0 to 5% down loans that make it VERY easy to BUY!

Real Estate

I get questions all the time about the FHA and VA mortgages so I asked my Favorite and Best mortgage guy, Chas Lapp, to give me some insight into general questions on both types of loans.  Click on the link below to read about - FHA vs. Conventional loans - VA Construction / Rehab Loans - VA Seller Concessions - VA Residual Income. Both of these loans are ZERO to 10% down loans that make it VERY easy to buy a home!  Whether you are a 1st time home buyer, Active or Retired Military or buying your NEXT home, these are AMAZING loans you can apply for! If you have any questions call Chas at 912-660-6074 or me at 912-844-9000.

 #teamyannett #myhomesavannah #chaslapp

 

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VA Construction / Rehab Loans
 The VA does allow construction and rehabilitation loans for Veterans.  Pairing an approved builder with a lender that offers these products can be a great way for Veterans to build their dream home or transform a property into exactly what they desire.  Additionally, VA conforming loan limits were just increased to $484,350, allowing more flexibility and choices for qualified Veterans.
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FHA vs. Conventional loans
FHA loans are a great product for borrowers that have lower credit scores, not much cash to put down as well as higher debt-to-income (DTI) ratios.  However, even though FHA loans typically have lower interest rates, conventional loan products always cost less when considering expenditures over the life of the loan.  While most conventional loans require a minimum of 5% down, there are products available that only require 3% down for qualified borrowers in many areas.
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VA Seller Concessions
VA seller concessions are often a misunderstood feature that Veterans can use when purchasing a home.  They do, in fact, offer tremendous benefits to Veterans.  The VA limits seller concessions to 4% of the "established reasonable value of the property".  There are three key points in how the VA defines seller concessions as defined in VA Pamphlet 26-7, Chap 8.

1.  "A seller concession is anything of value added to the transaction by the builder or seller for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide."  
2.  "Seller concessions do not include payment of the buyer’s closing costs, or payment of points as appropriate to the market." 
3.  "Do not include normal discount points and payment of the buyer’s closing costs in total concessions for determining whether concessions exceed the four percent limit.

So, how do we use seller concessions?  As an example, let's use a property wherein the seller and VA buyer has negotiated a sales price of $200,000.  The contract states that the seller will pay $10,000.00 in combined closing costs and seller concessions.  The property appraises for $200,000. (the "reasonable value").
Actual closing costs come to $2500 leaving $7500 in "seller concessions".  Here's how we use the remaining $7500 at closing.
$3500 goes to prepaid homeowners insurance and property taxes
$2500 is used to entirely pay off a borrower debt such as an installment loan
$1500 is used for a permanent interest rate buy-down on the loan
Now, it appears we've only done four things to benefit the Veteran using the $7500.  But, we've actually accomplished four.
With the payoff of the installment debt and the permanent interest rate buy-down, the borrower's debt-to-income ratio will be less which could be the difference between getting a loan or not.
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VA Residual Income
VA loans require "residual income" to be calculated.  The reason for this is that the VA wants to be assured that the Veteran will not only be able to afford larger, monthly expenses such as the new monthly mortgage payment, but also be able to pay for other expenses such as household upkeep and other family-related requirements.  This residual income requirement is a major reason VA loans have a low foreclosure rate, even with 100% financing.
Residual income requirements are set by geographical region in the United States, number persons in the household, and loan amount.   In some cases and with some lenders, the required residual income amount can be reduced by 5% if the borrower is active-duty or lives in close proximity to a military installation.  The amount required can also be offset by other income streams within the household that are not being used to qualify for the loan.  Included in these are non-borrowing spouse income.
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