Part 1
Part 2

On today’s show we talk Short Sales and Loan Modifications…. Here’s what’s in store for you.

• We dig deeper behind the myths and controversy surrounding Short Sales
• Take a closer look at why 85% of most Realtors don’t have a clue how to do them properly.
• Discover the best ways to find a true short sale professional.
• Examine the alternatives to a short sale
• How to do a loan modification

No related posts.

This sounds like a chicken or egg question but should you get a loan officer or a real estate agent first?  Let’s break it down to help you decide:

Realtor first! Believe it or not, real estate agents would want you to start with them.  A realtor would help you get to the right track and would want to influence you when it comes to choosing affiliates or other team players that involved in the house-buying process.  By saying team players, that includes loan officers.  This typically happens when the realtor finds out that you don’t have a lender yet.

Loan officer first! Get a loan officer first if you haven’t been preapproved for a VA loan.  Why?  Well, for one, it’s better to know your budget first before you go shopping.  Don’t fret if your loan officer asks if you already have a realtor.  Having a realtor before your VA loan application process begins is not a requirement.  The loan officer asks you this question to help you.  If the loan officer finds out that you don’t have a realtor yet, he’ll most likely give you a list of realtors he has done business with and even provide you a qualification letter that you can show to the realtors.

So what is the best thing to do?  To be honest, it doesn’t matter because the two will lead you to the other anyway.  Some people might disagree.  But the point is, you’ll end up finding a lender and a realtor since at the end of the day, you will need them both.  What is important is that you understand that aside from these two, there are other people involved in this process.  Here’s a quick list of other team players according to David Reed, a veteran of the mortgage industry:

• Loan Processor – The one who verifies, compiles, and reviews your loan application.  The loan processor also calls the credit bureau and employer to verify your information.
• Appraiser – The person who estimates the worth or value of a property and creates the document called Notice of Value.
• Inspector – The expert who performs structural and pest inspections – plumbing, electrical work, roof, structural stability, etc.
• Insurance Agent – The person who is authorized to sell and transact insurance.
• Title Agent – The guy who makes sure that it’s you and only you can claim property to the home you are buying.
• Attorney – Not all states require that you have an attorney when purchasing a home but some do!
• Surveyor – The surveyor measures the house’s dimensions – including permanent structures, boundary lines and easements.
• Underwriter – This team player analyzes the risks involved in your VA loan application and then establishes terms and conditions depending on the risks.
• Escrow Agent or Closer – The closer makes sure that all your papers are signed and the sale took place.
• Funder – The guy who generate wires for loans to fund.

But the most important person in this process is YOU!  Never let any members of the team push you around into deciding into something that you do not want or understand.

Related posts:

1. Good Faith Estimate 101 for Veterans
2. 10 Things You Must Do After Buying a New Home
3. Rate Shopping For A VA Loan? Read This First!
4. The VA Loan Process
5. How to time your VA loan financing.

One of the most important things that every veteran should know is how to evaluate a Good Faith Estimate or GFE.  A good faith estimate is not just a verbal quote of how much you are going to pay but it is actually a document required by the Real Estate Settlement Procedures Act (RESPA).

If you are applying for a loan, the lender or broker should provide you a written estimate within 72 hours after applying for a VA loan.

Don’t get confused if you get multiple GFEs showing different bottom line totals. In most cases, you will receive a preliminary GFE and later, a “Final” GFE after the lender as approved the loan.

Be aware that every bank or mortgage broker will estimate costs differently but it is critical you understand what fees are stated, and whether you are being charged correctly.

Also, remember that a GFE is just an estimate – this is your loan officer’s best guess on how much it’s going to cost you to close your loan.

To make things easier, let’s breakdown the GFE into two categories: lender or broker-associated costs and other costs.

Lender or Broker-Associated Costs – The costs under this category should be more or less accurate. This is basically how much the lender or broker asks you to pay to process your VA loan application. These costs should include but are not limited to: loan origination fees, loan discounts, appraisal fees, credit reports, lender inspection fees, any tax-related service fees, processing fees, underwriting fees, and wire transfer fees.  See VA allowable charges for a complete listing of acceptable loan fees.

