VA Loans

mf — Tue, 24 Nov 2009 23:47:54 +0000

VA guaranteed home loans benefit veterans because they do not need to make a down payment and there is no upper limit or required cap on the income of the borrower. Without a down payment as security against foreclosure, lenders receive a certificate of guaranty from VA. In essence, as gratitude for honorable military service, the government is vouching for the veteran’s trustworthiness to repay his/her debt.

To determine eligibility, a military veteran, active duty person, or a member of the National Guard or selected reserves, must submit a VA Form 26-1880 along with proof of service (DD Form 214, a statement of active duty, or proof of participation in the national guard or reserves) to the VA Eligibility Center, P.O. Box 20729, Winston-Salem, NC 27120. Based on the applicant’s length and type of service, VA issues a certificate for each person determined eligible to apply for a VA guaranteed home loan.

The seller can contribute up to 4% of the home price for their non-recurring closing costs and impounds.
Veterans must qualify on full income documentation. PITI plus all other debt (second ratio) must be under 43% of their gross monthly income unless they meet the VA residual income qualifications. Current service members receive an allowance for housing and food and those figures can be “grossed up” 115% for income qualification.

Appraisers are assigned by VA and the lender orders the appraisal. Many lenders participate in a delegated underwriting program but some opt to let the VA underwrite the appraisal.

VA doesn’t have a minimum required credit score though some lenders might have a minimum. A 12-24 month history of decent and reasonable payment history is required.

Underwriting: All loans will be submitted to DU. Approve/Eligible decision is required. If refer/eligible, the brokers will submit the full credit package to the lender for underwriting.

Minimum FICO for manual underwriting will vary from lender to lender.

Maximum LTV:
Purchase 100% + funding fee
No cash out refinance 90% + funding fee
Cash out refinance 90% + funding fee
IRRRL(interest rate reduction refinance loan): maximum mortgage calculated based on unpaid principal balance & costs of refinance
Most lenders and mortgage brokers are easily approved to originate VA home loans; sponsorship by a VA-approved lender is all that’s required.

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With the new Good Faith Estimate requiring that all broker and lender fees go on line 1, together with the VA requirement that the loan originator can only earn a 1% fee, it is highly likely that when LOs originate a VA loan, their profit margin is tight if non-existent.

Should the VA allow for a higher percentage amount to be charged to the Veteran on line 1. of the new GFE?

How much would be a reasonable amount? Please break down your estimation with a math example. For example, loan amount is X. What are the standard fees typically charged with originating a loan that includes ALL lender AND ALSO all broker fees?

What percentage does that come to?

Do you believe VA will approve a change to allow for the higher amount shown in your math example?

National Association of Mortgage Fiduciaries » VA Loans

VA Loans