Veteran should always consider the VA loan as their first option. There are few scenarios where VA will not be better than another type of loan program. To see the numbers, have your Orange County VA loan officer prepare a Side by Side Analysis comparing the VA loan to other loan options, which will help the Veteran see the numbers and make the correct home financing decision.

Filed Under: VA Purchase Loans, VA Refinance Loans Tagged With: advantages of the VA loan, va loan benefits

VA Loan Calculators | are they accurate for California Veterans?

May 18, 2016 by Tim Storm

Are VA loan calculators found on websites accurate? While a mortgage calculator can help in getting a quick idea of what a payment would be, in most cases they will not be accurate enough for what will be one of the biggest purchases you will make in your lifetime.

PITI – Principal, Interest, Taxes, Insurance

The total monthly payment on a VA loan is made up of a combination of several factors, including loan principal, interest, property taxes, homeowner’s insurance, and in the case of a condo, the Home Owners Association Dues.

Many mortgage websites contain a loan calculator that can be used to calculate an estimated monthly payment. Most of these calculators take into account most of the important values like purchase price, estimated down payment, and estimated loan term and interest rate. While these values play a big role in the calculation of your monthly payment, there are other factors that are involved in your monthly payment that these calculators either assume or don’t include.

Factors that can Affect the VA Loan Payment

The first of these factors that play a role in shaping a VA monthly payment are the calculation of the VA Funding Fee. Knowing whether the Funding Fee is 1.25%, 1.5%, 3.3%, or 0 is something that most online calculators do not account for. Whether or not a veteran has previously had a VA loan or if they are a disabled veteran factors heavily into the size of the VA funding fee, or whether there is a VA Funding Fee at all.

Other factors that play into determining a monthly payment include the property tax rate of the property (which will vary from one geographic region to the next) as well as the Homeowner’s insurance (earthquake insurance, flood insurance, rural area, etc). Each of these factors can vary by the area that you live in and may be different than the assumptions that the calculator is using.

What Does a California VA Loan Scenario Look Like?

With my clients I will always prepare a custom VA loan scenario, which will have a thorough breakdown of the Veterans payment, closing costs, and amount needed to close. Knowing these numbers in the early stages of the home buying process is crucial. I prepared a quick “screen capture” video which will show you what a VA loan scenario looks like. Click Here for the video.

While researching loan options and gathering information it is extremely beneficial to get an accurate loan scenario from a California VA Loan Specialist. A loan scenario will provide a full breakdown of all the factors that will play into shaping a VA loan and the monthly payment as well as being customized to your specific situation. A complete loan scenario will also give the California Veteran an accurate estimate of the amount of money to close to close, if any.

Filed Under: VA Purchase Loans Tagged With: orange county va loans, VA loan calculator, VA loan factors, VA Loans

CalVet Home Loan versus VA Home Loan | Which is Better?

May 16, 2016 by Tim Storm

California Veterans can choose between the CalVet home loan or the VA home loan. Both programs offer Zero Down Financing. But which program is better? It depends on several factors. The type of property you are purchasing, the purchase price of the home, and your long term plans with the home. A home loan is a major decision and it is important to select the right loan program for your situation. For California Veterans, the two primary programs are the Calvet and VA home loan programs. While both programs are very similar, there are important differences to consider before selecting the best program for you.

Eligibility for a CalVet Home Loan versus a VA Home Loan:

Both programs require a period of active duty service of at least 90 days as well as a discharge status other than dishonorable. CalVet is only available to veterans and active duty military living in California, while VA is available nationwide.

CalVet Home Loan:

When using the CalVet program, the desired home is purchased by CalVet and then sold to the veteran using a contract of sale. CalVet holds legal title, while equitable title is given to the veteran occupying the property. This process still gives veterans several ownership rights including property tax and mortgage interest deductions. Since CalVet holds the legal title, they can obtain a lower group rate for homeowner’s insurance. With CalVet holding legal title to your property, it can make it difficult to refinance or obtain a second mortgage in the future. CalVet does not refinance their loans, so if a Veteran wishes to takes advantage of lower rates or pull cash out based on increased equity, they will need to refinance out of the CalVet loan. The CalVet loan program is very flexible when it comes to purchasing manufactured homes, and is the better option if the manufactured home is on leased land.

