Tim Storm | Orange County, California VA Loans - Tim Storm

Can a VA Loan PreApproval be done in 5 Minutes over the phone?

June 9, 2014 by Tim Storm

VA loan PreApproval should not be confused with a verbal “Prequalification” over the phone. The most important and first step in the home buying process is to find out the price of the home you can afford. Ultimately the price will be determined by a combination of things, including how much money will be needed for the home purchase, the borrowers credit score, income (as shown on the tax returns), debts, and the Veterans payment comfort level. And while a 5 minute call to a lender is a good start, an actual PreApproval will take more than a brief phone call.

There are some mortgage websites that allow the borrower to print out their own PreApproval letter based on information they enter into an online form. The letter is available without a loan officer or underwriter reviewing any documentation. This is scary, because in today’s underwriting environment there are hundreds of potential issues that can arise during the loan process. Things that someone outside of the mortgage industry may not even think is an issue could be a deal killer if not dealt with prior to having an accepted offer to purchase a home.

VA loan PreApproval can be a fairly quick process depending on whether there are complications with the loan. Below are a few things that could cause serious headaches for the home buyer if they were to come up after an offer is accepted.

Depositing cash into an account to be used for closing costs. While depositing cash may sound like it’s not so bad, it can actually be disaster. All funds for closing a purchase need to be documented and come from an acceptable source. Cash cannot truly be documented. It could come from anywhere and with no paper trail . It could be a loan from a friend, which would not be acceptable. It could be a credit card advance, which would also not be acceptable. If you are planning to deposit cash into your bank account, discuss this with you loan officer prior to the deposit.
Paying off an old collection account just prior to making an offer on a home. This sounds like a good idea, and the lender may even need the collection to be paid off prior to closing. But paying off an old collection will “update” an old derogatory item on your credit report, which could lead to a lower FICO score. Your lender may suggest holding off on paying the collection until the loan is officially in process and a credit report with an acceptable FICO score has been pulled. The lender can have the credit bureau do a credit supplement during escrow to verify the account is paid off.
Closing credit card accounts prior to offer acceptance. Depending on your current FICO score, closing old credit card accounts could actually lower your FICO score. This is because those old accounts show that the borrower has a history of credit, hopefully in this case “good” credit. By closing the account, it will no longer be updated in the credit report, and the borrowers score could drop due to a lack of history.
Shopping for condos that are not on the VA approved list. There are ways to find VA approved condo’s that will save time if you are working with a local Orange County VA Loan Officer.

What is Needed for VA Loan PreApproval?

A more thorough review of the Veterans documentation will be needed before an offer to purchase is made if the odd’s for a smooth transaction are to increase. The VA lender will want to see the following items:

Paystubs for the most recent 30 days. For a self employed borrower, a Year to Date Profit and Loss statement.
Federal tax returns for the most recent two year time period, including all schedules. For a self employed borrower, the lender will also need their business tax returns for the most recent two years.
W2’s, 1099’s, and or K-1’s (self employed) for the most recent two years.
Bank statements for the most recent two months, including all pages (even if the last page is blank – if the first page shows “1 of 5” then provide all pages. The lender won’t know the last page is blank unless they have it in hand).
DD214 – this will be used by the VA lender to retrieve the Certificate of Eligibility. The Certificate of Eligibility will verify that the Veteran can use the VA program to finance their home. Making sure the Veteran’s Eligibility is in place prior to an accepted offer is very important.

The lender may also ask for additional items depending on the Veterans situation. Items like a divorce decree, bankruptcy papers, or documentation to back up derogatory items on a credit report will be needed. Also, if there are deposits that are not payroll related on the bank statements, then documentation to prove the deposits are from acceptable sources will be needed. Knowing this and already clearing these types of conditions will result in a very smooth and stress free closing. And no, this can’t all be done in 5 minutes. But it can be done quickly if you’re working with a loan officer who is dedicated to the VA loan program.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com

Filed Under: VA Purchase Loans Tagged With: prequalification, va loan preapproval

How Much Money is Needed to Buy a Home with a VA Loan?

