If the new Veterans Loan Limit is $692,500, how the heck is your client getting a VA loan higher than that?
A couple weeks ago, I told you that Veterans Affairs had dropped the loan limit from $843,750 all the way down to $692,500. We had some clients that listened to the message and quickly got deals done to take advantage of the higher limits. Most Veterans and real estate pros are now aware that you can still borrow over the limit!
Here is how—The VA loan limits are simply what a Veteran can do 100% financing up to. Without getting too technical, the VA guarantees 25% of the VA loan to the VA lender. That means if the borrower stops paying the mortgage, then VA helps with the costs of that problem up to 25% of the balance. Their guarantee stops at $692,500. If the Veteran wants to borrow more than $692,500, they need to do a small down payment. Here is an example
Home price = $800,000 —Difference between sales price and area loan limit is $800,000 – $692,500 = $107, 500 x 25% = down payment borrower needs $26,875. So the borrower is putting in 25% equity between the area loan limit and the sales price. That combines with VA’s 25% guarantee so that the whole loan has 25% coverage.
I urge you to compare that to their alternatives of JUMBO, conventional, and FHA. The down payments on those prices would range from $110k approx. to $160k. Kind of a great deal for Vets right? They earned it!
With a small down payment, you can exceed the area loan limits. Of course, we help you and the Veterans calculate this down payment when we are doing the pre approval process. This way they can shop confidently for the home knowing exactly how much cash they need in the deal to make it work.
I find that many people don’t fully understand the VA home loan benefit and how it applies to them. We are here to help. We also find that there are many people that in the area with VA loan eligibility that can afford these higher price points. We often do VA loans for $800k-$1 million. This is because of the down payment flexibility and also that rates on VA loans are lower than conventional or JUMBO.
Please contact us with any questions. We are the top VA lender in Virginia (Scotsman Guide, leading mtg industry publication) and look forward to helping your clients in 2014!
To your success,
Story from: http://www.housingwire.com/articles/28540-its-a-brave-new-qm-world-you-just-work-there
If you’re not ready, today is doomsday
The Consumer Financial Protection Bureau’s extensive new Qualified Mortgage (QM) rule went into effect Jan. 10, and like it or not it’s here to stay.
QM establishes the official template for lending and servicing standards the majority of lenders must use when qualifying home buyers. It’s one of the five biggest changes the industry is facing.
Some of the costs of QM are known. But cost is just one measure. There will be other effects over the long-haul, and it’s impossible to say what the changes will bring.
Most in the industry are welcoming QM, but there is understandable concern about the long-term effects.
“QM is impactful and this type of consumer protection is long overdue. However we need to be watchful that this rule doesn’t create barriers for lending institutions’ readiness or access to credit for qualified borrowers looking to obtain the dream of homeownership,” said David Stevens, CEO of the Mortgage Bankers Association(MBA).
Jeff Knott, a member of the product management team at Equifax Verification Services and vice chairman for the Electronic Signature and Records Association, said he believes the new standard will benefit both home buyers and lenders, and won’t create an undue burden on the industry.
“For the majority of the individuals out there tomorrow will be a day like any other. It will offer the additional assurance that the information and reporting used are informed versus self-reported. While at the same time giving consumers greater transparencies into the intricacies and the nuances of the lending experience that many lenders take for granted,” Knott said.
“The industry is catching up to the demands of the consumer and the government’s efforts to continue to ensure consumer protection,” Knott said. “With this rule there is going to be an even greater need for lenders to continue their best practices in qualifying applicants using valid data from a trusted source. These rules are not intended to be burdensome to the industry by requiring additional documentation, but they are designed to help improve the economy and protect all of our clients both the lenders and the buyers themselves.”
Kirk Stephens, a 20-year FDIC veteran and chief compliance officer at OSC, a financial risk management and insurance services company, said he thinks the industry is ready for QM, but there’s still a lot of work to be done to ensure compliance.
“The majority of lenders have been working on this for most of 2013. Many were in hopes of having the deadline extended but, once the 4th quarter of 2013 was here with no extension, lenders kicked in high gear. I believe most of the lenders are prepared,” Stephens said. “Keep in mind that the CFPB has promised to give enough time for banks to gather sufficient data before including the new mortgage servicing in the scope of their exams. What is considered ‘enough time’ is still undefined.”
“Many of the lenders were finalizing their testing this week and making revisions as necessary. We have been working with our lenders in testing cycles and providing samples of feedback with revisions as necessary,” Stephens said.
The data review element of QM will be where a lot of the rubber meets the road, he said.
“Lenders will have a robust review period once they go live. Most of the analyses will be in the form of reviews of required notices making sure their systems are generating information to the borrower in a timely manner, as required by the rules. Reports showing timelines of mortgage error resolution, force-placement notices and early intervention and loss mitigation requirements for delinquent borrowers will be paramount for their review,” Stephens said.
“Most lenders don’t have in place the compliance plans they need, because they have been focusing on the deadlines,” Stephens said.
“I believe many lenders are still in need of developing compliance plans and schedules for future reviews and audits. Right now, lenders are really trying to meet the deadlines and reviewing test results in comparison to rule requirements,” he said.
Outside the industry, homeowner advocacy groups like the California Reinvestment Coalition (CRC), meanwhile, thinks the new rules will only strengthen homeownership, but they don’t think QM goes far enough.
“These rules signify the end of the Wild West style of lending that created financial nightmares for America’s families, destroyed communities, and imploded our economy,” said CRC associate director Kevin Stein said. “These new rules will force banks and servicers to stop their reckless behavior and we are confident the CFPB will hold lenders and loan servicers accountable by monitoring their compliance and enforcing the rules on behalf of consumers.”
Stein said his organization would like to see the CFPB ban dual-tracking and address issues like foreclosures on surviving spouses, illegal evictions after foreclosures, language access problems, and the slew of issues created when the servicing of a loan is transferred.
This article from the Washington Post covers the new policies that multiple federal agencies are starting in 2014 in order to create more strict rules for underwriting loans in order to avoid another housing market crash. Read more here