VA Loan debt calculation different than FHA

The guidelines require that an estimated cost of living in the home be considered when calculating debt ratios and monthly expenses to decide if a veteran can qualify for the loan.  VA loans differ from other government backed loans in this regard.  The VA wants to be sure the military member can afford the housing expenses.

To estimate this follow the steps below.

• Use the MLS listing or county records showing correct square footage.
• Calculator

1. Find your listing sheet or county record (they should be about the same square footage), and go to the part that shows the square footage. Do not include unheated spaces such as a garage.
2. Multiply the total square footage of your home times the 14-cents-per-square-foot VA allowance for an estimate of monthly utilities and maintenance. Example: 2400 times 14 cents per foot equals $336.00. This is the monthly amount that would be used in the VA expense worksheet for shelter expense.
   
   
   The use of an experienced realtor is invaluable in helping you find just the right property within your budget.

Veteran's Administration (VA) loans allowable closing costs

There is often confusion involved in what fees the VA borrower may pay at closing.


The following  fees are allowable.

·       Lender's 1% Flat Charge - Maximum 1% of the loan amount - The lender’s flat charge is intended to cover all of the lender’s costs and services which are not reimbursable as “itemized fees and charges.” For Interest Rate Reduction Refinancing Loans (IRRRLs), this fee may not exceed 1 percent of the existing VA loan balance of the loan being refinanced PLUS the cost of any energy efficient items LESS any cash payments from the veteran. ·       Actual Cost of Itemized Fees and Charges From Third Party Services:- A veteran may pay reasonable and customary amounts for the following services. Whenever these itemized fees relate to services performed by a third party, the veteran MAY ONLY PAY the actual amount charged by the third party. o    Appraisal and Compliance Inspection Fee required for loan application o    Credit Report Fee o    Recording Fee o    Survey Fee o    Flood Zone Determination Fee o    Title Examination and Title Insurance o    Special Mailing Fees for Refinancing Loans o    Mortgage Electronic Registration System (MERS) Fee ·       Real Estate Taxes ·       Home Owners Insurance

Reasonable Discount Points used to permanently buy down the interest rate 


The following fees CAN NOT be charged to the VA borrower:

This list is LARGER - The following fees must be covered by the lender out of the 1% Flat Fee charge. If an origination fee is charged, lenders may NOT assess veterans any other fees, other than the allowable fees listed above. If an origination fee is not charged, the lender may assess other fees as long as the aggregate amount does not exceed one percent of the loan.

·       Lender’s appraisals – when the lender or seller request reconsideration of value (not when the appraisal is required for loan application per above).

·       Lender’s inspections, except in construction loan cases

·       Loan closing or settlement fees

·       Document preparation fees

·       Preparing loan papers or conveyance fees

·       Attorney’s services charged by the lender. This DOES NOT include attorney charges for title work and/or veteran seeking independent legal representation.

·       Photographs

·       Interest rate lock-in fees

·       Postage and other mailing charges, stationery, telephone calls, and other overhead

·       Amortization schedules, pass books, and membership or entrance fees

·       Escrow fees or charges

·       Notary fees

·       Commitment fees or marketing fees of any secondary purchaser of the mortgage and preparation and recording of assignment of mortgage to such purchaser

·       Trustee’s fees or charges

·       Loan application or processing fees

·       Fees for preparation of truth-in-lending disclosure statement

·       Fees charged by loan brokers, finders or other third parties whether affiliated with the lender or not

·       Tax service fees

·       Brokerage Fee - Fees or commissions charged by a real estate agent or broker in connection with a VA loan

·       Prepayment Penalties - A veteran refinancing his or her existing mortgage cannot use loan proceeds to pay prepayment penalties of the existing lien. A veteran who purchases a property with a VA loan cannot pay prepayment penalties required to be paid by the seller as a payoff requirement on existing liens.

·       HUD/FHA Inspection Fees for builders - If the veteran is purchasing proposed construction in which the dwelling was constructed under HUD supervision, the cost of any inspections or re-inspections must be borne by the builder or sponsor and CANNOT be charged to the veteran-purchaser. This includes:

o    Re-inspections by VA or HUD of onsite or offsite work for which an escrow agreement was established, and any additional re-inspections deemed necessary by VA to assure conformity with VA regulations.

