VA Loan on a Custom Home - Is It Possible?

If you are a first-time homebuyer and a veteran, the VA allows you to obtain a mortgage for new construction. However, many veterans are unaware that the VA does not provide the actual loan. Instead, the VA insures the loan with banks and mortgage lenders in the event you default on your mortgage. Therefore, you must find a lender who is willing to approve you for a construction loan.

A Closer Look at VA Construction Loans

The Department of Veterans Affairs states you can use a VA-backed construction loan to buy or build a home. You can also refinance a home using a construction loan. However, most lenders consider construction loans high risk since it does not convert to a permanent loan until construction is complete. The upfront construction costs cause many lenders to pass on these types of loans, including VA-backed loans. You might be thinking how lenders can pass on any VA-backed loan.

Although a bank or mortgage lender might be approved to issue mortgages backed by the VA, it is not a requirement. Banks and lenders can decline your application for a construction loan or any other type of mortgage, even when they are insured by the VA. Keep in mind that you must find a lender who is ready to approve you for a VA construction loan.

Finding VA Construction Loans

It can be tricky trying to find a lender willing to offer you a construction loan, but it is not impossible. Many lenders offer construction-to-permanent loans where you finance the cost to build with a developer or a homebuilder. Once the construction is complete, you can roll the loan into a permanent mortgage backed by the VA. In this scenario, the skill of a qualified VA loan specialist comes in handy. If you cannot find a lender willing to offer you a construction loan backed by the VA, a loan specialist can.

The VA Construction Loan Process

Since you can use your VA entitlement for a construction loan, you must meet all the minimum eligibility requirements outlined by the Department of Veterans Affairs. You will need your VA certificate of eligibility. You must meet minimum property requirements set forth by the VA. And, you also must meet the minimum credit score requirements, debt-to-income ratio requirements and the minimum down payment requirements set forth by the VA.

The VA does not have a minimum credit score requirement for qualified veterans. However, lenders want to see your credit score at 620 or better before they approve you for financing. The VA also uses a debt-to-income ratio of 41 percent as a benchmark. However, lenders can use an overlay to allow for higher or lower DTI ratios based on their perception of your level of risk as a borrower.

Another point to consider is VA-construction loan lenders can require higher down payments than the VA minimum down payment guidelines. Lenders are allowed this flexibility since they assume all the risks during the construction process. Here again is where a VA loan specialist can work out the exact details of a construction loan.

Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage. For more details call us at 619-350-1951 or visit our site http://sandiego.valoansforvets.com/

The views expressed here are those of the individual author and do not necessarily represent those of First Choice Bank (NMLS #: 177877) and First Choice Loan Services Inc. (NMLS #: 210764), 959 South Coast Drive, Costa Mesa, CA 92626. Equal Housing Lender. www.fcloans.com/disclaimer/

www.fcbhomeloans.com/privacy

VA Loans and the Inspection Process

A VA loan is available to active military, reservists and National Guard members. They are also available to spouses whose husband or wife died in the act of duty.

Veterans Affairs loans are attractive because they require zero down payment. A regular conventional loan requires a down payment of 20 percent. If you obtain an FHA loan then you will be required to put down 3.5 percent.

Your loan can only be used against a property you choose as your primary residence. You can reuse your loan as long as you pay it off in full each time. If you lost your loan due to foreclosure you may still be able to apply for another one.

Mortgage insurance is a fee you pay monthly included in your mortgage payment. Most lenders require that you pay mortgage insurance if you are not putting at least 20 percent down. However, with a VA loan you are not required to carry it. There is also no pre-payment penalty so you can make additional payments over time without being penalized.

How to Apply?

The VA doesn't provide the loans, private lenders do. While there are no minimum credit score requirements, you will still need to show suitable credit. A valid Certificate of Eligibility and sufficient income must also be provided. This can be obtained by you or your lender and proves you are eligible.

