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TRANSCRIPT
VA Lending – Basic Training
Brought to you by: Quicken Loans Mortgage Services – Q-University
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October 19, 2011
February 2014
What You will learn Today
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The Facts and Benefits Of VA
Who is Eligible for VA Loans
How to Structure VA Loans
Qualification Parameters
The “You Do/We Do”
Top 10 VA MyThs…DebunkeD
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The Benefits of VA Loans
What is it? What’s the Opportunity? What are the Benefits? How Does it Compare? Product Options?
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What is a VA Guaranteed Loan?
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“Guarantee” means the lender is protected against loss in
the event of a foreclosure, and replaces the protection
the lender normally receives by requiring a down
payment and/or PMI allowing the veteran to obtain
favorable financing terms.
VA charges a Funding Fee to pay for this insurance.
What are the Benefits of VA?
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Zero Down Purchases
No Monthly Mortgage Insurance
Lowest Monthly Payment
No Prepayment Penalties
The Mortgage is Assumable
Competitive Interest Rates & Closing Fees
100% LTV on Rate and Term Refinances
90% Cash out Refinances
Credit Scores as low as 620
DTI up to 60% with Approve Eligible Findings
Fixed rate only
If FICO score is < 640 and LTV > 95%, DTI is capped at 45%
Product Comparison
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VA FHA Agency
Max LTV 100% 96.5% 95%
(min 680 FICO score)
Max Base Loan
Amount $200,000 $193,000 $190,000
Upfront Mortgage
Insurance $6,600
(3.3% funding fee*) $3377.00
(1.75% UFMIP) $0
Max Total Loan
Amount $206,600 $196,377 $190,000
Monthly MI $0
$217.13 $207.42
Total Payment $986.34 $1,154.66 $1,114.51
Sir, Yes, sir! VA has the Lowest Monthly Payment!
Loan Scenario:
$200,000 Loan Amount
30 Year Fixed
Purchase
4% Interest Rate
Funding Fee* for a 100% Purchase with Subsequent Use.
$168.32
cheaper to
go VA than
FHA
VA Loan Programs
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Terms available:
Fixed: 15, 20, 25 and 30 year
ARM: 5/1 ARM
Also available: VA Jumbo: 15, 25 and 30 year +
5/1 ARM
Who Is Eligible for VA Loans?
Who’s VA Eligible? Who is VA IRRRL Eligible? What are the Guidelines and Qualifications for VA Loans?
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Who is eligible For VA?
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An eligible veteran is a person who:
Served in the military (Active Duty, Reserves, or National
Guard)
Served with acceptable character of service, or
Is the unmarried spouse of a deceased veteran who died while
in service or of service connected issues.
Active Duty Reserves/National
Guard Wartime Service
90 Days 6 Years 90 days
A veteran who has served less than the minimum required period of service or was discharged because of
a service-connected disability, may still be eligible.
Who is eligible for VA IRRRL?
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IRRRL – Interest Rate Reduction Refinance Loan
What Is it? A VA loan program where a veteran
refinances an existing VA loan.
What are the Benefits of an IRRRL?
Requires less documentation
Lower VA Funding Fee (only .5%)
Quicker Turn Times
Conventional appraisal required except for Quicken to
Quicken refinances (loan must be currently serviced by
Quicken)
General Rule: All clients on the previous loan must be on
the new loan
VA Loan Specific Requirements
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Only Veteran and Spouse may be on loan and title No non-owner occupied borrowers allowed
Co-borrower must be married to Veteran
Same Sex marriages are now allowed in certain states. VA must approve prior to submission to underwriting.
Must count child care for children < 12 years old in debt ratio
Residual Income calculations used in qualification, along with debt ratio calculations
Condos and Builders must be on VA approved list https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch
OR
https://entp.hud.gov/idapp/html/condlook.cfm
Qualification Details
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No Housing Ratio Calculation
Max Debt Ratio
Up to 60% with Approve/Eligible Findings 45% on ARMS
620 Minimum Credit Score
Max 1x30 mortgage/rent history in past 12 months
Max 45% Refer/Manual
640 Minimum Credit Score
0x30 mortgage/rent history in last 12 months
Max 2x30 in last 12 months on revolving/installment debt
2 months reserves required
How to Structure a VA Loan What are the Key Questions to Ask? How do you Price? Compensation? What does the 1003 Look Like?
How Do I Calculate Funding Fee/Entitlement? Fees & GFE Preparation
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Other Key Questions VA qualification
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Who will be occupying the property at close?
