Posts Tagged ‘No PMI’

VA Loans: Bonus Entitlement

August 23, 2016

blog-author-clayjeffreys3

Bonus entitlement is extra entitlement that a VA loan applicant can use to buy a home under some specific scenarios. For example, let’s say someone plans to buy a new home as a primary residence prior to selling their current home secured by a VA loan. Another example would be the entitlement the borrower can use after they may have cost the VA money from a short sale or foreclosure on a previous VA loan.

So how does it work? Well, I can’t give you complete details. There is a down payment requirement for sure, but the amount of the down payment is actually determined by the loan amount and how much of their previous entitlement was used either through a loss on a short sale or foreclosure OR how much of the entitlement was used on the purchase of the previous home.

The VA provides a worksheet to use when qualifying buyers, and it varies. For example, earlier this year I worked with someone who had to use bonus entitlement due to a short sale. They also needed 100% financing. Their max purchase price wasn’t the allowable $417,000 using the normal entitlement, but was around $230,000 using their bonus entitlement. Anything above that price point would require money to be contributed as a down payment.

Another client I had this year purchase a home using a VA loan at $170,000. Based on the amount he lost the VA on a previous short sale, 100% financing wasn’t even an option at any loan amount. After using the worksheet, he needed to make about a 6% down payment on that purchase price of $170,000. Even with the short sale from several years ago, he could still buy a new home with a VA loan. While the down payment was higher (about 6%) versus an FHA loan (only 3.5%), the VA loan was a better deal for this buyer. He qualified for the VA loan without needing the funding fee, and there is never mortgage insurance on a VA loan. He would have to make mortgage insurance payments on the FHA loan.

Assuming our VA loan applicant has a qualifying credit score and meets the income requirements, bonus entitlement can be used so long as they have enough to meet the down payment requirements.

While this post doesn’t give complete specifics about how to proceed, the purpose was to let veterans and VA loan applicants know it exists and can be used.

Wanting to buy a home but denied because of entitlement? Is the home in the state of Georgia? If so, contact me today. I’ve closed clients with VA loans that were denied at other lenders by using their bonus entitlement. Make sure all of your options are exhausted before giving up.

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VA Loans: Funding Fee

August 16, 2016

blog-author-clayjeffreys3

VA loans do not require mortgage insurance, but they do have a VA funding fee… which is another way of saying an “up-front” mortgage insurance. The funding fee amount is based on the down payment being made, whether the borrower is considered a veteran or a reserve, and if the borrower has used a VA loan in the past.

There is no way to get around the VA funding fee unless the VA deems you to have a disability from military service. If so, then the fee is waived entirely regardless of whether or not the VA loan applicant makes a down payment. There are a few good things about the funding fee. First, the VA loan applicant doesn’t have to pay this fee at closing. Much like FHA up-front mortgage insurance, the funding fee is rolled into the loan amount. Second, the amount of the funding fee can be reduced by making a down payment. For example, let’s assume this is the first time a veteran has used a VA loan to buy a home.

  • With no down payment, the up-front fee is 2.15% of the loan amount. This fee is rolled into the home loan, so it is not required to be paid by the VA loan applicant at closing.
  • The funding fee drops to 1.50% when making a 5% down payment
  • The funding fee goes down to 1.25% if making a 10% down payment.

Again, this example is for VA loan applicants qualifying as a veteran status. There are different amounts if qualifying as a reserve status. The funding fee can also increase when using a VA loan on buying your next home. The subsequent VA loan use jumps to 3.30% if making no down payment, but drops back to 1.5% when making a 5% down payment. While no down payment is required, you’ll save thousands of dollars by making as little as a 5% down payment.

Regardless of the down payment, there is no monthly mortgage insurance payments ever on a VA loan.

Are you a veteran looking to buy a home? Is this home in Georgia? Regardless of the loan program you plan to use, contact me today. We can get you prequalified, look over all your loan options, and get you on your way to home ownership!