You can research online or contact a mortgage broker to find a lender that participates in a VA home loan program near you. Better yet, contact a VA loan specialist to guide you through the process.

There are county limits on how much you can borrow and Veterans Affairs has a limit on how much they will be liable for. Upon receipt of your application, approved underwriters will verify eligibility, debt and income.

The Inspection Process

Your lender will require a professional home inspection. Before you start the process make any necessary repairs that are easily fixable yourself.

•  Make sure your basement or crawlspace doesn't smell of mildew. Inspectors look specifically for moisture and mold by examining the walls. Access moisture can attract insects and corrode the building materials.
• Roof repairs will be required if your inspector notices the shingles are moist or rotting.
• Plumbing clogs will need to be fixed and washers and dryers will be tested.
• The septic system and indoor faucets will be tested for water pressure.
• Toilets will be flushed, faucets turned on and sink drainage noted.
• Appliances will be turned on to make sure they work.

A pest inspection may also be required and you must have clearance. If this loan is being used for a refinance you may only need a title inspection.

Before the Inspection

Home inspectors are trained to make notes of everything. If there are issues that need to be addressed, work with the seller on getting those fixed or re-negotiate the sales price. If there are too many problems you can back out of the deal depending on your contract.

After said repairs required by Veterans Affairs have been made, the appraiser will come back and re-inspect the property. If all goes well and you have turned in the proper documentation you will be clear to close.

Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage. For more details call us at 619-350-1951 or visit our site http://sandiego.valoansforvets.com/

The views expressed here are those of the individual author and do not necessarily represent those of First Choice Bank (NMLS #: 177877) and First Choice Loan Services Inc. (NMLS #: 210764), 959 South Coast Drive, Costa Mesa, CA 92626. Equal Housing Lender. www.fcloans.com/disclaimer/

www.fcbhomeloans.com/privacy

Is There Any Reason to NOT Use a VA Loan?

Many military veterans apply for a VA loan when looking to purchase a house. In most cases, these particular loans offer favorable terms for the applicant, which is the reason that close to 80% of veterans own their own home. However, there may be certain instances when a VA loan may not be an appropriate option. What are some instances when an individual should look into other loan programs?

You Have Money for a Down Payment

Many people use VA loans because they can offer loans for homes without requiring down payment or mortgage insurance. In most instances, loan options through banks will require you to put some money down. However, what happens if you have the 20% to put down on a home?

In many cases, you may find more favorable options if you look elsewhere. VA loans normally have a fee, which is charged to each loan. If you are able to put down 20%, you may be able to avoid such fees. Typically, the fee can range from 2% to 2.2% depending on a certain set of criteria.

You Have Excellent Credit

If you have great credit, then many outside loan programs may be able to offer more favorable terms. Most VA loans allow for lower credit scores and also a higher debt to income ratio. If you have wonderful credit and limited debt, then you may want to explore a conventional loan.

You Are Looking to Purchase a More Expensive Home

In most cases, VA loan programs allow applicants to borrow up to $417,000 without putting any money down. However, many people look to purchase a home that is more expensive, especially if they live in an area with a higher standard of living. In this case, a conventional loan may be your only option.

Avoiding the Red Tape

If an applicant applies for a VA loan, then he or she should be prepared for some red tape. Some applicants have found that the VA loan office can be very meticulous when it comes to home inspections and appraisals. They may require the seller to make some repairs before the house can be sold. This can drag out the process and can ultimately lead to the loan being denied or the seller not accepting your offer to purchase.

Purchasing a Fixer Upper

In most cases, a house purchased with a VA loan must be move-in ready. If you have found a house that is very affordable but requires some repairs, then you may want to look elsewhere to find a loan. Remember that VA loans must pass a stringent inspection process, which may mean that you may not be able to purchase certain types of property.

If You Have Another VA Loan

Remember that if you have a current VA loan, you cannot apply for another until the first one is paid off. If you find another piece of property, you may want to apply for a conventional loan instead.