June 4, 2014 by Tim Storm

The total amount of money needed to buy a home with a VA loan depends on several factors. Most Veterans know that VA offers 100% financing. But some assume that 100% financing means they will not need any money to buy a home. While it is definitely possible to buy a home using VA financing and not need any money to close, this needs to be planned out before the initial offer to purchase the home is made. There are closing costs and prepaid expenses that need to be paid by someone, if not by the Veteran.

Costs Involved in Purchasing a Home in Orange County, CA

The funds needed to close a VA loan are comprised of two things. Closing costs, which are one time costs having to do with the purchase of the home. The Closing costs are “non-recurring”. And Prepaid Expenses, which are also known as “recurring” expenses.

The Closing Costs include lender fees, appraisal, credit report, escrow closing costs, title report fees, recording fees to the county, and notary fees. There are also other items that can turn up depending on the property. For example, if purchasing an Orange County VA approved condo then expect a “condo transfer fee”, which is typically charged by the management company for the home owners association. The total closing costs can be anywhere from 1% to 2% of the purchase price.

Prepaid expenses include interest, property taxes, and home owners insurance.

Prepaid interest will vary depending on the date of closing. For example, if the loan closes on June 10 then 20 days of “prepaid” interest is collected. The daily interest is calculated by multiplying the loan amount by the interest rate for the loan and dividing by 360. A $500,000 loan at 4.25% would have $59 per day of prepaid interest. So closing on the 10th would require $1,180 of prepaid interest to be collected (20 x $59). The good news is that the first payment on a loan closing on June 10 will not be until 50 days later, on August 1. The first payment will nearly always be at least 30 days after closing. A loan closing on June 30 would have no prepaid interest, but would have its first payment 31 days later on August 1.
Property taxes. VA loans require an “impound account“, also know as an “escrow account”, for property taxes. The number of months of taxes that is deposited into the impound account is dependent upon the closing month of the loan,which in turn determines the 1st payment date. Your Orange County VA loan officer can help calculate the number of months needed as well as the total amount. The typical property tax calculation is 1.25% of the purchase price divided by 12. For example, a $500,000 purchase price x 1.25% = $6,250. $6,250 divided by 12 = $520 per month. A VA loan closing in June would require 6 months of taxes to be collected, or $3,125.
Home Owners Insurance. A one year premium is paid at closing for the Home Owners Insurance policy. This is something the Veteran will shop for on their own, but as a quick estimate use a factor of .3% of the loan amount divided by 12. A $500,000 loan amount x .3% = $1,500. On top of the premium, three months of insurance is also deposited into the impound account. So the total estimated amount needed for the insurance is $1,875. But again, the Veteran will shop for their own insurance. .3% is just an estimate.

The prepaid’s in the examples above add up to over $6,000 on a $500,000 loan. So between closing costs and prepaid’s, expect to pay between 2% and 2.5% of the loan amount. On a $500,000 loan this means the Veteran would need between $10,000 and $12,500. But what if the Veteran wants to do a VA No No, where not only in there no down payment but also the buyer will not paying any closing costs or prepaid’s? This is where planning comes into play. Your Orange County VA mortgage lender will be able to provide a detailed estimate of the funds needed as well as help offer options for having the costs paid. The obvious solution is to negotiate to have the seller pay all the buyers closing costs and prepaid expenses. However, Orange County has been in a sellers market in 2014 which makes it difficult to get an offer accepted when the Veteran is asking for a closing costs credit. Which is why it can make more sense to look at an option where the lender issues a “credit” that will cover some or all of the closing costs and prepaid expenses. Typically there will be an upward adjustment in the interest rate, but with the benefit of not needing funds to close.

Every transaction is different. And interest rates change every day. And these are the reasons why consulting with an experienced “VA loan” mortgage originator who can provide custom loan scenarios is so important. The scenario should have a detailed breakdown of the estimated closing costs and prepaid expenses so that the Veteran is prepared before making an offer on a home.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com

Filed Under: VA Purchase Loans Tagged With: va closing costs

VA Approved Condo for Sale in San Clemente, CA

May 28, 2014 by Tim Storm

Finding VA approved condo’s for a Veteran using VA financing can be time consuming. Understanding how to properly use the VA Approved Condo search on the Veterans Administration website is important. But also important is understanding that now all attached, “condo like” homes are actually condo’s. In San Clemente, CA there several projects that look like condo’s, and more importantly are priced like condo’s. But they will not be on the VA Condo Approval site since they are actually not condos.In many cases they are “townhomes”.

