FHA & VA LOANS
There are many factors to consider when applying for a government loan. We will be by your side every step of the way. Below is some helpful information to help get you started.
FHA LOANS: Federal Housing Administration's Mission
The Federal Housing Administration was started in 1934 as part of the new deal. The FHA's goals have remained the same through out the years and they are to contribute to building and preserving healthy neighborhoods and communities, maintain and expand homeownership, and to stabilize credit markets in times of economic disruption.
Details of an FHA Home Loan
The FHA now offers a variety of loan programs to a large population and FHA mortgages can have fixed or adjustable interest rates. Many find these home loans attractive because they require very small down payments, gifts can be used for down payments and closing costs, and because the FHA regulates the closing costs. These loans also have qualifications that are easier to meet than traditional mortgages. The FHA does not require a minimum FICO score to meet qualifications and these programs will allow home purchase two years after a bankruptcy filing.
Energy Efficient Mortgages
Energy Efficient Mortgages, EEMs, recognize that reduced utility expenses can permit a homeowner to pay a higher mortgage to cover the cost of the energy improvements on top of the approved mortgage. FHA EEMs provide mortgage insurance for a person to purchase or refinance a principal residence and incorporate the cost of energy-efficient improvements into the mortgage. The borrower does not have to qualify for the additional money and does not make a down payment on it. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, or savings and loan association, and the mortgage is insured by HUD. FHA insures loans. FHA does not provide loans.
Rehabilitation Mortgage Insurance (203K)
Section 203(k) insurance enables homebuyers and homeowners to finance both, the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage - or to finance the rehabilitation of their existing home. FHA approved lending institutions which include many banks, savings and loan associations, and mortgage companies can make loans covered by Section 203(k) insurance.
Reverse mortgages are becoming popular in America. Reverse mortgages are a special type of home loan that lets a home owner convert the equity in his/her home into cash. They can give older Americans greater financial security to supplement social security, meet unexpected medical expenses, make home improvements, and more.
FHA Refinance Requirements
FHA has permitted streamline refinances on insured mortgages since the early 1980's. The "streamline" refers only to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction. The basic requirements of a streamline refinance are:
- The mortgage to be refinanced must already be FHA insured
- The mortgage to be refinanced should be current (not delinquent)
- The refinance is to result in a lowering of the borrower's monthly principal and interest payments.
- No cash may be taken out on mortgages refinanced using the streamline refinance process.
VA LOANS: Why a VA Loan?
The more you know about our home loan program, the more you will realize how little "red tape" there really is in getting a VA loan. These loans are often made without any down payment at all, and frequently offer lower interest rates than ordinarily available with other kinds of loans. Aside from the veteran's certificate of eligibility and the VA-assigned appraisal, the application process is not much different than any other type of mortgage loan. And if the lender is approved for automatic processing, as more and more lenders are now, a buyer's loan can be processed and closed by the lender without waiting for VA's approval of the credit application.
Additionally, if the lender is approved under VA's Lender Appraisal Processing Program (LAPP), the lender may review the appraisal completed by a VA-assigned appraiser and close the loan on the basis of that review. The LAPP process can further speed the time to loan closing.
What is a VA Guaranteed Loan?
These loans are made by a lender, such as a mortgage company, savings and loan or bank. VA's guaranty on the loan protects the lender against loss if the payments are not made, and is intended to encourage lenders to offer veterans loans with more favorable terms. The amount of guaranty on the loan depends on the loan amount and whether the veteran used some entitlement previously. With the current maximum guaranty, a veteran who hasn't previously used the benefit may be able to obtain a VA loan up to $240,000 depending on the borrower's income level and the appraised value of the property. The local VA office can provide more details on guaranty and entitlement amounts.
Who is Eligible?
Veterans who served on active duty and were discharged under conditions other than dishonorable, during World War II and later periods are eligible for VA loan benefits. World War II (September 16, 1940 to July 25, 1947), Korean conflict (June 27, 1950 to January 31, 1955), and Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90 days' service. Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 days' active service. Veterans of enlisted service which began after September 7, 1980, or officers with service beginning after October 16, 1981, must in most cases have served at least 2 years. VA regional office personnel may assist with additional eligibility questions.
VA Loan Applications
The application process for VA financing is no different from any other type of loan. In fact, the VA application form is the same as that used for HUD/FHA and conventional loans. The mortgage lender verifies the applicant's income and assets, and obtains a credit report to see that other obligations are being paid on time. If all is well and the appraised value of the property is enough to cover the loan needed, the lender, in most instances, can then close the loan under VA's automatic procedure. Only about 10 percent of VA loan applications have to be submitted to a VA office for approval before closing.
VA Loan Uses
You may use VA-guaranteed financing:
- To buy a home.
- To buy a townhouse or condominium unit in a project that has been approved by VA.
- To build a home.
- To repair, alter, or improve a home.
- To simultaneously purchase and improve a home.
- To improve a home through installment of a solar heating and/or cooling system or other energy efficient improvements.
- o refinance an existing home loan.
- To refinance an existing VA loan to reduce the interest rate and add energy efficiency improvements.
- To buy a manufactured (mobile) home and/or lot.
- To buy and improve a lot on which to place a manufactured home which you already own and occupy.
- To refinance a manufactured home loan in order to acquire a lot.
VA Loan Costs
A basic funding fee of 2.0 percent must be paid to VA by all but certain exempt veterans. A down payment of 5 percent or more will reduce the fee to 1.5 percent and a 10 percent down payment will reduce it to 1.25 percent.
A funding fee of 2.75 percent must be paid by all eligible Reserve/National Guard individuals.A down payment of 5 percent or more will reduce the fee to 2.25 percent and a 10 percent down payment will reduce it to 2.0 percent.
The funding fee for loans to refinance an existing VA home loan with a new VA home loan to lower the existing interest rate is 0.5 percent.
Veterans who are using entitlement for a second or subsequent time who do not make a down payment of at least 5 percent are charged a funding fee of 3 percent.