Ultimately, if you are looking to purchase a home, you should investigate all of your options thoroughly. Even if you are a veteran, you may find that a VA loan may not be your best option. Consult a loan officer and research all the programs out there and you may find something with more favorable terms and conditions.

Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage. For more details call us at 619-350-1951 or visit our site http://sandiego.valoansforvets.com/

The views expressed here are those of the individual author and do not necessarily represent those of First Choice Bank (NMLS #: 177877) and First Choice Loan Services Inc. (NMLS #: 210764), 959 South Coast Drive, Costa Mesa, CA 92626. Equal Housing Lender. www.fcloans.com/disclaimer/

www.fcbhomeloans.com/privacy

What Happens to my VA Loan if I Die?

If you are a United States service member or a retired service member and need a home loan, the VA offers an excellent choice. Private lenders provide VA loans, and they are guaranteed by the Department of Veterans Affairs. If you qualify for a VA loan, you need to know how the process works.

Eligibility for a VA Loan

If you are a member of any branch of the U.S military, you should be eligible for a VA loan. Spouses of serviceman who were killed in action or have a disability related to service-related injury also qualify for the loan. You are eligible if you have served actively for 90 consecutive days during wartime or if you have served 181 days during peacetime. If you have more than 6 years of service in the National Guard or Reserves, you will qualify.

What is Required to be Approved?

To get a VA loan, you will need a certificate of eligibility to prove that you qualify. This certificate will tell the lender how long you served in the military. You can obtain this certificate online, download it and mail it in.

Advantages of a VA Loan

One of the biggest advantages of this loan is that you are not required to have a down payment. The VA insures 100% of the loan. You are also not required to have private mortgage insurance, which will make your monthly payment amount lower. You do usually need to pay a one-time funding fee, but it can be rolled into your loan. If you cannot make payments on the loan, the VA will try to negotiate with the lender to come up with a solution.

Qualifying for a VA Loan

There is not a minimum credit score requirement; however, most lenders want you to have a score of at least 620. If it is any lower than that, you will pay a higher interest rate. You will also need to show proof of income to show that you make enough money to pay the loan. You must use it for a primary home; you cannot use it for a vacation or investment home.

Applying for a VA loan

You can get pre-approved for a VA loan online with a VA approved lender. You will need to provide your certificate of eligibility along with additional paperwork required by the lender. After you are approved, you can sign the paperwork. An appraisal will be ordered. If everything looks good, you can close the deal.

What Happens if I Die?

If the military member dies before the loan is paid, the spouse or other individual can keep making the payments. If a co-borrower is not available, the veteran’s estate will be obligated for the loan.

A VA loan is a great way for a person who has served in the military to be able to buy a home. You will not need a down payment, and you do not need perfect credit. You can apply with a lender who accepts VA loans, and you will be on your way to owning a new home.

Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage. For more details call us at 619-350-1951 or visit our site http://sandiego.valoansforvets.com/

The views expressed here are those of the individual author and do not necessarily represent those of First Choice Bank (NMLS #: 177877) and First Choice Loan Services Inc. (NMLS #: 210764), 959 South Coast Drive, Costa Mesa, CA 92626. Equal Housing Lender. www.fcloans.com/disclaimer/

www.fcbhomeloans.com/privacy

How a VA Loan Specialist Can Help You

The Path to Home Ownership

Eligible U.S. veterans frequently rely on loans from the Department of Veterans Affairs ("VA loans") to finance the purchase of their residences in the United States. This form of home financing is popular with military service members.

Yet the process of completing a mortgage loan application sometimes appears daunting to prospective buyers. Consulting with an experienced VA loan specialist may help.

What Makes a VA Loan So Attractive?

