VA Loan, Best Interest Rate Available. Done by a Veteran Loan Officer (Lee Duran).
No Down Payment, Period.
No Mortgage Insurance, Period.
Great Interest Rates, Period.
If you are reading this page, odds are you are a United States Armed Forces Veteran.
Thank you for your Service. Now lets get you started.
First thing we will need is your DD214, with this we can get your “COE” Certificate of Eligibility. This can be done by contacting the Veterans Administration, no worries I will do it for you.
The VA loan is not given by the Veterans Administration, the VA loan is insured by the VA.
The VA insures 25% of loan limit and because of this there is no need for mortgage insurance.
The Loan limit in San Bernardino County and Riverside County is $424,100 so the VA insures $106.025.00. There are many different Loan limits and they can be seen here for the entire United States Link. This number is very important, especially if you want to buy a home in Corona, California or Rancho Cucamonga, California.
This does not mean that that $424,100 is the max you can borrow with a VA loan, it means is the max you can borrow with zero down. You can borrow more you just have to come in with 25% of the difference. For example … if you wanted to borrow $500,000 then the first $424,100 is covered by the VA at zero down, so the difference 500,000 – 424,100 = 75,900. The number 75,900 must be multiplied by 25%…. 75,900 x 25% = 18,975.
So you can buy a $500,000 house in San Bernardino and Riverside County for $18,975.00 with a VA loan. This number is very important, especially if you want to buy a home in Corona, California or Rancho Cucamonga, California.
The reason a VA loan has no mortgage insurance is that the VA is basically providing the insurance.
On any loan the bank is concerned with risk. The less money down the greater the risk, and to the contrary the more money down the less the risk. The bank is not in the business of taking homes that are in default back but if they have to then there is a cost to do this… first the months of missed mortgage payments lets say $2,000 x 6 months = $12,000, then there a legal fees for foreclosure, lets say $20,000, then there are repair fees and sheriff eviction fees…lets say $3,000. Obviously it is much more complicated than this , total fees $35,000 then the bank can resell the house. In an FHA loan Mortgage Insurance is mandatory. In an Conventional loan if you put 20% down then there is no mortgage insurance but if you but any less then Mortgage Insurance is mandatory.
If you were buying a $500,000 house with a conventional loan 20% would be $125,000 in order to have no mortgage insurance. Even if you did this the VA interest rates are still much better. If you are a veteran then my goal is to get you the best interest rates available.
My Friend Johnny Joey Jones tells about the VA loan done right.
VA funding Fee
The only downside to a VA loan is something called the “VA Funding Fee”.
If you are “service connected” then the VA funding fee is waived. You can see the funding fee tables HERE.
As a general rule the VA funding fee is 2.15% first time use and 3.3% for every use there after.
So lets take the $424,100 loan limit in San Bernardino and Riverside County and multiply that times the 1st time use amount of 2.15% so $424,100 x 2.15% = $9118.15. That will be the cost to use the VA loan.
Lets say it is the second time use then $424,100 x 3.3% = $13,995.30. This is the cost for the second and any use there after. This number is very important, especially if you want to buy a home in Corona, California or Rancho Cucamonga, California.
Is it worth the cost… In my humble opinion YES.
Here is why, on a VA loan the interest rate is usually .5% to .75% better than a conventional loan which at $424,100 translates into $100 – $200 savings a month.
$200 a month x 12 months is $2,400 a year. $2,400 x 10 years is $24,000. $2,400 x 30 years is $72,000 savings because of the best rate available on a VA loan. The VA funding fee is added to the loan and is not an fee that must be paid at closing so the interest on the fee is usually tax deductible. The VA loan has many great reasons to use it but… if you have an in experienced loan officer then there are difficulties. NO worries you are with me… = NO DIFFICULTIES.
Now we get into the nuts and bolts of a VA loan, the Residual.
The Veterans Administration wants to make sure that the vet can support their family after all bills are paid. A VA LOAN IS RESIDUAL DRIVEN, most other loans are debt to income driven. because of this the vet may qualify for amounts on a VA loan that they simply could not qualify for with another loan.
The loan officer has to take in all bills including federal taxes and state taxes, done correctly we even have to take into account a maintenance fee for up keep of the home.
This is where the in experienced loan officer usually messes up.
You = No worries
You = Lee Duran for your Loan Officer.