Other costs – Aside from the lender and mortgage broker, there are also other entities involved in your VA loan application procedure. These bodies require a certain amount to be paid in order to complete your application.  Some examples of these costs are insurance premiums, VA Funding Fee, title charges, escrow fees, transfer charges, and any additional settlement charges.

How exactly do you make use of this information?

We recommend you focus your efforts on interest rate AND lender charges because these are the only variables the bank actually controls.  All other charges such as taxes, home owners insurance, settlement fees, and escrows will vary dramatically depending on the institution that prepares the GFE.

In some cases, your bank or VA mortgage broker won’t even take the time to quote these third party fees.   So, if you get a GFE with very low costs take a second look at what’s actually being charged.  You may be surprised to learn your VA lender has omitted 50% of the required information.

Surprisingly, the highest costing GFE can often be the best deal! If your VA lender did a great job, your GFE should be complete.  But be aware, this may also translate to a higher bottom line when you compare to other “incomplete GFE’s.   A completed GFE will include: all escrows, taxes, home owners insurance.  This is also a good indicator that your working with a VA lender that has your best interest at hand and does quality work.  Don’t deal with VA lenders that can’t provide accurate documents.  That’s the best advice I can give.

In addition to your GFE, and before you make your final decision, ask your VA lender for a performance guarantee and make sure they put it in writing. What is a performance guarantee you ask?  This is a document that your VA lender provides guaranteeing your costs on the loan.  It will also guarantee your interest rate should you choose to lock the VA loan.

By obtaining a “completed” GFE and performance guarantee you can rest assured your homework is done and your ready to select a VA lender.

Related posts:

1. VA Loan Closing Costs 101
2. How To Find The Right VA Lender
3. Rate Shopping For A VA Loan? Read This First!
4. Characteristics Of Predatory Lenders
5. Loan Officer or Realtor: Who Do You Get First?

For guaranteed loans, the law requires the borrower to pay the VA Loan Funding Fee.  A veteran will be asked to pay this upfront during the final stage of the loan application process. Though VA home loans provide veterans a no-money-down benefit, a veteran is asked to pay the VA Funding Fee as a contribution toward the cost of this unique benefit. As a result, the VA Funding Fee reduces the cost to taxpayers.

For first time veteran borrowers, the fee is currently at 2.15% while second-time users who don’t want to make a down payment are asked to pay 3.3%. Why are second-timers asked to pay more? It’s pretty simple, these veterans have already taken advantage of the benefit in the past plus they have also had the time to save money to pay for a down payment.

Another important aspect of the VA Funding Fee that every veteran must know is that it can vary depending on the type of service rendered and whether the loan is a purchase, a streamline refinance or IRRL, or simply a cash-out transaction. The following charts show the details of the VA Funding Fee.

Cash-Out Refinancing Loans

* 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.

Although almost all veteran home buyers pay the VA Loan Funding Fee, there are some exceptions to this:

• Veterans with service-related disabilities who are receiving VA compensation
• Veterans with service-related disabilities who did not receive retirement pay but are entitled to receive compensation
• Surviving spouses of veterans who died while rendering service or from any service-related disabilities

Related posts:

1. Rate Shopping For A VA Loan? Read This First!
2. VA Loan Closing Costs 101
3. How To Find The Right VA Lender
4. Benefits to Refinancing with a VA Streamline Refinance Loan
5. VA Cash Out Refinance

A VA appraisal is a critical step in funding a VA loan.  Let’s examine the appraisal process and highlight the key points every veteran should understand.

Don’t try to order your own VA appraisal!

The VA lender is responsible for ordering the appraisal.  This process normally takes place just after the borrower has submitted their entire loan package.

The Department of Veteran’s Affairs will assign a VA loan appraiser. In order to prevent appraisal fraud, the homebuyer will not be able to choose which appraiser performs the work.

The approximate cost of a VA loan appraisal is around $400.00. This fee is state-regulated so it depends on the location of the home sale. The VA loan appraisal fee, in most cases, must be paid before the VA loan is closed.