VA Home Loan:

With a VA loan, the veteran receives full ownership rights and legal title to the property, just like most other types of home loan programs. VA also allows for more flexibility in terms of occupying the property. With a VA loan the veteran must initially occupy the property, but after a few years they are able to live elsewhere and rent out the property. Compared to CalVet, which requires the purchased property to be the primary residence until the loan is fully repaid. Also, VA loans are much easier to refinance. VA offers the Interest Rate Reduction Refinance Loan (IRRRL), which allows the Veteran to refinance their loan to lower their interest rate and payment without doing a new appraisal and without supplying income documentation. Also, while the VA loan program does allow for financing of manufactured homes there are not many lenders who will fund a VA loan on a manufactured home, especially if it is on leased land.

County VA Loan Limits and Loan Entitlements:

The size of the loan you need will likely influence which program better suits your needs based on which county you live in. In Orange and Los Angeles counties the current VA loan limit is $625,500 whereas in Riverside County the current loan limit is $417,000. It is even possible to get a Jumbo VA loan that is above the county $0 down loan limit by coming in with a down payment. VA loans in the $800,000 to $1,000,000 range are not unusual.

Understanding your options are very important. Make sure to research both VA and CalVet to make sure you are choosing the right loan program for your needs.

Filed Under: VA Purchase Loans Tagged With: calvet, orange county va loan, VA Loan, va versus calvet

Is An Earnest Money Deposit Needed for VA Financing?

January 22, 2016 by Tim Storm

Is an Earnest Money Deposit needed with VA Financing? This is a question that comes up quite a bit with Veterans using VA financing to purchase a home in Orange County, CA. Since no down payment is needed for a home purchase up to a price of $625,500, some would wonder why a deposit is even needed. Especially in a situation where the loan will be a VA No No. With a VA No No, not only is there no down payment, but the closing costs and prepaid expenses are also paid, either by the seller, the real estate agent, or the lender through a lender credit. The answer is “Yes”, an Earnest Money Deposit is necessary. To understand why it is important to understand the true purpose of the Earnest Money Deposit, or EMD for short.

Purpose of the Earnest Money Deposit

By providing an Earnest Money Deposit as part of the initial offer you are showing the seller how serious you are. The EMD is held in an escrow account, not by the seller or real estate agent. Imagine if you owned a home and had three offers to purchase your home for $500,000. The first offer comes in with a $15,000, or 3% of the purchase price. The second offer comes in with an EMD of $7,500. The third offer comes in with a $1,000 EMD. As the seller you would most likely feel that the two offers with an EMD of $15,000 and $7,500 are more serious, and may have a better chance of closing than the offer with only a $1,000 EMD. Unfortunately, the offer with a $1,000 EMD may not even receive a counter offer. In order to let the seller know you are serious, the buyer will need to include an Earnest Money Deposit. The amount needed will vary from transaction to transaction. The real estate agent will most likely be able to give advice on the amount needed.

Is the Earnest Money Deposit Refundable?

The Earnest Money Deposit is money that is held in escrow and will go towards the funds needed by the buyer to close escrow. Even with a VA loan with no down payment, there may be some funds needed to close. Let’s assume an Orange County Veteran is purchasing a VA approved condo in Mission Viejo for $600,000 with no down payment. Their EMD is $10,000. All closing costs and most of the prepaid expenses are covered by a lender credit, leaving just $2,000 needed from the Veteran to close escrow. Since they already have $10,000 deposited to the escrow company, they will received a REFUND of $8,000 when they close escrow on their new home.

Is the Earnest Money Deposit at Risk of Being Forfeited?