Zero Down VA Loan
There is only 1 way to say this.
Zero down = zero, nada, nothing, zilch, nix, zip, nought, el zippo… you get the point.
There is a confusion on the closing costs though… There are 2 major sets of costs when you are buying a home 1) down payment 2) closing costs.
Zero down payment on a VA loan is ZERO DOWN PAYMENT , not zero closing costs. So closing costs need to be taken care of. This is where the confusion comes in… what most veterans hear when they hear “zero down payment” is no money out of pocket. This is not the case, it means zero down payment. Closing costs range from $3,000 to $6,000 and then there is “pre paids”. Pre paids are county taxes that are impounded in the loan and mandated by the VA. There is also home owners insurance that is impounded in the VA loan and this is also mandated. This can range from $2,000 to $10,000 and is quite a shock to veterans when they find out. These numbers are very important, especially if you want to buy a home in Corona, California or Rancho Cucamonga, California.
You = NO FEAR. There are ways to help cover these costs.
The seller can cover the closing costs, the lender can cover the closing costs thru something called lender rebate, or anyone else can cover the closing costs. Part of the deal I have with the realtors that I work with is that they are to negotiate for the veteran NOT to have to pay for all closing costs. Most are very successful at this and what ever is left the lender is able to cover thru lender rebate.
In simple terms = Veteran can possibly have a No/No.
No down payment and no closing costs paid by the veteran.
If you choose a loan officer with the right understanding of the VA loan (Lee Duran the finance man) then your VA loan can go as smooth as it can be. You will also get the best interest rate available.
“I, Lee Duran do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; and that I will obey the orders of the President of the United States and the orders of the officers appointed over me, according to regulations and the Uniform Code of Military Justice. So help me God.”
This is the oath that all veterans took and we all signed on the dotted line.
Now our country allows us benefits that are very powerful and allow us to get into the home of our dreams.
VA loan hacks…
One of the most common mistakes that I see made by other loan officers is miscalculation of the residual, so how do we cure this issue?
1st call me… Lee Duran (323) 717-1144 and lets get this done. The common error is that at ratios above 45% DTI then the residual must be 120% of the prescribed amount.
There are only a few ways to solve this issue.
- More income.
- Lower Monthly payment.
- Ensure the “residual” is calculated correctly.
1) More Income
More income is tricky because if the loan was done correctly in the first place then the income should be dead on, and you can “gross up” for ratio purposes but not for “residual” purposes. That being said sometimes the client forgot to tell you about a small consistent income like an annuity payment of $53.00. The client thought the small amount made this income insignificant. If you need a few bucks to make the residual work then this can be the difference between getting a home and not getting a home for a veteran.
2) Lower monthly payment
The payment can be lowered by doing a few things. 1st increase the deductible on the hazard insurance and this will in turn decrease the monthly payment, sometimes this can reduce your payment by $20-$30 a month which can make all the difference between getting a home and not getting a home for a veteran. The other thing that you can do is is reduce the interest rate, this will decrease the monthly payment. On all loans you can get a lower rate… you just have to pay for it, and sometimes it is better to use some money up front to get the lower interest rate and qualify for the residual and get the home. Sometimes this can be the difference between getting a home for a veteran and not getting a home.
3) Ensure the “residual” is calculated correctly
When calculating the residual the biggest mistake is the family size. The VA wants to make sure that the veteran has the income to support the family after the mortgage payment and all the bills are paid. So the higher the number of family members the higher the residual amount, you can see a detailed explanation HERE. The next most common error is in the Federal and State income tax withholding. If this is done incorrectly then this can lead to false positives or denial of a VA loan due to the inability to meet the residual. As most people know the income tax is a “graduated tax” and the more money you make the higher on the tax scale you are for withholding. It has been my experience that the non taxable income makes it into the calculation which sometimes skews the numbers against the veteran. It is an easy fix but we first must know the root of the problem.
The amount of family members on the VA loan are obtained by the 1003 (Uniform Residential Loan Application) and by statement by the veteran. If there is a conflict then this can be solved by a “LOE” letter of explanation. The veteran simply tells in their own words the reason for the conflict, as long as it makes sense then the VA will accept the justification and make their decision.
All in all the VA loan is a great loan and can really benefit a Veteran, make sure you have the right professional helping you I.E. Loan Officer (Lee Duran the Finance Man) (323) 717-1144.