Isaac F. Davis asked:




Many VA borrowers ask about private mortgage insurance (PMI). PMI is a lender-charged fee on mortgages with more than 80% loan-to-value (LTV) ratio. VA loans never require PMI, and it’s important to understand why this is such an attractive feature.

For conventional and other type mortgage programs, PMI functions as insurance against loss in case of foreclosure. VA loans are backed by the federal government, so VA-approved lenders don’t need added PMI.

The savings a VA borrower can experience by not paying PMI are big. Typical rates for PMI on a $200,000 conventional loan are around $120 per month or about $1440 per year. A conventional borrower would need to bring twenty percent cash down at closing in order to avoid monthly PMI charges. Even though VA loans require no money down at closing, they never require PMI.

PMI is a reality for most other mortgage borrowers. And, once PMI is charged, there is no legal obligation by the lender or the servicer of the loan to cancel PMI. Even if the borrower pays the mortgage down to an 80 percent LTV ratio, he or she may still be paying PMI. To cancel PMI, the request must come from the loan servicer. This will often require an appraisal to verify that there is 20 percent equity in the financed property. An appraisal may cost the borrower from $300 to $450 and is yet another expense that VA borrowers can skip by using the veterans’ home loan program.

Sometimes people in the market for a home loan can be attracted to mortgage products marketed as no-PMI loans. Buyer should be aware, that loans advertised as “no PMI required” may simply be lender-paid PMI loans with higher interest rates. In these cases, the borrower would ultimately pay for the PMI indirectly through higher monthly mortgage payments. With VA loans, a borrower will never see PMI disguised as anything else, especially not jacked up interest rates to offset the cost of lender-paid PMI.

Certain non-VA borrowers may be able to avoid PMI by utilizing a second mortgage as a piggyback second. A piggyback second can sometimes help when a borrower has less than twenty percent down. For instance, an 80/10/10 program would mean that 80 percent of the value of the property is financed with the first mortgage, 10 percent is financed by the second and the borrower puts 10 percent cash down. A common disadvantage to the piggyback-second method of avoiding PMI is that interest rates on second mortgages are typically higher than those for first mortgages.

After analyzing all the different issues associated with PMI, a no-PMI VA loan looks better and better. No PMI is just one of the many advantages associated with the VA home loan program. Some of the other benefits of VA loans include:

Zero Down 100% LTV on purchase and refinance loans Less stringent qualifying standards Low interest rates No prepayment penalties Cash-out and debt consolidation refinance Streamline rate reduction refinance.

Diane

emma25 asked:


I would like to know where to located propertys that have a assumable mortgage and or the home owner cant afford it anymore.I know that FHAAND VA LOANS that closed before 1988 can be done with type of transaction without having to go through a credit check I just dont know where to find the homes/homeowners

Virginia

Kristin Abouelata – Home Loans asked:


In 1930, Congress and the President established the “GI Bill” which allowed the Veteran Administration (VA) to coordinate benefits for its service people.  One of these programs, known as the Home Loan Guaranty Program, was created to help returning veterans and their families assimilate back into civilian life after sacrificing so much personally for their country. 

 

Who qualifies for VA loans?  If you served in the military, naval or air service and are active duty or released from duty for reasons other than a dishonorable discharge, you may qualify.  You had to serve for 90 days active duty or 181 days consecutively in peacetime. If you served less than the minimum requirement because of discharge or service connected disability, you may also qualify. In addition, if you are the surviving un-remarried wife or husband of an eligible service member who died for his/her country, you may too be eligible.  This program was designed to reward you and your loved ones for your service.

 

“The VA program, in general, is an exceptional program.  Many veterans don’t know it can even benefit them if he/she is overseas.  We’ve been helping active duty service people by putting their families in homes, and giving them peace of mind that their loved ones and their immediate needs are being taken care of while they’re away”, reflects Jamie Utton, Director of Product Development at Mortgage Investors Group.

 

These loans are available only for a primary home you intend to occupy.  You can’t go and buy a beach house for weekend use with it.  However, you can also use your eligibility to refinance your primary residence and pay off debt (except for Texans, for some reason, they don’t allow it in that state).  Or, if you had a VA loan prior, and the interest rates have dropped dramatically, you can do a “streamline” refinance – no worries about paying for a new appraisal or the hassle of verifying your income.  You’re all set to go.

 

So what makes the VA loan stand out above other types of financing? It allows for 100% financing for loans up to $417,000 with no reserves (checking and savings money to burn) required. The loan amounts allowed go up to $1.5 million, but you’d have to put some type of down payment into the transaction if you want to borrow that much money, plus show you have enough money to pay your mortgage for two months sitting in the bank if you need it.   And if you’re buying a home, the program allows for the seller to pay up to 4% of the closing costs, based upon the purchase price.  Basically, you can get into a home for very little or no money at a more than affordable market rate.

 

And the best part?  No extra money is added to your payment for mortgage insurance if you put a less than 20% down payment on the home.  That’s a pretty unique feature that makes this loan more affordable than others.  Most of the time, the veteran  will be required to pay a VA Funding Fee, but it is financed into the loan amount.  So, the funding fee is not an out of pocket expense for closing.  A veteran can be exempt from paying the funding fee for different reasons, including service connected disability, or if he/she is a surviving spouse of a veteran who died in service or from a service related disability.  And regarding credit scores, the VA loan program has more flexibility than some other programs offer. 

 

If you think you may qualify for this loan, let me first of all say, “Thank you.”  I really appreciate the sacrifices you’ve made for this country.  And if you’re looking to purchase or refinance your home, call a lender today who specializes in VA loans, and take advantage of this great benefit.



GARLAND