First, why do lenders, real estate professionals and home buyers usually welcome VA loans as a method of financing a real estate purchase? Obtaining this type of mortgage loan offers significant advantages:

Eligible veterans and active members of the military may obtain VA loans;

In some cases, a buyer using a VA loan may acquire real estate with no down payment.

Buyers do not need to pay money at the closing to obtain mortgage insurance when they use a VA loan. The Department of Veterans Affairs guarantees the financing. Home buyers using VA loans do not need to meet minimum credit score requirements. This often allows prospective home buyers with very poor credit to qualify for this specialized type of mortgage financing.

Private lenders appreciate VA loans because they realize the Department of Veterans Affairs guarantees part of the financing. (Provided everyone complies with VA loan requirements, of course). If a home buyer cannot pay the mortgage at some point, and the lender must take back the property, the lender will receive at least partial reimbursement for the mortgage. Essentially, the VA assumes much of the risk of extending financing, not the bank.

How VA Loans Assist Home Buyers

In recent years, property values have risen significantly in many communities around the United States. Since a mortgage down payment typically represents a percentage of the purchase price of a residence paid up front by a home buyer, the ability to rely on VA loan financing has become exceedingly valuable.

For example, a 20% down payment on a $50,000 home requires a $10,000 out-of-pocket payment by the home buyers. Yet when a house increases in value to $100,000, prospective buyers must pay $20,000 down simply to qualify for most conventional mortgage financing. With residential real estate in some cities now exceeding an average price of $250,000, families frequently encounter difficulty raising money to make a down payment. The availability of VA loans greatly assists eligible veterans and active military personnel in becoming home owners.

A Helpful VA Loan Specialist

A capable VA loan specialist assists home buyers in determining whether they meet the eligibility requirements for VA loan financing. The specialist can also provide advice about gathering necessary documentation required to prepare a VA loan application.

Complex rules apply in determining eligibility for these loans. However, numerous veterans, active duty military service people, reservists and National Guard personnel potentially qualify.

Consult a VA Loan Specialist

To explore ways to finance your dream of home ownership, call 619-350-1951. Today, obtaining VA loan financing helps many buyers become first-time home owners!

Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage. For more details call us at 619-350-1951 or visit our site http://sandiego.valoansforvets.com/

The views expressed here are those of the individual author and do not necessarily represent those of First Choice Bank (NMLS #: 177877) and First Choice Loan Services Inc. (NMLS #: 210764), 959 South Coast Drive, Costa Mesa, CA 92626. Equal Housing Lender. www.fcloans.com/disclaimer/

 www.fcbhomeloans.com/privacy

Base Housing vs Buying a Home

Relocating to start a new tour? Exploring housing options available near your base? Or debating between remaining on base or moving off-base and buying your own home? There are pros and cons associated with each of these two options. A closer look will help you to determine which is the best option for you.

What to Expect from Base Housing

Many military professionals enjoy base housing because it is affordable and conveniently located. There are usually amenities close by. A store, a pool, a park for the kids and more. Typically, officers live among other officers. Enlisted personnel live close to others of a similar ranking. If relocating to a new base, you generally do not need to worry about buying out a lease or selling a home. However, many people may be looking for a home that is larger, nicer or otherwise more removed from their workplace. This allows them to “get away from it all” during their off-duty hours. Others may find that the wait list at their home base is longer than their tour length. They may be forced to look for an off-base house.

The Benefits of Buying a Home

Buying a home off-base is a popular alternative to base housing. It provides you with a comfortable place close to the base yet in a removed location. And it is entirely your own. It may provide you with more space to enjoy if you have a family. You can also enjoy the financial benefits of home ownership. For example, each mortgage payment you make is partially applied to principal reduction. As a result, you generally may see your equity increase over time. In addition, you can enjoy certain tax benefits. These benefits include write-offs for your mortgage interest and property taxes. In the event you are relocated, you can sell the home. Or you can rent/lease the home quickly. This can generate a stream of rental income.

