FHA & VA Loan Programs: What People Are Craving To Know

Guest Interview: Cory and I meet over lunch to talk about FHA and VA loans.

Visit Cory's Chase Nation Page

I met Cory at one of our weekly office meetings.

Cory is a 4'th generation Montanan who finished his bachelor's degree in finance and economics at the University of Montana. 

Shortly after his graduation, he got into the lending industry at the age of 22.  He's been in the business for 17 years. 

I asked him to give us his thoughts on FHA and VA loan programs.  It was time well spent for I gained new understanding on these very important loan programs.  Hope it gives value to you too!

(Note: this article is not meant to encompass all the nitty-gritty details about these programs. Our hope is that through Cory's insights we can all learn something new and hopefully help you in your decision-making. But I tried my best to include resources with the topics we discussed.  If something is not clear to you or would like to know more, you're more than welcome to call me directly (Joe: 775-338-7653) and I will do my best to help you or recommend someone who can.)

FHA Loans (Federal Housing Administration) 

• Allows 97% of purchase price to be refinanced.  So if you have a $100,000 loan, your max loan amount would be $97,000.

• FHA has an upfront mortgage insurance charge plus a monthly mortgage insurance charge. The upfront mortgage insurance is stacked on top of the loan amount. So even though the loan amount is 97,000, that would only be your base loan amount. Your total loan amount would be your base loan amount plus your upfront mortgage insurance premium. So in the last scenario Your total loan amount would probably be closer to 98,600. The extra $1,600 is your upfront mortgage insurance that's financed in.

• FHA allows a little bit more liberal debt-to-income ratio compared to Conventional loans.

• FHA allows for a little bit loser underwriting standards in regards to the credit. So it really is a program that's geared to people who has had issues in the past but have learned form their mistakes.

• FHA is a good loan for people who maybe hasn't saved up enough money for a huge down payment.

• FHA also has FHA Access which you can do 100% financing. However, the rate adjustment on that are stiff. For example if you're quoting 6.25% for a FHA loan, your FHA access would probably be at 7.5% for the extra 3 percent (in down payment).  That's why I don't usually recommend FHA access.

Additional Resources:

• Let FHA loans help you (http://www.hud.gov/buying/loans.cfm)

• FHA loans Wiki (http://en.wikipedia.org/wiki/FHA_loan)
  

VA Loans (Veteran's Affairs)

• VA allows for 100% financing

• VA has what's called a funding fee.

• The myth is that you can only use your VA loan once. That is not true. A veteran has the option to use their VA as many times as they want as long as the previous VA loan has been paid off.

• VA has an upfront funding fee similar to the upfront mortgage insurance that FHA has but VA funding is a little bit more. It's 3% for the first time that you use it. 

        It's 3.25-3.5% for subsequent uses and that's based on the loan amount. So if you have a 100,000 loan. VA funding fee will be $3,000. Again, its calculated very similar to FHA.  You have your base loan amount plus whatever your funding fee or your upfront mortgage insurance is to get your total loan amount. So with VA you'll start with a 103,000 loan with a 100,000 loan.

• VA is very competitively priced. If your veteran, through service, has been disabled, the funding fee can be waived.  In my mind, It's still a very strong program. Its probably right now the best program out there.

Additional Resources:

• Am I eligible for a VA loan (http://www.homeloans.va.gov/eligibility.htm)?

• Frequently asked questions about VA (http://www.homeloans.va.gov/faqelig.htm).
  

• VA loan Wiki (http://en.wikipedia.org/wiki/VA_loan)
  

Who qualifies for a VA loan?

• Anybody who has been honorably discharged from the Armed Services of the United States of America.

• And from that point it's just making sure the Veteran has what's called a DD214 which is the date of discharge papers. And you use that to get your certificate of availability. You can also get that online right on VA's website. If you can't get it over the web, you can request it via snail mail. Great program.

• VA allows for a little bit of Debt-to-Income ratio compared to a Conventional loan.

Some notes about FHA & VA loans

• Both FHA and VA looks at certain aspects of the property. By their mandate they are trying to avoid somebody purchasing a house and having to replace the roof or having to cost them financial hardship.

• Health and safety hazards are usually noted on the appraisal and usually have to be repaired before closing. A bad roof would probably get called and you've got problems with the heating units. All of those things would have to be addressed before you close A FHA or VA loan.

• The major difference bet FHA and VA right now is you can manually underwrite a VA loan with a low of 580 you can't do that anymore for FHA. If there below 580 you'll have to have an automated approval in order to close it. I do believe that that would probably come back in time.

CONTACT INFO:

Cory Henderson
Cell: 775-815-5500
Office: 775-828-9500
Email: cory.henderson@mannmortgage.com
Address: 495 Apple St. Suite 105 Reno,Nevada 89502

Comments

[Debbie]

Cory,
thanks for the info. This is good. I need to tell my niece about this. There are so many infos out there that it gets tough to sort through the clutter.

thanks guys

[yanni raz]

Today's Most Popular Fha Loans

What is fha loans with bad credit ?

Fha loans are the most popular consumer mortgage loans you can possibly have today.
Also fha bad credit loans are done by the government, basically the government have created these loans years ago and it was actually very popular.
Fha bad credit loans also called fha hud loans have their fha guidelines and fha requirement.
So for you to get a consumer mortgage and an fha approval you need to know the guidelines.

1.Fha fees- fha fees are not so much different than any other conventional mortgage loans you had in the past.
The problem is that some of us that apply to have a consumer mortgage are being charged high points in conventional mortgage loans.
If you will read the fha guidelines you will understand that with fha lending it's a much safer way to go because there are some restriction with the fha fees.
2.Fha appraisal- fha appraisal is also not so different from a normal appraisal you will have to get done in a conventional mortgage.
But here the appraiser that will appraise your home will have to be fha approved to get you an fha appraisal done.
3.Fha conventional- fha conventional is not a normal term but some people are using this term for some reason.
Fha conventional is not related to one another, fha is fha and conventional is conventional.
4.Fha lenders- there are not a lot of fha lenders and fha brokers.
A lot of people think that every mortgage broker can help them with their fha Home mortgage, no.
Only a few Mortgage brokers out there are really fha approved, so before you make a decision about the next mortgage broker you will use make sure they're approved.
5.Fha loan limits- the fha loan limits have changed recently. Until march of 2008 the fha limits were up to $417,000, because of states like California, New york and Florida the fha loan limits have changed to $729,000.
The new loan limits will help many homeowners to refinance their homes and avoid foreclosure.
6.Fha pmi- fha pmi is the mortgage insurance you required to pay.
Please read the fha requirements, in conventional loans you will pay pmi only if your loan is more than 80% ltv.
Since fha programs don't offer a second loan on your mortgage they will make you pay pmi instead, which is good because paying pmi is much better then a second loan.
7.Fha rates- fha rates are much better then conventional interest rates.
Conventional banks have a higher interest rates because they charge to the index of your loan a margin. Fha interest rates have no margin since the fha program is done by the government.
Fha rates are lower then conventional rate loans.

So again learn the fha guidelines and the fha requirements.
now you will know the fha loan limits.
1. you will probably have to pay fha pmi.
3. The fha rates shouldn't be higher then conventional rate loans.
Now go find fha lenders or an fha broker, get your refinance or mortgage done and save your home.

[Ian mariano]

Yanni,

Thanks for the detailed overview of FHA loans. Good comment.

[mortgage rate/s]

Last week I noticed a post about a newly published statistics section on VA Loans from the producers of You Served, VA Mortgage Center.com. It's an interesting read for anyone in the mortgage industry, especially if you are considering offering the VA products to help diversify your client base.