If active duty, spouse can satisfy occupancy requirements
Who will be on title?
Only spouse can be co-client or added to title
What’s the name, address, telephone # of the nearest
living relative outside of the home?
If condo, what is the condo project name? (Must be on
approved VA list)
If new construction, builder must be on the VA approved
list
How do you calculate the VA Funding
Fee?
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To determine Funding Fee, the following factors will
apply:
Type of Service (Regular duty or Reserves/National Guard)
Down Payment amount
First time or Subsequent Use
Veteran receiving VA Related Disability and Surviving Spouses
May be eligible for exemption of Funding Fee (Funding Fee = 0%)
Key Questions for funding fee
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What is your military branch of service?
What is your service type?
Are you currently receiving, eligible to receive or have
previously received VA disability?
Yes/ No (If yes, then exempt from Funding Fee.)
Have you ever had a VA loan?
What is your military status?
Is your current loan a VA loan?
(IRRRL has Reduced Funding Fee of .50%)
VA Funding Fee CHART
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Veterans Can Use the VA Home Loan
Benefit Multiple Times!
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Here’s how it works:
VA provides each qualified Veteran with at least
$104,250 in “entitlement” and extra entitlement in
select high cost counties.
Entitlement has a 25% rule – you have to have 25% of the
loan amount in entitlement to guarantee the loan.
When a Veteran obtains a VA loan, a portion of the
entitlement is “charged” to the loan as a guaranty to
the lender in the event of default
How to calculate entitlement
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Entitlement Examples Full Entitlement Reduced Entitlement High Cost County (Camden, NJ) Non-High cost County
Loan Amount $200,000 $200,000 $940,000 $940,000 Value $200,000 $200,000 $940,000 $940,000
Entitlement
Available $104,250 $25,000 $235,000 $104,250
Entitlement
Required $50,000 $50,000 $235,000 $235,000
Equity or Down
payment
needed $0 $25,000 $0 $130,750
Max Loan
Amount $200,000 $175,000 $940,000 $809,250
All qualified Veterans start out with: $36,000 in basic entitlement; and
$68,250 in bonus entitlement or $120,375
bonus in AK and HI
Extra entitlement for high cost counties
available to county limit (see chart in GURU)
Note: Bonus entitlement can only be applied
to loan amounts > $144,000
The math:
$104,250 in entitlement x
25% = $417,000
Pricing a VA Loan
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How You Earn Your compensation
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Client Paid Compensation (Direct)
VA mandates that total origination charges not exceed 1%.
This includes percentage based and flat fees (i.e. loan
application or processing fees)
Lender Paid Compensation
Must choose a rate that produces a rate premium that is AT
OR ABOVE your pre-determined compensation plan with
QLMS.
QLMS charges NO ($0)underwriting fees
for VA loans
*Non-allowable Costs:
Administration
Underwriting
Processing
Tax service
Courier/mail fees, etc.
Attorney services that are other than for title work Must be on title exam line on
HUD-1
Origination (1% max)
Discount
Appraisal
Credit report
Title search (Title Exam)
Title insurance
Recording fees
Survey
Closing Costs
**Allowable Costs:
** Allowable Costs may be paid by
veteran/borrower.
*Non-allowable costs may be paid by
Lender or Seller.
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Lender Paid
Compensation =
You can make your Broker
Comp up to 3%
GFE – Example
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The Process Of a VA Loan at QLMS
Who Does What? The “You Do/We Do” and The Things We Need From You (TTWNFY)
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What we Do for your client
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QLMS will issue the Things We Need From You and Post Required
Disclosures
QLMS will access from the Automated Certificate of Eligibility (ACE) System
If unable to obtain, your CCS will reach out for assistance
QLMS will ensure VA Appraisal is Ordered
Do not order an appraisal through the VA site! This will be considered an appraisal
transfer with additional documentation required
We will perform all the Vendor Management Services (HOI, VOE’s, Payoffs,
etc.)
QLMS will Underwrite and Condition the File
QLMS will send Funding Fee and application for Guarantee after loan closing
Your part - What You do
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Complete the 1003 and Register
Gather The Things We Need from You
HUD – VA Addendum to URLA
QLMS Mortgage Broker Fee Agreement
VA Child Care Expense Statement (If Applicable)
VA Loan Disclosures and Certifications
VA Amendment to Purchase Contract (If
Applicable)
Help with COE if needed (obtain
DD214 or other documentation from
client)
Manage the lock process
Initiate Appraisal Order on Lender
Portal
Send Conditions
Set Closing Time with Veteran
What evidence is needed to get the COE?