When dealing with appraisals, the financing can be delayed if the property is not up to par.  VA appraisal guidelines can be found on the Veterans Affairs website.  These rules discuss the particular instances that could cause a home to appraise for less than the sale price.  In order for a VA loan to fund, The appraisal must meet or exceed the purchase price.

If your home does not appraise this could be why

• The home is not in livable condition
• The home is in poor condition-if there are repairs needed they must be completed before the VA loan is closed.
• There are safety issues with the home; lacking a home foundation, no railings on a stairway; etc.

After a VA loan appraisal is conducted you will receive a CRV (Certificate of Reasonable Value) which will be based on the VA loan appraiser’s estimate of the property’s value.

If your appraised value is low, take these actions.

• Negotiate the sale price of the house with the seller in order bring the price down to meet the VA loan appraisal amount.
• Make a down payment to cover the difference.  (I only recommend doing so if you have a home you can’t pass up.)
• Request a “Reconsideration of Value” if there were new comps and additional information that would raise the value of the home, which were not available at the time of the original VA loan appraisal.

Related posts:

1. How to time your VA loan financing.

You finally closed on your new home. Congratulations! The process of checking credit reports, getting a VA loan to finance your purchase, finding a realtor, looking for a house, and moving are over so whats next?

1. Update your address. Complete an official change of address form online or at a local post office to make sure that all your mails are routed to your new address. Don’t forget to call financial companies and your utilities providers for a change of address.
2. Transfer your utilities. You wouldn’t want to move in to a new home without electricity, gas, or water, right? If you’ve already started doing this, then good for you. And oh, don’t forget to call the telephone and cable company.
3. Invest in security. One of the important things that some people miss would be taking care of security. You don’t have to hire a security guard to do the job, all you gotta do is call a locksmith to change the locks since you wouldn’t know if someone else still has a key. Got extra dough? Get a security cam.
4. Meet your new neighbors. Don’t wait for your neighbors to come over and say hello. Go ahead and introduce yourselves. Your neighbors are the people who keep an eye at your new home when you’re away.
5. Don’t forget to pay your mortgage. I know it’s tempting to buy a new high definition TV or furniture for your new home. But, it’s wise to ease into your mortgage payment first before making any big purchases.
6. Familiarize yourself in the new area. Drive around and familiarize yourself in the area. The sooner you find out where the nearest Home Depot, grocery store, and gas station are the better. Also, take note of the garbage collection day and the phone number to the pizza delivery.
7. Attend a retreat. Everyone needs some time to relax, restore, and reconnect. If you are a veteran, there are special retreat programs for you and your family. Check out the Coming Home Project for more info about retreats especially created for veterans and service members.
8. Join a newcomer club. One of the nice ways to meet new people is by joining any ongoing newcomer clubs. Expand your social network and know the dish about the best dry cleaner in town, the nearest gym, and entertainment venues.
9. Buy tools and repair items. I bet you will need to hang or drill something. Every new homeowner needs a well-stocked tool box.
10. Celebrate! Savor the experience of getting your very own home by celebrating. You don’t need to throw a huge party. A little housewarming dinner with your family and closest friends should do it.

Want to do these things but you don’t own a house yet? Visit the VA Loan Store to get started.

Related posts:

1. Save Money and Time with a VA Home Loan from the VA Loan Store!
2. Loan Officer or Realtor: Who Do You Get First?

Whether you are applying for VA loan or any mortgage loan, a borrower has to pay the closing costs. But what exactly are you supposed to and not supposed to pay? If you’ve already began your research, you will notice words such as allowable and non-allowables. Veterans applying for VA mortgages or loans are only supposed to pay the “allowables.” David Reed, columnist for Realty Times and Mortgage Originator magazine, has created this easy to remember mnemonics (ACTORS) about the allowable closing costs for veterans:

Appraisal (aka Notice of Value, NOV) or inspection charges

Credit report fees

Title or title-related charges

Origination fees and points

Recording charges

Survey fees if needed

Now that you have an idea of what the allowables are, let’s take a quick look at the non-allowables. Here is a list of fees that CANNOT be charged to a veteran:

Document preparation, loan closing or settlement, attorney services for anything other than title work, preparing loan papers for conveyance fees, locking in interest rate services, photographs, stationery, mailing or postage charges, telephone calls, amortization schedules, general overhead, membership, escrow charges or fees, document preparation and / or assignment, notary, loan application, processing, loan broker or finders fee other than your mortgage company, trustee’s fees or charges and tax service.