The Difference Between a Condo and a Townhouse in California

Definitions for condo’s and townhomes vary from state to state. California does not actually have a legal term “townhouse”. However, it is a commonly used term to describe a style of home. Typically “townhomes” are built in a row and will share one or two walls with adjacent units. A townhouse will typically start on the ground floor. A condo owner owns only the interior walls of the condo. They do not own the land under the condo, especially since in many case there may be another condo unit below them. In other terms, a condo is a legal description that defines the common ownership of the land, buildings, and common areas. A townhouse is a physical description of the property. It’s important to note that in areas of California, especially in Orange County, it can get confusing. There are Detached condos and Attached Single Family Homes that may look just like a condo or townhome.

To know for sure if you’re looking at a condo or not, the most accurate method is to review the Legal Description of the property. Also, in Orange County, if the Assessors Parcel Number (APN) begins with a “9”, then it is a condo. If it does not start with a “9” then it is not a condo and for VA financing purposes there is no need to see if the property is “VA Approved”. Condo’s are the only type of property that need to be “VA Approved” for a VA loan.

218 Avenida Adobe, San Clemente, CA 92672

A great example of a currently for sale Attached Single Family home is 218 Avenida Adobe, San Clemente, CA. Priced at $439,999, this home is is within the Presidential Heights community of San Clemente. It is a nice and spacious 2 bedroom and 1.5 bathroom home. There is a large open living and dining area with tile in the kitchen and dining room. There is a huge patio that is only steps from the community pool. The bedrooms are both on the second level, with a balcony off the guest bedroom. Both bedrooms have “peek a boo” ocean views. The home has approximately 1,060 square feet and the Home Owners Dues are $250 per month.

Presidential Heights is a community that sits above the San Clemente Municipal Golf Course and is known as a community perfect for first time buyers because of the affordable prices and location near golf and beaches. This community is also perfect for Orange County Veterans using the a VA home loan who want to live near Camp Pendleton.

The listing agent for this property is Stevie Koller with Realty One Group. The MLS Id is OC14052018. To learn more about the property you can call for pre-recorded information at (800) 349-3898 x 122.

Website with VA Approved Condo’s in San Clemente

To see a current list of VA approved condo’s for sale in San Clemente, go www.OrangeCountyVACondos.com. The site keeps the list updated by using an IDX feed directly from the MLS.

VA Home Loan Program for Orange County Veterans

The most important step in the home buying process is the initial consultation with a loan officer. Veterans looking to use the VA loan program to buy a home in Orange County should discuss their options with an experienced VA loan office. The loan officer should be able to prepare custom VA loan scenarios detailing on the purchase price, loan amount, payment, closing costs, and amount needed to close. Knowing these numbers before making an offer will put the Veteran in a better position to achieve a VA No No, where the Veteran buys the home with no down payment and no money out of pocket for closing costs.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Home Point Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com

Filed Under: VA Purchase Loans Tagged With: san clemente condo for sale, va approved condo

The Ultimate VA NO NO Home Loan for Orange County Veterans

May 23, 2014 by Tim Storm

If you could buy a home with no down payment and no money out of pocket while at the same time paying down or eliminating credit card debt, would you do it? Sometimes a potential first time home buyer will delay their home purchase until all credit card debts are paid off. This is smart. Owning a home will involve unexpected expenses and having credit card debt at the same time as an unexpected expense can result in your credit card debt spiraling out of control. For Veterans, there is a way to actually buy a home with no down payment or money out of pocket, while at the same time having their debts paid off using what I like to call the Ultimate VA No No home loan.

