mortgages and loans

The Veterans Administration (VA) was created in 1930 to aid military veterans and current military personnel. The VA loan soon followed to aid veterans and military personnel in finding affordable mortgage loans. The VA office acts as a co-signer by guaranteeing a portion of the loan. Standard banks and lenders will originate, fund and service the loan. When the borrower defaults, the VA will reimburse bank losses.
Most veterans and current members (both active and reserve) of the United States armed services are qualified for the loan. However, a minimum requirement of six full and continuous months of active duty must be satisfied. The veteran applicant must present a copy of his or her DD Form 214, which is provided to the veteran when military service ends.
There is no down payment requirement for VA loans, unless the lender establishes one as a condition for the loan. Providing a down payment will often improve the conditions of the loan, so many borrowers do choose to pay some down payment.
Although the Department of Veterans Affairs does not limit the size of VA loans, most lenders usually establish a limit of about $184,000 on the loan amount. VA loans do not allow balloon programs.
The way in which VA loans are guaranteed is through the use of entitlements. The entitlement refers to the amount that the VA will repay if the borrower defaults on his or her loan. Today, the entitlement amount is $36,000 for the average loan. For loan amounts less than or equal to $144,000, the VA guarantees the full $36,000 entitlement.
Generally, lenders want the entitlement amount to cover at least one-fourth (1/4) of the total loan amount. For loan amounts greater than $144,000 but less than $184,000, the VA will guarantee an additional 25% of the loan amount above the $144,000 level. The $184,000 limit is set by Ginnie Mae.
The VA loan guarantee tends to operate as an insurance policy. Instead of paying a premium, however, the applicant must pay a funding fee to the Veterans Administration office. The funding fee is based on the amount of down payment that the borrower makes.
● For down payments less than 5%, the funding fee is 1.25 percent of the loan value.
● With down payments at or more than 5% but less than 10%, the funding fee is normally 0.75 percent of the loan amount. With at least 10% down, the funding fee drops to 0.50 percent.
● With refinances, the funding fee is normally a flat 0.50% of the loan amount.
Applicants for VA loans must have the subject property appraised by a VA appraiser, who will issue a Certificate of Reasonable Value (CRV). The Veterans Administration office will use the CRV amount as the working sales price or market value of the property. If the official sales price is higher than the CRV amount, the borrower must provide for the difference.

The Federal Housing Agency (FHA) is an agency of the U.S. Department of Housing and Urban Development (HUD). Unlike the VA, however, FHA loans do require some down payment. Also, the FHA loan has the additional advantage of allowing much of the closing costs to be financed by the mortgage loan.
FHA loans are geared to provide financing opportunities to home buyers with lower income or more debts. However, the FHA has suffered heavy losses in recent decades, because they tend to cover riskier applicants. FHA loan applicants have slightly higher income qualification ratios. Most FHA borrowers, in fact, would have a difficult time qualifying for a standard loan.
FHA guarantees or insures mortgage loans, at a price. Borrowers must pay the FHA’s mortgage insurance premium. The annual mortgage insurance premium is 0.5% of the outstanding loan amount, paid in monthly installments. Obviously, this monthly fee decreases as the loan balance decreases. The FHA will also charge a one-time fee, in addition to the monthly premium, for mortgage insurance.
Appraisals must be performed by an FHA-approved appraiser. FHA loans are also no longer freely assumable Loan amounts are limited according to regional economics. Across the country, the maximum loan amount for FHA loans is $151,725 for a single-family property in the most expensive areas.

If you have all necessary documents with you when you visit your lender, you’ll save a good deal of time.
What you need:

1. Social security numbers for both your and your spouse, if both of you are applying for the loan;
2. Copies of your checking and savings account statements for the past 6 months;
3. Evidence of any other assets such as bonds or stocks;
4. Recent paycheck stub;
5. List of all credit card accounts and the approximate monthly amounts owed on each;
6. List of account numbers and balances due on outstanding loans;
7. Copies of your last 2 years’ income tax statements;
8. The name and address of someone who can verify your employment.

Depending on your lender, you may be asked for other information

Adding hidden points or fees is a way for lender to make more money off homeowners. Every homebuyer should be well-educated as to all fees and costs to their mortgage.

Homeowners may not be aware of the fees charged at closing. You should always seek mortgage lenders who do not include a pre-payment penalty or higher interest rate. At closing time, it is usually too late for most homeowners to find a new mortgage. There are a lot of mortgage options available and you should find the best ones for your current situation.