There is always a risk of the EMD being forfeited, especially of the contract is poorly written. By using an experienced real estate agent who is familiar with working with Veterans using VA financing, contingencies can be written into the contract that will protect the Veteran deposit from being forfeited. A contingency for inspections, loan approval, and the appraisal will all help to protect the EMD. The VA Addendum, which is included with the sales contract, will help to protect the Veterans deposit in the event that the VA appraisal comes in low.

Knowing and understanding how the EMD works is important for any home buyer. For Veterans, it just add’s to the importance in working with experienced real estate professionals who are very familiar with the Jumbo VA loan program in Orange County, where home prices and VA loan limits are higher than most parts of the country.

Filed Under: VA Purchase Loans Tagged With: earnest money deposit, emd, VA Loan

VA Loan after Bankruptcy | Only 2 Year Wait for Orange County Veterans

January 14, 2016 by Tim Storm

Getting a VA loan after bankruptcy is not as difficult as many think. While most loan programs require anywhere from a 3 year (FHA) to 4 year (Conventional) to even 7 year (some Jumbo programs) wait period after a bankruptcy, the VA program only requires a 2 year wait after the discharge of a bankruptcy.

VA Loan After Chapter 7 Bankruptcy

Depending on the type of bankruptcy, the wait period could even be shorter. For a Chapter 7 bankruptcy, which is total discharge of debts, 24 months must pass from the date of discharge to the loan approval. And while some VA lenders will have “overlays”, or their own guidelines which may be tougher than standard VA guidelines, an eligible Orange County Veteran who knows how flexible VA can be will have a better shot at buying a home sooner rather than later by working with a lender with minimal VA guideline overlays.

Another important thing to know is that many VA lenders will allow a two year wait for loans under $417,000. But for VA loans over $417,000 they will require a longer wait. For Veterans in Orange County, where home prices are high and where the 100% financing limit in 2016 is $625,500, working with an Orange County, CA VA lender who will allow only a 2 year will be the difference between buying a home and not buying a home in 2016. This means it is possible to purchase a condo, within a VA approved condo project in Orange County, only two years after a discharged bankruptcy.

VA Loan Immediately After Chapter 13 Bankruptcy

A Chapter 13 bankruptcy is a restructuring of debt. In most cases the debts are not “discharged”, but are instead paid off over a specified time period. For example, if a Veteran has $25,000 in credit card debt, the court may create a payoff plan over a 3 or 5 year time period. It is actually possible to get a VA loan before the Chapter 13 is even discharged. If a perfect 24 month payment history in the Chapter 13 is proven then the Veteran can get VA financing. It is even possible to use a VA cashout refinance to pay off a Chapter 13. For someone looking to buy a home, there is no wait period after the discharge of the bankruptcy if they were in the Chapter 13 for at least two years and had a perfect payment history. (If you are in chapter 13, do not miss a payment.)

VA Loan After Foreclosure

The VA guideline for getting a loan after a foreclosure mirror their bankruptcy rules. Only a 2 year wait period is required. Even for loans oner $417,000. This is important to know because a very common overlay for VA lenders to is require between 4 and 7 years wait after foreclosure on for loans over $417,000.

Jumbo VA Loans and Bankruptcy

Understanding what a Jumbo VA loan is and how it enables a Veteran to finance a high priced home even after bankruptcy or foreclosure can be beneficial for a Veteran who may have had a rough financial stretch a few years ago. While most Jumbo loan programs are very restrictive when it comes to prior bankruptcies and foreclosures, the VA Jumbo program follows the standard VA guidelines of only a 2 year wait. Again, not all lenders follow the standard guideline, so knowing the guidelines and finding a local Orange County VA lender who follows the guidelines is important.

FICO Score Requirements for VA Loans

Technically VA does not have an official guideline for a minimum FICO score. Most lender will not go below 620 for loans under $417,000 and 640 for loans over $417,000. However, there are lenders who will go down to a 580 FICO score.

Filed Under: VA Purchase Loans Tagged With: bankrupty, fico score, foreclosure, short sale, va loan after bankruptcy