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

5 Myths about the VA Loan Program | Orange County, CA

January 22, 2015 by Tim Storm

VA loans are probably the most misunderstood mortgage program in Orange County, CA. Real estate agents, Loan Officers, home sellers, and even eligible Veterans often receive incorrect information when they inquire about the VA loan program. A recent VA survey found that approximately half of all military veterans do not understand the VA loan program and how they can benefit from it. With this in mind, below are 5 myths about VA loans that Orange County Veterans, and anyone involved in the sale of a home with VA financing, should know and understand.

Myth 1: The VA Loan benefit has a “one time” use.

Fact: Veterans and active duty military can use the VA loan many times. While there is a limit to the Veterans entitlement which determines the amount of VA loan the VA will guarantee, it is important to know that even if the entitlement was used on the previous purchase of a home, once restored, it can be used again. Also, if the borrower has an outstanding VA loan, it is possible to get another VA loan. If the entitlement available is exceeded with the new purchase then a down payment would be required. But the down payment, in many cases, would still be less than that required by other types of loan programs. In Orange County, where the 2015 VA loan limit is $625,500 for 100% financing, there is “bonus entitlement” available for Veteran because of the it is considered a “high cost” area.

Myth 2: VA home loan benefits expire if they are not used.

Fact: For eligible Veterans and active duty military, VA mortgage benefits never expire. This myth most likely comes from the confusion over the Veteran benefit for education. In most cases the Montgomery GI Bill benefits expire 10 years after discharge. But VA mortgage benefits do not expire. It is not uncommon for a Veteran 30 years removed from the military to use the VA loan program for the first time to purchase a home for $625,500 or more in Orange County. The down payment is less ($0 if the price is under $625,500), there is no mortgage insurance, and the interest rates tend to be better than other types of financing.

Myth 3: A Veteran can only have one VA loan at a time.

Fact: You can have two or more VA loans out at the same time as long as you have not exceeded your entitlement and eligibility. Although, as mentioned above, it is possible to exceed the entitlement by coming in with a down payment. It is not uncommon for someone who is moving to Orange County from out of state to purchase a home with a VA loan while already having a VA loan on their out of state property, which has been turned into a rental. Because Orange County has a higher VA loan limit (and bonus entitlement) than most counties throughout the country, Veterans moving from out of state, or even from a low limit California county, will be able to take advantage of their “Bonus Entitlement” that is available in high cost counties like Orange County.

Myth 4: If a borrower has a short sale or foreclosure on a VA loan, they cannot have another VA loan.

Fact: If an Orange County Veteran has a claim on their entitlement they may still be able to get another VA loan. But the maximum amount they would qualify for may be less. VA is actually more flexible than other types of mortgage programs when it comes to the waiting period required after a bankruptcy, short sale or foreclosure. VA only requires a two year wait period for any of these events. FHA requires 3 years after a foreclosure. Fannie Mae and Freddie Mac require 7 years after a foreclosure.

Myth 5: The seller has to pay all of the Veterans closing costs

Fact: The Veteran is allowed to pay most of the closing costs without any restrictions. There are certain costs that are known as “non-allowables”. Non-Allowables are primarily made of up the escrow closing fee and the lender fees. However, the VA borrower is allowed to pay up to 1% of the loan amount towards “non-allowables”. Since most VA lenders do not charge an Origination Fee and will waive lender fees on VA loans, the 1% allowance covers the other non-allowable costs, meaning that the seller does not need to help the Veteran with closing costs. Just like any real estate transaction, everything is negotiable. In Orange County, where a typical VA loan is higher than $300,000, and can easily be higher than $600,000, that 1% allowance more than covers the non-allowables. Also, in many cases the lender can use a “lender credit” to cover the closing costs for the buyer. So it is still possible for a VA buyer to have no down payment and pay no closing costs (a VA No No) without any help from the seller.

The most important first step in the home buying process is getting Prequalified for the loan. For Veterans in Orange County, working with a local VA Loan Specialist is important. The VA loan officer should be able to prepare custom loan scenarios and present them in a unique manner that makes it easy to understand the options available.

Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loans. MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com. I will prepare custom VA IRRRL loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Filed Under: VA Mortgage, VA Purchase Loans Tagged With: va loan myths

Orange County Home Sellers Who Don’t Accept Offers from VA Buyers are Losing Money

January 6, 2015 by Tim Storm

Home sellers in Orange County who don’t accept offers from VA buyers may be losing money. Not taking all offers seriously is a bad strategy in any situation, but avoiding offers from a Veteran using VA financing is just bad all the way around. There are several reasons why there is a perception that VA buyers may not make it to the closing table, but there are plenty of reasons why VA buyers actually do close, and most likely at a higher close rate than other types of loans.

Myths about the VA Loan Program

There are several myths about the VA loan program which seem to get in the way of common sense thinking. Below are a few of those myth’s.

Myth 1 – The seller is required to pay closing costs for the VA buyer. This is not true. While there are certain closing costs that are known as “non-allowables”, the VA buyer is allowed in many cases to pay those costs. In the old days, which for this article we’ll say is back in the 90’s, it was common for the seller to pay closing costs for the VA buyer. At the very least they would pay the “non-allowable costs”. The Non-Allowables include the lender admin fees (underwriting, processing, etc), escrow closing, notary, and a few other smaller fees. However, if Veteran is allowed to pay up to 1% of the loan amount in “non-allowables” if there is not a 1% Loan Origination Fee. In most cases lenders do not charge a loan origination fee on VA loans. Many lenders don’t even charge a lender fee. This means there is only the escrow closing fee, which in most cases is less than 1% of the loan amount. Even better, many lenders offer VA loan options where there is a lender credit going back to the VA buyer that will cover all closing costs and prepaid expenses. Other than typical termite clearance fees, which are common on any real estate transaction, a seller shouldn’t have to pay any closing costs for the VA buyer unless they want to.
Myth 2 – The VA appraisal process is stringent and the valuation is conservative. This also is not true. While the VA appraisal process is a little different than for Conventional financing, the valuation process is no different than any other type of appraisal. As a matter of fact, most VA appraisers are also Conventional loan and FHA appraisers. They will be looking at the same sales comparables and making the same adjustments no matter what type of appraisal they are doing. A VA appraiser will be looking for safety issues with the property (FHA does this as well). So if there are holes in the floor, loose wires hanging from sockets, broken windows, or peeling lead based paint, then the VA appraiser may call that out and require repairs. However, most buyers using any type of financing will have a Home Inspection Report completed, which would be calling out the same repairs. This should not be a concern.
Myth 3 – The VA buyer has no “skin in the game”, making their offer weak. This couldn’t be further from the truth. An interesting fact about the VA loan program is that it has the lowest default rate of any type of loan program, even though there is no down payment required in most cases. Veterans have character and have proven that they will stay within their budget and meet their obligations.In most cases, the VA buyer should have been Prequalified or PreApproved before making the offer on the home. The seller is going to get paid whether the Veteran buys the home with all cash or uses 100% financing. (I recently had a Veteran in Orange County make an offer on a home in the $600,000 price range. It would have been a 30 day escrow. The seller ignored the offer and accepted an offer with Conventional financing that was $10,000 under the VA buyers offer. Thus, this article.)

There was recently a great article in the LA Times titled “Sellers who ignore VA buyers are missing out” which makes several strong points about why sellers should take an offer from a VA buyer seriously.

The Truth About VA Loans in Orange County, CA

The truth is that the VA loan program in Orange County is very strong. The 2015 VA loan limit for Orange County is $625,500. This means an Orange County Veteran can purchase a home with no down payment up to that amount. But it is also possible to get a Jumbo VA Loan, which is what happens when a Veteran purchases a home with VA financing that is higher than the VA loan limit for 100% financing. Many local Orange County, CA VA lenders will lend as high as $1,500,000 on a VA loan. There is a down payment required, but not much. The down payment is equal to 25% of the difference between the $625,500 loan limit and the purchase price. For example, if a Veteran is buying a home for $825,500 (and even $200,000 above the limit) then the down payment would be $50,000 and the VA loan would be $775,500. That works out to only 6% down payment for the Veteran on an $825,500 price. Along with the other benefits to the Veteran of having no monthly mortgage insurance, competitive 30 year fixed rates, flexible qualifying when it comes to credit and debt to income ratios,this makes the VA loan program an excellent option for both the VA buyer and the seller.