Although a lender is not supposed to charge for non-allowables, there is such a thing as a “One percent Guideline.”  This simply means that even though there are non-allowables, “the lender is allowed to charge a flat one percent of the loan amount and apply that fee to the various miscellaneous lender charges the veteran may not otherwise pay for,” according to Reed.

Want more tips about VA loans and mortgages?  Always visit our website www.NoBSVALoans.com or subscribe to our RSS feed for more useful and free information right at your fingertips.

Related posts:

1. Good Faith Estimate 101 for Veterans
2. How To Find The Right VA Lender
3. To Pay or Not to Pay? The VA Loan Funding Fee
4. Rate Shopping For A VA Loan? Read This First!

Researching is very crucial if you are currently considering a VA home loan. And while you’re at it, you can’t help but discover some funny information about getting this type of loan.

Here are the truths behind the five of the most common VA loan myths:

Myth No. 1: I have bankruptcy on my credit report and lenders won’t make a mortgage loan so I have to wait for ten years for the bankruptcy to be removed from my report.

The Truth: This is absolutely not true. What’s good about VA loans is that it has a more lenient credit guideline. It allows 2 years to pass before issuing a mortgage after bankruptcy.

Myth No. 2: I can only apply for a VA loan from the US Department of Veterans Affairs.

The Truth: Actually, VA does not make loans. You can apply for a VA loan with any mortgage lender as long as the lender participates in the VA home loan program. A good example would be the VA Loan Store.

Myth No. 3: I have to be on active duty in order to qualify for a VA home loan.

The Truth: Your eligibility is based on your current and past service. According to the VA General Rules for Eligibility, you are most likely eligible for a VA loan if you have served at least 181 days from 1964 to today.

Myth No. 4: VA loan limits are lower than the regular, non-government loans.

The Truth: Loan limits usually change every year especially if there’s a ten percent increase in home prices. Currently, zero downpayment VA loan limits range from $417,000 up to $1.094 million.

Related posts:

1. Credit Requirements for VA Loan
2. VA Loans – An Overview

Even though the VA loan is more lenient than conventional mortgage programs, there are still credit requirements in order to be approved for a VA loan.   Most banks require a minimum 620 credit score and 12 months mortgage history with no lates.

Types of imperfections on a credit report that may affect the VA loan approval process:

• Collections
• Late payments
• Judgments

Payment History Factor

Re-payment history is an important factor in getting approved for a VA loan. Your rental and mortgage payment history signify your ability to pay your housing payment and will better qualify you for a VA loan.

If you lack credit history, provide explanations for any of the following:

• If you are a veteran who has been recently discharged and have not been able to establish credit
• Use cash instead of credit on a regular basis for bill paying and purchases
• Veteran has not used credit since reconciliation of bankruptcy and judgments

Bankruptcy

Bankruptcy does not immediately disqualify a veteran who is applying for a VA loan. If you have had a bankruptcy discharged over 2 years previously to applying for a VA loan it may not be considered. If the bankruptcy discharge was within 1-2 years of applying for a VA loan there are a couple things that are taken into consideration that may still help qualify a veteran:

1. If you have obtained credit following the bankruptcy and made satisfactory timely payments
2. If reasons for Bankruptcy were above and beyond the control of the veteran-Loss of job, medical bills, divorce, loss of a business etc.

Foreclosure

Foreclosure is still another issue that will be a deciding factor in qualifying a veteran for a VA loan. The same rules apply as did with bankruptcy, but if the foreclosure is on a VA loan that may change the amount of entitlement available to be used.

