So the House has got the ball rolling on removing the VA loan limit cap and also dropping seller mandatory fees. If this thing gets legs and makes it through the Senate, it could be a really nice modification to current VA loan guidelines.
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We already have jumbo VA loans and have been doing them for years. You can go way over the 417k mark. You just have to put 25% of Anything over 417k as a down payment. Also the non allowable buyer paid fees have been a non issue for a long time. If you don't charge an origination fee the vet can pay all their own fees up to 1%. The only fee they can't pay in this case is the pest inspection.
One small comment, the best performing loans are not the VA, they are the USDA loans which are also 100% financing. The CFPB did do one thing right, they profiled what type of people go into foreclosure. They looked at men vs women, white vs black vs Hispanic, good credit vs bad credit and every other combination. Their findings is this, people with high DTI's are the most prominent people to go into default. The VA addresses that issue by looking at discretionary dollars and that is why those loans perform.
VA loans have a low default rate due to the independence of the appraisers involved in the loan. The appraisers are hired by the VA, not the mortgage company or an AMC, with no pressure to “hit the number” or fear losing further assignments. Even with nothing down VA borrowers are in a better LTV position than other borrowers with inflated appraisals
The fees are VA Non-Allowables, not Seller Mandatory Fees. And if the Senate does away with them, it simply is an injustice to VETS. I do on average of 3 VA Purchase transactions each month and I can't tell you the last time the VET didn't get his VA Non Allowables picked up by the Seller. Yes, the Seller can refuse to pay the VA Non-Allowables, which means the Lender can charge up to 1% in an Origination Fee to make up for the fees and/or Premium Price and pay for it through the SRP/YSP. The unfortunate item with VA Non-Allowables is that there is such a small percentage of LO's who understand this caveat and even a smaller percentage of Realtors who understand it, so it usually is presented to the Seller in an ill manner, unless you have an LO who knows what is going on and even then the LO has to walk the Realtor through it. If presented properly, we never get any pushback from the Sellers in regards to the VA Non-Allowables. And the # 1 reason why a Seller wouldn't take a VA deal is not because we are asking for the VA Non-Allowables to be paid for, it is because typically VA Appraisals are the most conservative and take a longer turn time than regular FHA/Conv/USDA Appraisals.
…and if they're in a high loan limit county they can go up to the county loan limit. Then anything above is (loan amount x.25% – county limit x.25) = their down payment. Still a darn good deal!
On another note, I wish some agents were aware of how the VA loan works,back in the good 'ol days when we had HUDs, I had the seller's agent say "Wow, the buyer gets money back at closing?"
Thank you for the information. I am curious as to how / where you find all of your VA Buyers! It sounds like a great business practice…
Being known as one the "VA guys" within my Company and within my Community helps a lot. This is my 17th year in the biz and I am more of a Purchase guy who believes in making my network of Realtors as large as possible. I have some Realtors who still do that "hand out 3 biz cards" type of thing, but when it comes to a VA Buyer, they only refer me, because I have helped them with their contracts so many times, so they don't look ignorant or lose a deal. I also have 2 VA designations. USA Cares and Heroes Home Advantage.
Good show Bryan… However… you never introduced your co host. I have to admit she is much easier on the eyes than you… keep up the good work !
Eric Kinneman I completely agree the seller will pick up the fees….after the contract has been accepted. In SoCal, there are still multiple offers on properties. When sellers have a choice of offers, as Brian pointed out, the seller will always choose the highest net offer. And why shouldn’t they? I am a DVBE/SB Broker owner. I fight like crazy to get my guy’s offers accepted. I am grateful I live and work in a community that supports our military.
Our lenders are able to offer our Veterans a VA loan package that is at a slightly higher rate that absorbs the seller mandatory fee. This was a great compromise!
But getting rid of the fees entirely would be amazing! Then Vets could receive competitive loan rates and be able to consider homes in our location (where the current $417K cap is often prohibitive).
I am good with this. Our Vets need, at a minimum, an even playing field. This would actually give them the advantage they actually deserve.
What Brian called “mandatory” fees actually used to be called “non-allowable” fees. These included escrow, underwriting, processing, admin, notary and pest inspection. The veteran borrower was not allowed to pay them. Typically, it would be the seller, lender and/or real estate agent who would pick them up. Today, those “non-allowable” costs can be paid by the buyer so long as they don’t exceed 1% of the loan amount. Many agents in my observation still believe that the seller has to pay them–and that puts the veteran at a competitive disadvantage.
As a loan originator who does a fair amount of VA business, I have been able to counteract at least some of the sellers’ reluctance to accept a VA deal–I include a short fact sheet about VA loans along with my preapproval letter. I do appeal to the seller’s patriotism, as well–every little bit helps!
Its funny…this sounds identical to when I testified to the House Financial Services Committee on the QM and told them to just use VA as the example of quality loans: http://financialservices.house.gov/uploadedfiles/hhrg-112-ba15-wstate-jhudson-20120711.pdf
VA is basically the best loan in the business. There is not a limit on VA loans right now. No limit at all. But there is a limit to 0% down. And all fees can be paid for by the vet, every single one of them. It's just that some of the fees that are "non-allowables" must total, in agregate, 1% or less of the loan amount. Vet's need to work with LOs that know this product. A VA specialist will also know the tricks to getting the offers accepted.
Get well soon
Hell to the Yes!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Hey Brent Bruce 🙂
Check out Operation Surf hosted by Seabright Mortgage in Santa Cruz… not only do our Vets need THANKS in the way of good loans… they deserve our community support to help assimilate back into civilian life and to heal wounds, both seen and unseen! Please visit the Facebook page and if your in the Bay Area, volunteer for the Santa Cruz CA event in April 2016: https://www.facebook.com/operationsurf/
And I do agree, these are the best loans going and Realtors need not shy away from them.
What the VA and FHA have to do is stop having a list of only approved condos and manufactured home parks to get a loan in also. They need to stop banks from stopping loans to be approved in HOA’s just because there are to many rentals. I do not know if it the VA or the banks, but a nightmare from a loan officer in W.F. and its underwriting was asking for engineering data on how a manufactured home was tied down, how the supports were done, material and so forth, along with tons of paper work. To say the least, I got a bad rap from the buyer along with excuses from the loan officer, barbecue he did not get the VA loan for the manufactured home.
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