The first step for the VA Buyer is to talk to an Orange County VA loan specialist who can prepare custom loan scenarios based on the Veterans long and short term financial goals. A VA specialist should be able to educate the buyer on how the numbers work and how it will fit in to their budget. By the time a VA Buyer is ready to make an offer on a home they should already know all they need to know about the financing.

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. I prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Filed Under: VA Mortgage, VA Purchase Loans Tagged With: orange county va loan, va buyers, va sellers

2015 VA Loan Limits for Orange County, CA to be $625,500

January 2, 2015 by Tim Storm

The VA loan limit in Orange County, CA for 2015 will be $625,500. This is actually a decrease from the 2014 limit of $687,500, but is still a higher loan limit than most parts of the country. It is important to understand that this “loan limit” is for 100% financing. This means it is possible to purchase a home in Orange County, condo or Single Family Detached, for up to $625,500 with No Down Payment. It is also important to understand that with a small down payment it is possible to get a VA loan that is higher than $625,500. VA loans of over $1,000,000 are not unusual in Orange County, which is known for having high cost housing.

How are VA Loan Limits Determined?

Each year the Veterans Administration announces the new limits for 100% financing. The limit can vary from county to county. For example, in most counties the 100% loan limit is $417,000. In Riverside and San Bernardino counties the limit is $417,000. For the last few years the 100% loan limit was increased in order to help “spur economic” activity. Now, in 2015 the loan limits are tied to the Conforming loan limits set by the Federal Housing Finance Agency which oversees Fannie Mae and Freddie Mac. Since the Conforming loan limit is $625,500 for Orange County, the VA loan limit now matches up with the Conforming amount. FHA does as well.

What About Jumbo VA Loans?

It is still possible to get a loan amount higher than $625,500. This is commonly known as a VA Jumbo Loan. A down payment is required, but when compared to other types of financing VA still comes out far ahead in most cases. The down payment is equal to 25% of the difference between the 100% loan limit and the purchase price. For example, if a Veteran purchases a home in Orange County for $725,500, which would be an even $100,000 over the 100% financing limit, then the down payment required would be $25,000. ($725,500 – $625,500 = $100,000. 25% * $100,000 = $25,000 down payment) This would mean the base VA loan amount (not including the VA Funding Fee if required) would be $700,500. In this scenario the Veteran was able to purchase an Orange County home with only 3.44% down payment. There is no other type of mortgage product that comes close to allowing that small of a down payment on a $725,500 purchase price. Even at a $1,000,0000 purchase price the down payment would be a little less than 10%. And the best part is VA offers very competitive 30 year fixed interest rates with no monthly mortgage insurance, which would be required on other types of financing when there will be less than a 20% down payment.

VA is Great for Purchasing OR Refinancing a Home

The VA program is great, whether you are looking to purchase a home or refinance into a VA loan. The first step in any home financing process is to talk to a local Loan Officer, and for VA financing, preferably an Orange County loan officer who specializes in VA financing. The loan officer should be able to prepare Custom Loan Scenarios that will give you the details you need to make a sound decision based on your long and short term financial goals. And of course, if you are planning to purchase a home, then VA Loan PreApproval is the first step.

Filed Under: VA Mortgage

What is CAIVRS?

May 9, 2014 by Tim Storm

Credit Alert Verification Reporting System, commonly known as CAIVRS, is a shared database of Federal debtors. CAIVRS was developed in 1989 as a quick way for “processors of applications for Federal credit to identify people who are in default or have had claims paid on direct or guaranteed Federal loans, or are delinquent or have other debts owed to Federal agencies.” In the case of an applicant for a VA home loan, this means the lender is required to check the CAIVRS database to verify the potential borrower does not owe the Federal government money.

How Does CAIVRS Work?

The CAIVRS database has records on delinquent borrowers from several government agencies, including the Department of Housing and Urban Development (HUD) and the Department of Veterans Affairs (VA). Since a lender offering VA financing needs a “guarantee” from the VA, the lender is required to check CAIVRS. Most of the time there are no issues on the report. But if the applicant is reported to be delinquent or a claim was paid within the past three years, then the borrower will not be eligible for a new VA loan. At least not yet. There are three instances where the applicant may still be eligible.