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VA Loans: How to qualify

August 9, 2016

blog-author-clayjeffreys3

VA loans are loan programs designed for those who have served our country as part of the Armed Forces. VA loans require no down payment, a 620 credit score, and one can purchase a home up to $417,000 without putting any money down.

VA loan applicants can purchase a home above $417,000, but must make a down payment of 25% of the money over $417,000. For example, let’s say someone is buying a $500,000 home. The first $417,00o doesn’t require anything for a down payment. The only money down would be 25% of the remaining $83,000, or $20,750. If you qualify, a half million dollar home could be purchased with just over $20,000 down… less than a total 5% down payment!

Who exactly qualifies for a VA loan? It is more people than you’d think.

  • Active service for at least 90 days during wartime
  • Active service for at least 181 during peacetime
  • 6+ years in the national guard
  • Spouse of a soldier who has died in combat OR died as a result of a service related disability
  • Also some personnel of Public Health Service officers and coast guard

Qualifying for a VA loan isn’t restricted to only to veterans. In fact, I closed a loan for someone earlier this year who was never in the service, reserves, ROTC or anything… he worked for the CDC in the Public Health Core of officers.

I know what you may be thinking… “Great, I qualify, no what?”

There are lots of reasons to use a VA loan if you qualify for one.

  • VA loans do not require a down payment
  • Even at 100% financing, there is no monthly mortgage insurance payment
  • The interest rate is better than a conventional loan

That is why I’ve yet to have a client not use a VA loan if they qualified for a VA loan. The only potential drawback to an FHA loan is the funding fee. More on that next time.

How do you know if you qualify for a VA loan? If you are buying in the state of Georgia, contact me today. Provide a copy of your DD214, and we’ll order your Certificate of Eligibility and get the loan process started!

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LPMI Loans – Things to consider

May 7, 2015

blog-author-clayjeffreys3

Continuing a series on LPMI loans, or Lender Paid Mortgage Insurance. Last time I introduced LPMI loans. Today, I want to focus on two things to consider when deciding between using a conventional loan with monthly mortgage insurance OR using a LPMI loan.

#1. Credit – I bet you could have guessed this one! With a higher credit score, the impact to the interest rate is decreased. That said, the lower the credit score, the more the interest rate will be increased.

Remember how LPMI loans work – the borrower won’t pay a monthly PMI payment, but to do so, they are agreeing to a higher interest rate. How much higher? Let’s take a look at two examples of a $300,000 purchase price with 5% down. That gives us a loan amount of $285,000 on a 30 year fixed rate loan.

– 760+ Credit Score: the interest rate on the LPMI loan is 0.375% higher. While the mortgage payment is higher, when you factor is NOT making a monthly mortgage insurance payment, the LPMI loan is lower by about $65 per month.
– Under 720 Credit Score: this time, the net total payment is about $30 less going with the LPMI option. The drawback is the increase to the interest rate, which is 0.750% higher going with the LPMI loan.

The lower payment with the LPMI loan is great, but having the interest rate increased that month is tough to swallow (at least it is to me). The moral of the story is this – an LPMI loan may make more sense for those with excellent credit.

#2. Down Payment – the more money that is put down at the time of the purchase will lower the impact to the interest rate when using an LPMI loan. For example, let’s look at a 5% down payment versus a 15% down payment on our $300,000 purchase price.

– 5% down: it would take about 9 years for monthly PMI to fall off making the minimum monthly payment.
– 15% down: it would take a little over 4 years for monthly PMI to fall off the loan.

The borrower may have the lower monthly payment using an LPMI loan, but why go with the higher rate if the monthly PMI will fall off in only a few years. With an LPMI loan, you are stuck with a higher rate for the life of the loan. The monthly MI payment may result in a higher mortgage payment for a little while, but when the PMI falls off, you’ve got a lower monthly payment. The moral of the story is this – an LPMI loan makes more sense when making a smaller down payment.

How to decide? Tune in next time when we ask the question that helps to decide which option is best for you!

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LPMI Loans – What are they?

