If you're buying a home in Contra Costa County, you need to let your REALTOR know that you served our country honorably. There is a credit crunch going on and the new VA loan limits, for 2009, allow Contra Costa County veterans to purchase a home, with NO MONEY DOWN, up to $1,094,000. Let me repeat that for you;
ZERO DOWN PAYMENT UP TO A MILLION DOLLAR PURCHASE PRICE IN CONTRA COST COUNTY
The word isn't out about this, yet. Contra Costa County REALTOR Wendy Cutrufelli made this observation today:
Let me preface my response with the following information: I am located in Contra Costa county (northern California) and VA financing hasn't been used in this market for close to 10 years. So the fact that his realtor got a bank to accept VA financing AND pay for Section 1 repairs.......every fiber of my being wanted to tell this buyer to genuflect at his realtor's feet for accomplishing a miracle.
This is my fault, not the Contra Costa County real estate agents'; I should be screaming this message to them at the top of my lungs. With a median price of $659,000 in Contra Costa County, more than half of the homes selling are covered by the new VA home loans. With the higher limits, that percentage steadily increases as prices drop there. Contra Costa County REALTORs would do well to ask homebuyers if the are eligible for VA home loan benefits. After all, one in ten Californians between the ages of 21 and 55 have VA eligibility.
How do VA home loans work? From an article I wrote on the HomeGain Blog:
The VA Home Loan Program is the only national 100% financing loan program. Veterans can purchase a home with no down payment and the seller can contribute up to 4% of the sales price for their non-recurring closing costs and impounds.
Often referred to as the VA No-No program, combining the max sellers’ closing cost contribution with a VA home loan affords buyers the chance to “get into a home”, for no money, at a below market rate.
There are no “stated income” options nor “interest-only” options for a VA home loan. Veterans must qualify on full income documentation. Their total monthly obligations (including the proposed mortgage payment) must be under 43% of their monthly income unless they meet the VA residual income qualification. Current service members receive an allowance for housing (BAH) and food (BAS) and those figures can be “grossed up” 115% for income qualification.
Appraisals are assigned by VA and ordered by the lender. Many lenders participate in a delegated underwriting program (LAPP) but some opt to let the VA underwrite the appraisal. General guidelines suggest that if the home is inhabitable, the loan can’t be made. VA appraisers, however, are not so stringent that the home needs to be “new home perfect”.
There is no minimum credit score requirement for a VA home loan although a 12-24 month history of good payments is required. Some lenders have imposed credit score minimums but a good mortgage broker always has a lender who will fund VA loans on the more relaxed VA-compliant credit requirements.
Frequently Asked Questions:
Are VA loans more expensive?
Heck no. A VA home loan offers, with a loan balance under $417,000, offers rates that are equivalent to what a conventional loan costs. Today, that interest rate is about 5.0%. Loans from $417,001 to the $1,094,000 limit carry an interest rate of about 5.25%. Compare that to the jumbo rates of 5.5% to 8% and the VA home loan program offers even better rates than the conventional loans.
Doesn't the VA funding fee make it more expensive?
I don't think so. For a first-time VA home loan user, a 100% loan requires a 2.15% charge (added to the loan) but eliminates the need for costly PMI. There are no 100% conventional loan options in Contra Costa County.
A 95% conventional loan (if you can get one) has an annual PMI charge equivalent to .875%. The VA funding fee for a 95% loan is just 1.5%; that money is "recouped" in 20 months. If you plan to own the home for at least two years, the VA home loan is much less expensive.
A 90% conventional loan requires an annual PMI charge equivalent to .625%. The VA funding fee for a 90% loan is just 1.25%. Again, the money is recouped in less than two years.
Do VA home loans have higher qualification standards?
Nope, Quite the opposite.
The appraisal can be a tad more onerous but that benefits you, the buyer, because they really analyze the property in greater depth than a conventional appraiser.
The VA credit requirements don't have a minimum credit score but most lenders require a 620 credit score today. Conventional loans become more expensive with credit scores under 740 and conventional loans over $417,000 require 660 credit scores.
Income calculations are more pragmatic as the VA home loan underwriters use residual income analysis in addition to the traditional debt-to-income ratios conventional underwriters use. The VA also uses residual income analysis for determining "capacity". From the VA website:
The primary method of evaluating a veteran's income is the residual income method. Under this method, the underwriter determines that a veteran has sufficient income to cover day-to-day living expenses after paying housing expenses, taxes, and other debts such as car payments and credit card payments.
For example, if an 0-2 (with three years service) were receiving a base pay of $3484, a BAH of $2000 and BAS of $300, her total monthly income would be $5784. We would deduct her taxes (on the base pay), of about $800. She's single, without dependents so there are no childcare expenses. This gives her contributory income of $5084. If she had $1200 in monthly expenses (credit cards, car loans, etc), her contributory income is reduced to $3884. The VA requires a residual income of $491. In order to "trump" the debt-to-income ratio analysis, we would need residual income of 120% of that, or about $600; this would allow for a maximum housing expense of $3,200.
Using the "eight dollars per thousand" estimate, Lt (jg) Smith would be approved for a $400,000 VA home loan.
VA home loans offer Contra County Homebuyers a great chance to take advabtage of fallen prices and more generous underwriting guidelines. I can't think of any other time, in my fifteen years of lending, where someone could buy a million dollar home with no money down.
Veterans in Contra Costa County can do that today. Remember to remind your REALTOR that YOU are eligible and call me at (858)-777-9751. You've EARNED it by proudly serving our great country.
PS: Ask some of the Navy and Marine Corps veterans who I've helped about my VA home loan expertise.