Loan Assumptions. If the VA borrower sold a previous property, with or without a release of liability, to someone who eventually defaulted on the government loan then the new applicant may be eligible if they can prove that the loan was not in default a the time of the home sale/loan assumption.
Divorce. The applicant may be eligible if the divorce decree (or legal separation) awarded the property and responsibility for payment to the former spouse. However, if a claim was paid on a mortgage that was in default prior to the divorce then the applicant is not eligible.
Bankruptcy. If the property was included in a bankruptcy that was caused by circumstances beyond the borrowers control, like death or big medical bills, then the borrower may be eligible if certain requirements are met. This exception can be a tough one but it is possible.

How do I “Clear CAIVRS”

Clearing CAIVRS can be a waiting game. For someone who lost a home with FHA or VA financing, a claim would have been paid from FHA or VA to the lender. But many times the lender doesn’t foreclose right away or doesn’t file the claim immediately. Especially in the past few years, with the abundance of foreclosures, some claims weren’t filed until months, or even years after the applicant lost their home. 3 years after the claim is paid the applicant can get a new VA or FHA loan. So it’s important to find out when the clock started ticking on that three years. Don’t assume it is three years after you lost the home.

A fast way to clear CAIVRS is to just pay back the amount owed to FHA or VA. Sometimes it can be a small amount and it may be worth it to just pay it off so that you can move forward with a new home purchase.

If you do have a debt owed on CAIVRS then your VA loan officer can give you a copy of the report. The report will show the agency reporting the default, the case number of the defaulted debt, the type of delinquency (default, claim, foreclosure, lien or judgment), and a telephone number top call for further information or assistance.

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 Mortgage

What Is The VA Funding Fee?

May 2, 2014 by Tim Storm

The VA loan program is one of the only 100% financing home loan options available in the mortgage industry today. Available to eligible United States veterans, it allows for the purchase of a home with no down payment to purchase prices as high as $687,500 in Orange and Los Angeles Counties, CA and $1,050,000 in Contra Costa, San Francisco, Marin, Alameda, and San Mateo counties. Offering low fixed rates and no monthly mortgage insurance, the VA home loan program is truly one of a kind. But a common question does come up. What is the Funding Fee?

*California county limits for VA Loans

The VA Funding Fee is a fee that is required in order to receive a VA loan. The amount of the Funding Fee is pre-determined by VA based on a several factors, depending on whether the Veteran has used their VA eligibility previously, the amount of down payment (if there is any), and whether or not the Veteran served in the “regular” military or the Reserves. And for some, the Funding Fee is waived. It’s important to note that the Funding Fee is sent directly to VA to go towards losses on loans that go into default.

Below is the Funding Fee chart for those who served in the regular military.

Below is the Funding Fee chart for those who served in the Reserves and National Guard

When is the VA Funding Fee Waived?

Below are circumstances when the VA Funding Fee is waived.

Veterans who are getting VA compensation due to service related disabilities.

Veterans who would be receiving VA compensation due to service related disabilities if they were not already receiving retirement pay.

Loans for spouses of veterans who passed away in service or because of service related disabilities.

The Certificate of Eligibility will let the lender know whether or not a Funding Fee is to be charged.

How is the Funding Fee Paid?

The Funding Fee can be financed into the loan. For example, if a Veteran purchases a home in Orange County for $500,000 using 100% financing, the “base” VA loan would be $500,000. The Funding Fee ( assuming this the the Veterans first time using their entitlement) would be $10,750 ($500,000 * 2.15% = $10,750). If the Veteran chooses to finance the Funding Fee, as most do, then the total VA loan amount would be $510,750. The Veteran can also choose to pay the Funding Fee “out of pocket”, and in some cases the lender may even offer enough “lender credit” to pay cover the Funding Fee.

What about a VA Refinance?

The amount of Funding Fee on a refinance just depends on the type of refinance. The most common VA refinance is the IRRRL, or Interest Rate Reduction Refinance Loan. This is a VA to VA refinance with no cash out. The Funding Fee on an IRRRL is only .5%. For a refinance of a non-VA loan into a VA loan, or any “cash out” refinance, the Funding Fee is 3.3%.

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 Mortgage