May 5, 2015

blog-author-clayjeffreys3

LPMI loans, or Lender Paid Mortgage Insurance, is a loan program that does not require a borrower to make monthly mortgage insurance payments regardless of the size of the down payment. A borrower can make a 3%, 5%, etc. down payment and not make monthly mortgage insurance payments.

Sound too good to go be true? Maybe. There is a catch. In exchange for not making a monthly mortgage insurance payment, the borrower agrees to a higher interest rate on the loan. The lender takes that higher interest rate and purchases a onetime up-front mortgage insurance premium at closing – thus Lender Paid mortgage insurance.

While the lender is technically paying the mortgage insurance, the borrower is really paying it through a higher rate. Does it make sense to use a LPMI loan?

If the goal is a lower payment, the answer is “yes.” When using an LPMI loan, the monthly payment will be lower than having a loan with a lower interest rate but paying monthly mortgage insurance.

Next time, I’ll discuss a couple of items to evaluate when considering a LPMI loan. In the meantime, if you’d like to know more about it, contact me today. I can help get you started on the path to home ownership.

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Fannie Mae HomePath Mortgage

February 8, 2011

About a year ago, Fannie Mae created this loan program to help sell properties they own. Most of these properties are foreclosures. When the program was initially rolled out, I threw up a blog post about the details. It has been a year, and some of the guidelines have loosened up… so it seemed like a good time to revisit this loan program.

The HomePath Mortgage program has some major selling points.

  • available for primary residence, second home, and investment purchases
  • borrowers only need a 3% down payment to get started
  • non-occupant co-borrowers are allowed with a 5% or greater down payment
  • allows for sellers to contribute up to 6% of the purchase price toward a buyer’s closing costs and prepaids (typical amount with less than a 10% down is only 3% toward contributions)
  • no appraisal is required
  • no private mortgage insurance will be on the loan regardless of the size of the down payment

Some of the changes that have occurred over the past twelve months include the qualifying credit score being lowered to 660 and investors now only need a 15% down payment to qualify. On all other conventional loan programs, investors need at least a 20%-25% down payment to get started. A requirement of only 15% down is a big deal in the investment purchase market.

Again, Fannie Mae designed this loan program to facilitate the sale of homes they own. There are numerous properties available, and you can search for them here. That being said, do proceed wisely. I’m not saying anything is wrong with the homes, but one should:

  • as with any home purchase, hire someone to do a thorough inspection of the home
  • since there is no appraisal required for the loan, I would ask your real estate agent to conduct research on the home against recent sales in the area to ensure the purchase price is a good deal for you
  • some of these homes will probably be classified as being purchased “as is,” so don’t expect the seller to do many (if any) repairs to the home prior to purchase

Anyone interested in making an offer on a home to take advantage of a loan program that doesn’t require an appraisal or private mortgage insurance will need a prequalification letter, and that is something I can assist in providing! If you are looking to get prequalified, learn more about interest rates for this program, total monthly payments, etc., feel free to call or email me. It would be my pleasure to help you through the mortgage process!

3% down and no PMI

April 22, 2010

Yes, you read that correctly. Conventional loan, 3% down, no private mortgage insurance, and to top it off… no appraisal required! The program is known as HomePath Mortgage by Fannie Mae and is available to borrowers looking for a primary residence OR an investment property.

Investors using the HomePath Mortgage program need a 15% down payment, but will not be required to get private mortgage insurance or an appraisal on the investment property. Also, the limit on the number of total properties financed in an investors name is waived.

Fannie Mae designed this loan program to facilitate the sale of their foreclosures. There are numerous properties available, and you can search for them here. However, before you find a home and get ready to submit an offer, remember this is a foreclosed property and there are some things to keep in mind:

  • the property is purchased “as is”
  • the property may require some repairs
  • definitely get an inspection!
  • no contingency offers (on the sale of a current home) allowed

All offers must include a prequalification letter. If you are looking to get prequalified, learn more about interest rates this program, total monthly payments, etc., feel free to call or email me. It would be glad to help you through the mortgage process!