The “VA No No” Loan

The VA home loan program allows eligible Veterans to buy or refinance homes up to 100% of the VA loan county limits. In Orange County, CA the VA Loan limit for 100% financing is $687,500. A “VA No No” is a common term referring to a Veterans ability to have NO down payment and NO closing costs. But closing costs do exist. So who pays them if the Veteran doesn’t want to? It’s important to note that if a Veteran plans to do a VA No No, then a loan officer needs to be consulted prior to the offer being made or escrow being opened. Closing costs on VA loans do exist, so if the Veteran does not have the funds to pay them or intends not to pay them then it is important that the initial purchase offer is structured in a way so that that happens. This is not something that should come up after the offer is accepted, especially in the case of a Veteran who has debts (credit card, car etc) that he expects to payoff through the purchase of a home.

There are three basic ways to achieve the second “No” of a VA No No.

The Seller can pay the buyers closing costs. In a “buyers” market this is fairly common. However, in a “Sellers” market it is not. And right now in Orange County, in 2014, we are in a sellers market. Home inventory levels are low and there are plenty of buyers trying to buy a home. Many homes for sale have multiple offers coming in. The offers that are negotiating for the seller to pay the buyers closing costs are at a big disadvantage. So while it is possible to have a seller pay the buyers closing costs, in many cases the buyer will have an uphill battle trying to get their offer accepted.
The real estate agent can pay the buyers closing costs. This does happen sometimes. There are some “discount” real estate companies that will credit some of their sales commission back to the buyer. But in most cases, even if there is a credit coming from the agent for closing costs, it’s probably not enough to cover everything.
The lender can pay the costs. This is actually a great way to do it. Depending on rates and loan pricing, it is possible to get a “credit” for closing costs from the lender. On any given day there is a “matrix” of rates that can be offered to the buyer. The lower the rate, the higher the cost. The higher the rate, the lower the cost. And if the rate is pushed higher enough, there could be enough lender credit to cover not only the closing costs, but also credit card debts (or other debts) of the buyer.

Seller Concession in VA Financing

The VA loan program is the only type of loan that allows for debts to be paid off on the Veterans behalf as part of the home buying process. In the case of the seller paying off debts, this is considered a “Seller Concession”. VA allows a Seller Concession of 4% of the appraised value. A concession includes:

The Veterans VA Funding Fee
The Veterans “prepaid” expenses – taxes and insurance impound account and prepaid interest
Temporary interest rate buy down fees
Gifts, such as a television, appliances, etc
The Veterans debts.

An Orange County Veteran buying a home in Mission Viejo for $550,000 with $0 down, and assuming a typical first time use VA Funding Fee of 2.15% would end up with a total loan of $561,825. If we assume that typical closing costs and prepaid expenses on a home purchase are 2% of the purchase price, then by going with an interest rate of 4% (4.246% APR) at 0 points, the Veteran would need $11,000 to close and their Principal and Interest Payment (P&I, not including taxes and insurance) would be $2,682. The Veteran could instead choose to go with a rate of 4.25% (4.327% APR) because the lender is offering a 2% credit which will be enough to cover the closing costs and prepaid expenses. This achieves a VA NO NO and the P&I is $2,763. The Veteran has saved $11,000 out of pocket with the trade off having a payment that is $80 higher per month. But what if the Veteran has $5,500 in credit card debt? In this case the lender may be able to offer a rate of 4.5% (4.5% APR) with a 3% credit towards the closing costs, prepaid expenses, and credit card payoff. Since the closing costs are 2%, this would leave 1%, or $5,500 ($550,000 price * 1%) for credit card payoff. The P&I payment would be $2,846, or $80 higher than the payment at 4.25%.

For some home buyers this may make sense. And for others it may not. But knowing your options and how you want to structure your deal before you make an offer is important. Finding an Orange County VA home loan specialist who can prepare custom loan scenarios showing a detailed analysis of the payment, closing costs, and amount needed to close is critical if you want to have a smooth, hassle free transaction.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com

Filed Under: VA Purchase Loans Tagged With: va no no

Why Orange County Home Sellers Should Accept Offers from Veterans

May 16, 2014 by Tim Storm

Orange County home sellers should take offers to purchase their homes from Veterans using VA financing seriously. It can be frustrating for Veterans in Orange County when sellers seem to disregard an offer because of a fear that somehow a VA loan has a lesser chance of closing than other types of financing. Besides the fact that Veterans did serve our country and fight for our freedom, the VA loan program is a solid and easy to close loan. So why do some sellers (and maybe their real estate agents) think otherwise?