Plan ahead and improve credit

When applying for a VA loan, work in advance to reconcile issues on your credit report by paying collection accounts in full or setting up payment plans with judgments against you.

Here are several things you can do:

• Get a free copy of your credit report in order to review
• Letters from creditors stating balances have been paid in full
• Pay credit card bills down to at least half of what open credit in on card
• Secured credit cards can help re-build credit

Close excess credit cards that are open only keeping necessary and low interest rate credit cards open—to much open credit can hurt you qualify for a VA loan.

For Recommended Credit Repair companies -

Sky Blue Credit Repair: Our Top Choice among Credit Repair Companies

Sky Blue Credit Repair has our vote for the best credit repair program available. It is our opinion that they have taken the business to a whole new level. This is far more than just a dispute factory. Sky Blue focuses on making sure you are left with truly usable credit – credit that meets prospective lender guidelines so you can really benefit in a tangible way.

We especially appreciate the Sky Blue Credit Repair focus on personalized customer service. The one-on-one attention is part of a comprehensive approach that makes them so attractive. They include unlimited credit bureau disputes, debt validations, credit score consultation, guidance with building new credit, and even assist with rehabilitation of student loans if needed.

We also really like the fact that Sky Blue Credit Repair only charges a single low monthly fee without requiring any upgrades. One price covers everything needed to clean up and restore your credit. They also offer a great 50% discount for spouses if you sign up together.

Sky Blue Highlights:

• Credit repair services offered since 1989
• A focus on the highest ethical standards
• One-on-one customer service
• A unique approach designed to build truly usable credit
• $99 setup fee followed by $49 per month – half price for spouse
• All inclusive – No confusing program options or costly upgrades needed

Check them out at Sky Blue Credit Repair. We think you will be impressed too!

Related posts:

1. Recommended Credit Repair Companies
2. 4 VA Loan Myths Demystified
3. VA Loans – An Overview

Everyday I get quite a few questions regarding the American Recovery and Reinvestment Act of 2009 and how it would apply to buying a home using VA financing.

For those of you that don’t know, this act was initially passed as a “tax credit” to first time home buyers up to $8000 dollars.

Many groups like the National Association of Realtors petitioned lawmakers to monetize the tax credit which would allow buyers to use the credit as a form of down payment.

Using a tax credit as down payment mainly benefits FHA borrowers.

With a VA loan, borrowers already have 100% financing in place. Conversely, the FHA requires purchasers to make a 3.5% down payment. In those cases, a monetized tax credit could be used to offset closing costs and related transaction fees.

Technically speaking – VA borrowers could use the tax credit to buy down the VA funding fee.

The traditional VA funding fee is 2.15% for 100% financing. If a veteran puts more than 5% down in the transaction, the VA funding fee drops to 1.25%. For this to work with as little down payment as possible, the home purchase price would have to be $160,000 or LESS. Furthermore, this strategy only makes sense for Veterans intending to put the 5% down regardless of the situation. Otherwise, putting 5% down to save less than 1% in a VA funding fee is crazy.

A word of caution to all VA buyers.

Just because HUD may allow buyers to use tax credits as down payments, your bank may not. So, regardless of what people tell you, the BANKS make the rules. If you plan on using the tax credit in addition to your down payment, consult with your bank first. Failing to do so could result in a rude awaking. At the time of this writing, most banks DO NOT have a system in place for honoring down payment tax credits.

For your reading enjoyment I have also attached:

• hud_mortgagee_letter_2009-15. This includes IRS form 5405 which is used to file for the home buyer tax credit.
• fha_mortgagee_monetization_explanation

Here is also a brief excerpt taken from the National Association of Realtors website regarding the tax credit.

Who Qualifies?

First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?

The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Will the Credit Be?

The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:

The price of the home—the credit is equal to 10% of the purchase price of the home, up to $8,000.

The buyer’s income—single buyers with incomes up to $75,000 and married couples with incomes up to $150,000—may receive the maximum tax credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $95,000 for singles and over $170,000 for couples are not eligible for the credit.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.

Related posts:

1. Attention Home Buyers: Tax Credit Could Go Up!