The VA home loan program was established after __________ to help military veterans finance the purchase of their homes with affordable loans.
When a VA-guaranteed loan is approved by the lender, a portion of the loan amount is guaranteed by the ____________________.
Department of Veterans Affairs (the VA)
A VA-borrower just has to be in the military to qualify.
false; they still need to qualify and be an eligible applicant just like other loan borrowers.
A VA loan can be used to buy or build residence with up to four units.
The VA doesn't accept investor loans, the borrower must occupy the house.
VA doesn't require a downpayment or cash reserves.
The VA does not set a maximum loan amount and there are no maximum income limits.
VA underwriting standards are stricter than conventional loans.
A VA loan can be fixed-rate or a hybrid ARM.
VA loans typically have 40 yr terms.
false; typically have 30 yr terms
Mortgage insurance isn't required on a VA loan, but the borrower is charged a funding fee, which the VA uses to help fund the guaranteed loan program. Obtaining a VA loan with no downpayment, the funding fee is ___% of the loan amount. If the borrower is making a downpayment of 5% or more, the funding fee is reduced to ___%. With a downpayment of 10% or more the fee is ___%.
2.15%, 1.5%, 1.25%
The funding fee can be paid at closing or financed along with the loan amount.
VA loans can have prepayment penalties.
A VA loan may be assumed by any buyer who meets the VA underwriting standards--the buyer doesn't have to be a veteran or service member.
Putting off collecting of VA loan can be because...
-financial difficulties caused by"
--unemployment, disability, large medical bills, or death of a spouse.
Funding fees are slightly higher for members of the Reserves or the National Guard.
Veterans with service-related disabilities are generally exempt from the funding fee requirement.
There are restrictions on fees that a lender can charge for a VA loan. A borrower can be charged only fees and costs that are included on the VA's list of allowable charges. A lender can only charge a flat 1% flat fee of loan amount, along with discount points. What is most likely included and excluded from the 1% allowable charge?
-allowed: lender administration is only 1%
appraisal fee, title insurance costs, recording fees
-Excluded (borrower can't pay): standard origination fee, escrow fee or a mortgage broker's fee, no miscellaneous tacking fees, and borrowers are not permitted to pay a real estate agent's commission, seller pays
Sales concessions from seller on a VA loan cannot exceed ___% of the property's appraised value. What can the seller's concession cover? However the percent does not apply to payment of the buyer's closing costs, or to payment of discount points that are in line with the market.
-payment of the buyer's funding fee
-prepayment of the buyer's property taxes and insurance
-a temporary or permanent buydown
-gifts of household items, such as furniture or appliances
Eligibility for VA loans the borrower must have served a minimum active duty service requirement, any discharge other than dishonorable, or surviving spouse.
The VA, not the lender, determines whether a veteran or service member is eligible for a VA loan. If they are, the VA will issue a ______________________.
Certificate of Eligibility
-lender can obtain a loan applicant's certificate through an online system or an applicant can obtain a certificate by applying online or by mail.
The VA covers only a portion of the loan amount, this is called the...
The VA guaranty amount depends on...
-the loan amount
-maximum guaranty amount that applies in the county
The guaranty amount available to a particular veteran or service member is referred to as his or her ______________. This does not expire. When a veteran or service member takes out a loan, this is reduced, but can be restored to full amount once the loan is paid off.
What is the VA rule for a person who pays off their VA loan without selling their home?
-one time restoration of entitlement to a borrower who paid off a VA loan without selling the property and now wants another VA loan to buy an additional property. This is only permitted once. If the owner wants to buy another property with a VA loan he/she must sell all of the properties fianced with VA loans
With assumption, The original borrower's guaranty entitlement will be restored only if the buyer who assumes the loan is an eligible veteran or service member and the buyer agrees to a substitution of entitlement.
VA doesn't set a maximum loan amount, but the loan amount can't exceed appraised value. If it does the borrower has to pay out of pocket.
A VA-approved appraiser must perform the appraisal, and a _________ will be issued, stating the appraised amount.
Notice of Value (NOV) aka Certificate of Reasonable Value (CRV)
Most lenders require the veteran's guaranty entitlement to equal at least __% of the loan amount.
25%; if borrowers want to exceed that limit, lenders will require a downpayment; the borrower can use secondary financing for downpayment under certain conditions.
A VA loan applicant's debt to income ratio should not exceed ___%.
A VA loan applicant's income is analyzed using two different methods: the income ratio method and the residual income method. Explain what each of these are.
-Income ratio method: Instead of bot a housing expense to income ratio and a debt to income ratio, the VA uses only a debt to income ratio; cannot exceed 41%.
-Residual income method: aka cash flow analysis; gross monthly income minus payroll taxes, monthly shelter expense (PITI), and recurring obligations; how much residual income is require depends on the location, family size, and size of proposed loan.
What is a monthly shelter expense?
proposed housing expense (monthly PITI)
A VA emphasizes that the 41% income ratio and the figures on the residual income chart are only guidelines. Failure to meet these guidelines The VA can use compensating factors for the loan application to pass. List some compensating factors.
-excellent long-term credit history
-conservative use of consumer credit
-minimal consumer debt
-significant liquid assets
-a sizable downpayment
-little or no increase in the shelter expense
-satisfactory previous experience with home ownership
-high residual income
-a low debt to income ratio
-tax credits for child care
-tax benefits of home ownership
-(for refinancing) significant equity in the property