The Importance of Reviewing Your Budget

VA loans for military professionals provide you with a wonderful financing solution for paying for your new home. With a VA loan, you will not have to make a down payment. And closing costs are typically affordable. You can expect competitive interest rates and great loan terms. You will still receive a housing allowance if you buy a home. This can be counted as income when you apply for your VA loan. It is important that you review your budget to determine a mortgage payment that is comfortable for you. And, also, to ensure that you can pay for the closing costs.

Whether you are in the military or not, the decision to buy a new home is not a matter to take lightly. Getting pre-qualified for a VA loan will tell you a couple of things. The maximum sales price you can consider. And the mortgage payment for which you can qualify. After pre-qualification, you can then explore local homes for sale in your desired area. These steps can help you to better determine if buying a home is the right move to make.

Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage. For more details call us at 619-350-1951 or visit our site http://sandiego.valoansforvets.com/

The views expressed here are those of the individual author and do not necessarily represent those of First Choice Bank (NMLS #: 177877) and First Choice Loan Services Inc. (NMLS #: 210764), 959 South Coast Drive, Costa Mesa, CA 92626. Equal Housing Lender. www.fcloans.com/disclaimer/

www.fcbhomeloans.com/privacy

How to Determine Your Debt-to-Income Ratio

Whether you’re applying for your first mortgage or your fifth, you must know your debt-to-income ratio. It is one of the most important factors used to determine not only whether you can afford a new mortgage, but how much you can afford and at what interest rate. 

Lenders are loaning you their money to buy or refinance a home. Your financial situation, income and debts you owe, are important to them. They must determine if you already have too much debt to repay. 

It’s one of many ways they assess your ability to repay the loan you are asking for from them. They want to know they’re making a wise financial investment.

What is Considered Debt?

There are many questions associated with calculating debt-to-income ratio. ***Not all your monthly expenses are considered debt. But for this calculation, it’s important to know which ones are considered.

- Mortgage payment

- Escrowed real estate and homeowner’s insurance

- Car loans

- Student loans

- Personal loans

- Credit card payments

- Time shares

- Alimony

- Child support

- Loans you co-signed

Things such as your car insurance, health insurance, utilities, and other bills of that nature are not included in the debt portion of your debt-to-income ratio.

How to Calculate Debt-to-Income

The ideal ratio is at or below 36%. But it’s always best to keep your debts as low as possible. The way to calculate this percentage is to add up all debts included in the list above. Then add up all sources of gross income. Gross income is the amount of money you earn each month prior to the subtraction of taxes and other deductions from your paycheck. This is important to note. If you use your net income for this calculation, you will get an incorrect analysis of your debt-to-income ratio.

Once you correctly determine these numbers, take your debt and divide it by your income. This is the percentage of your debt-to-income ratio. For example, if you have $2,000 in monthly debt expenses and $10,000 in monthly gross income, your debt-to-income ratio is 20%. This is low and looks good to lenders.

When your debt-to-income ratio exceeds 36%, it’s not a good sign. Many lenders will refuse to work with you. Or they will require you to spend some time and money paying down your debts. Paying off your mortgage or car loan might not be possible. But paying off any other loans in your name or credit card balances will work in your favor. Your lender will advise you as to what you need to pay off.

It’s also important to remember your current mortgage is not going to be calculated in this ratio if you are applying for a new one. The potential new mortgage you’re applying for is the one that’s calculated when you go through this process. Speak to your lender about any questions you might have regarding your debt-to-income ratio.

Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage. For more details call us at 619-350-1951 or visit our site http://sandiego.valoansforvets.com/

The views expressed here are those of the individual author and do not necessarily represent those of First Choice Bank (NMLS #: 177877) and First Choice Loan Services Inc. (NMLS #: 210764), 959 South Coast Drive, Costa Mesa, CA 92626. Equal Housing Lender. www.fcloans.com/disclaimer/
 www.fcbhomeloans.com/privacy