As you can see from the list above, it's always a good idea to use a realtor familiar with the needs of the VA borrower so they can negotiate with the seller to help pay for the non-allowable VA fees at closing.

VA Loan Funding Fee

You may wonder what a VA funding fee is.  The funding fee is a guarantee fee charged to the VA. Department of Veterans Affairs (VA)  a federal agency which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.  So, they pool the money from each loan and then use the money towards any defaults.


Now, the funding fee varies based on the circumstances of the veteran or military member applying for the loan, the type of transaction and amount of down payment. All funding fees can be financed into the loan amount so no out of pocket money is required to pay this up front.
Veterans with a service related disability of 15% or more are exempt from these fees so they do not have a funding fee.


Below is a table for the funding fee as of today.


Purchase Transactions:

Type of Veteran	Down Payment	First Time Use	Subsequent Use for loans from 1/1/04 to 9/30/2011
Regular Military	None 5% or more (up to 10%) 10% or more	2.15% 1.50% 1.25%	3.3%  * 1.50% 1.25%
Reserves/ National Guard	None 5% or more (up to 10%) 10% or more	2.4% 1.75% 1.5%	3.3%  * 1.75% 1.5%

Cash-Out Refinancing Loans:

Type of Veteran	Percentage for First Time Use	Percentage for Subsequent Use
Regular Military	2.15%	3.3% *
Reserves/ National Guard	2.4%	3.3% *

* The higher subsequent use fee does not apply to these types of loans if the veteran’s only prior use of entitlement was for a manufactured home loan.

Other Types Of Loans:

Type of Loan	Percentage for Either Type of Veteran Whether First Time or Subsequent Use
Interest Rate Reduction Refinancing Loans	.50%
Manufactured Home Loans	1.00%
Loan Assumptions	.50%

VA loans may be used to purchase or refinance a property.

VA Occupancy Requirements

VA loans require the home be the primary residence. The military member who qualified for the loan using his/her benefits must move into the property within 30-45 days.  Always before the first payment is due.  If the member is on active duty and deployed the spouse may meet the requirement by moving into the property.  However, the same is not true of other family members. VA rules specifically require the member and/or spouse occupy the premises.

Eligibility for VA loans

Okay, I've recently had a lot of loans for military members. There's always a question about the eligibility requirements. I wish this was easy and cut and dried but it isn't so I'm going to try and explain as easily as possible. 


Basically the following groups have eligiblity:

• Veterans
• Active duty 
• Reservists/National Guard members
• Some surviving spouse

However, you need to obtain a Certificate of Eligibility from the VA to show your benefits.  To apply, you need to supply a copy of your DD-214 or sometimes the lender can obtain it online for you.

Wartime - You must have at least 90 days on active duty and been discharged under other than dishonorable or discharged for a service connected disability.

Peacetime - You had to serve at least 181 days of continuous active duty and been discharged under other than dishonorable or discharged for a service connected disability.

Active Duty Personnel - If you are now on regular duty (not in active duty for training) you're eligible after having served 181 days (90 days during the gulf war) unless discharged or separated for a previous qualifying period of active service.

Reserve and National Guard - Basically you need 6 years of service in the Reserves or National Guard (a member of an active unit, attending required weekend drills and 2-week active duty training) and 

Honorable discharge, retired or transferred to the Standby or Ready Reserves after honorable service OR continue to serve in the Selected Reserves.

Spouse - An unremarried spouse of a veteran who died while in service or from a service connected disability or a spouse of a serviceperson missing in action or a prisoner of war. Also a surviving spouse who remarries on or after they turn 57 may be eligible (this can vary by lender).

So, that pretty much covers the subject of eligibility.  If you have questions leave a comment, I'll try and answer it for you.

First Post

Okay, so I'm a little late coming to the game of blogging.  This is going to be my first post.
My goal is to try and answer some of the frequent questions I get from borrowers and first time buyers. There are so many that I'm going to just do a brief one each posting.  If you have questions just ask and I'll do my best to answer them for you.  As you know today's mortgage climate is like walking a tightrope over a mine field. The guidelines and rules change everyday, I'll do my best to give you up to the minute information.  Keep checking back because as I said, it's a moving target.