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Veteran
• DD Form 214;
Active Duty
• A current statement of service signed by (or by the direction of): the adjutant, personnel office, or commander of the unit or higher headquarters showing:
• Your full name Social Security Number
• Date of birth
• Entry date on active
• duty
• The duration of any
• lost time
• The name of the command providing the information
Currently Serving in Reserves/National Guard
• Statement of service signed by (or by the direction of): the adjutant, personnel officer or commander of your unit or higher headquarters showing:
• Your full name Social Security Number
• Date of birth Entry date on duty
• The total number of creditable years of service
• The duration of any lost time
• The name of the command providing the information
Discharged Member of National Guard
• Either: NGB Form 22, Report of Separation and Record of Service, for each period of National Guard service
• OR
• NGB Form 23, Retirement Points Accounting, and proof of the character of service
Discharged Member of Selected Reserve
• Copy of your latest annual retirement points statement and evidence of honorable service
If Quicken is unable to obtain the client’s Certificate of Eligibility (COE)
from VA’s automated site, we will require one of the following:
In GURU under VA Client
Eligibility > VA Documentation
Requirements
COE example
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COE
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For COEs with exempt status the following conditions may appear:
Funding fee – Veteran is exempt from the funding fee due to receipt of service connected
disability compensation of $____monthly
Funding fee – Veteran is exempt from the funding fee due to receipt of service connected
disability compensation. Monthly compensation rate has not been determined to date
Funding fee – Please fax a copy of VA form 26-8937(VOB) to the VA regional loan center of
jurisdiction
Funding fee – Please have the lender VA regional loan center for loan processing. Please fax a
copy of VA form 26-8937 to the RLC of jurisdiction
For COEs with a non-exempt status the following condition may appear:
Funding fee – Veteran is not exempt from the funding fee
Funding fee – Veteran is not exempt from the funding due to receipt of non-serviced
connected pension. Loan application will require prior approval processing by VA.
For COEs with “contact RLC” status the following condition will appear
Funding fee - Please fax a copy of the 26-8937 to the RLC of jurisdiction.
VA Survival Guide
Underwriting and Structuring the loan
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bAsic unDerwriTing: The “Diff”
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Military Income – Active Duty
Additional income may be used for qualification
BAS, BAH, OHA, Combat Pay, etc.
Cannot be grossed up
Look for allotments on LES
If ETS is < 12 months from closing date
Client must prove re-enlisted, or
Civilian offer letter
Assets
Only need reserves if using rental income or if loan is Refer/Eligible
bAsic unDerwriTing: The “Diff”
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Only one Qualifying Ratio = 41%
To exceed 41% ratio, the veteran must have 20% additional
residual income above the required amount and obtain
Approve/Eligible Findings
Residual Income requirements must be satisfied
Residual income must be greater or equal to amount
established for applicable region, income level, and
family size
Residual is calculated by number in family, geographic location
and square footage of subject property
Include all household members in family size
Key Questions for residual income
calculation
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Are you located within 30 miles of a military base?
Reduction in Residual Income calculation
How much are your monthly tax withholdings? (Federal/State/SSI/FICA)
How many dependents do you have? What are their ages?
Residual calculation is dependent on number in household
How much are your monthly child care expenses?
Required for children ages 12 and younger
What’s the square footage (gross living area) of your home?
Utilities and Maintenance expense is $0.14 x GLA
Residual Income chart
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5 instances allow a veteran to get more
than one VA loan:
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1. They can use left-over entitlement that was not charged to a prior
loan.
2. They can sell the property to pay off the previous VA loan and restore
the entitlement.
3. They can pay off a VA loan (by paying it down or refinancing), and
restore the entitlement.
VA allows entitlement to be restored using this method only once.
4. They can refinance the old VA loan into a new VA loan to reduce the
rate and payment or convert your ARM into a Fixed.
In this case, the entitlement from the prior loan transfers to the new loan.
5. Another qualified Veteran can assume the prior VA loan (subject to
lender approval) and substitute his/her own entitlement.
PURCHASE MONEY: Seller Concessions
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4% Max Seller Concessions
Does not include normal and customary closing costs or
discount points of up to 2%
4% includes:
Paying over 2% in discount points
Paying veterans debt to qualify for the loan
Payment of veterans judgments
Funding Fee
Prepayment of property taxes and insurance
Want to Learn More?
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