Common Myth’s About the VA Loan

The seller is required to pay closing costs for the Veteran. – Uh yeah, NO. This is not the case. The seller is NOT required to pay closing costs for the buyer. The buyer can pay their costs. Why do some real estate agents and their sellers think they must pay the buyers closing costs? Most likely because of the commonly misunderstood “non-allowable” closing costs. However, the Veteran is allowed to pay up to 1% of the loan amount in what would be considered “non-allowable” closing costs. The biggest non-allowable cost is the escrow fee. If an Orange County Veteran is buying a home for $400,000, then they can pay $4,000 towards non-allowables. And the escrow fee on a $400,000 purchase price will not be close to $4,000. So there is no problem. On top of that, in many cases the lender can issue a lender credit that will cover the Veterans closing costs. THE SELLER IS NOT PAYING THE BUYERS COSTS.
VA appraisers are conservative. – Couldn’t be further from the truth. VA appraisers are probably the most experienced group of appraisers out there. Also, it’s not like a VA appraiser is ONLY a VA appraiser. They have experience with all types of appraisals. Would you rather have an experienced appraiser appraising your home, or an inexperienced appraiser (maybe even an “apprentice”) showing up for your Conventional loan buyer. The valuation process for a VA appraisal is the same as for other types of loan programs. Recent sales comparables are adjusted based on size, condition, time of the sale, etc. If VA appraisers were going out there are cutting the value on their appraisals, then yes, that would be frustrating. But that is just not the case.
If the appraisal comes in low then the loan is dead. – Actually, that is not the case. Everything in real estate is negotiable. This “myth” is not even specific to the VA loan program. There is probably more flexibility with a VA buyer if the appraisal comes in low than with most other buyers. Think about it. VA allows for 100% financing. Just because a Veteran is not coming in the with a down payment doesn’t mean they have no money. If the value on a $500,000 purchase price comes in at $490,000, then the Veteran can either just come in with a $10,000 down payment, or negotiate with the seller for a price at $490,000 or somewhere between $500,000 and $490,000. There are situations where there are no sales comparables available to support the price a buyer is willing to pay, no matter what type of financing the buyer is using. A Conventional buyer coming in with an even 10% or 20% down may be stretching and have no additional funds if their appraisal comes in low. At least with VA there is a little more flexibility in this situation.
The VA appraiser will require repairs to the home. – Again, this should not be something that is specific to VA. While it’s true that a VA appraiser, just like an FHA appraiser, will call out safety concerns like loose wires hanging from an outlet, these types of things will be called out on any home inspection report, which just about any home buyer will want prior to closing escrow. With VA, if there are repairs that need to fixed prior to funding, the Veteran can pay for the repairs. Like other types of financing, just about everything is negotiable.
VA Loans Take Longer to Close. – VA loans can easily be closed in 30 days or less, if being processed by an Orange County lender who specializes in VA loans. That can be said for all types of financing. These days most VA buyers have already talked to a lender and have their PreApproval letter in hand. The lender already has their paystubs, W2’s, tax returns, bank statements, etc. It’s not like the lender needs to send the file into VA. VA will eventually guarantee the loan for the lender, but VA does not underwrite or review the loan. The lender does, just like any other type of loan. And just like other types of financing, the appraisal is ordered immediately upon offer acceptance. Being in escrow to buy or sell a home can be scary no matter what type of financing the buyer is using for the purchase. What’s important is making sure the lender processing the loan is experienced and stays on top of the calendar and contingency dates.

Is there Anything to be Aware of with a VA Loan?

The only unique thing about a VA loan in Orange County is the requirement for a clear termite report. Yes, VA does require a clear termite report prior to funding the loan if the property is a single family home. (This is generally not required for condos). Section 1 of the report must be cleared by the inspection company. So if the property is infested with termites and needs to be tented, then be ready for that before closing. The buyer can actually pay for the repairs since, again, everything is negotiable. Just like with any other type of financing.

So when a Veteran makes an offer on your Orange County home, take that offer seriously. They must like your home and depending on their current situation, have visions of living in your home for many years to come.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com

Filed Under: VA Purchase Loans Tagged With: va loan to purchase home