Author Topic: VA home loans? (Read 4098 times)

Balog · « **on:** August 19, 2009, 05:40:26 PM »

Been thinking about a house yet again. My wife and I are both making way more than we ever have before, we're totally debt free, and the savings are starting to add up. I've been looking at VA loans as a way to get into a house before prices go back up and the "first time credit" thing goes away. $8k is a nice little chunk to be able to throw against the principle right out of the gate.

However, I've heard that VA loans are a pretty bad deal in terms of rates etc. Anyone have experience with them? Should I write them off totally, or just really do my research? Would USAA or my local credit union be a better source of financing?

esheato · « **Reply #1 on:** August 19, 2009, 05:50:52 PM »

We have a VA loan.

USAA is our bank also. The way I understand it is VA guarantees the loan and ours was painless and we have a good rate.

I don' t have any other home purchasing experience, but I'd do it again.

Ed

roo_ster · « **Reply #2 on:** August 19, 2009, 05:58:44 PM »

Quote from: Balog on August 19, 2009, 05:40:26 PM

Been thinking about a house yet again. My wife and I are both making way more than we ever have before, we're totally debt free, and the savings are starting to add up. I've been looking at VA loans as a way to get into a house before prices go back up and the "first time credit" thing goes away. $8k is a nice little chunk to be able to throw against the principle right out of the gate.

However, I've heard that VA loans are a pretty bad deal in terms of rates etc. Anyone have experience with them? Should I write them off totally, or just really do my research? Would USAA or my local credit union be a better source of financing?

We used a VA loan and it was no big deal. There are a couple of extra details, but it is not onerous.

I got the best VA home loan deal from a local bank, even better than my CU or any of those loan folks. The APR was less than any other competitive loan, due to my disability percentage allowing me to waive the VA loan fee.

IOW, it was not much more hassle and was more than competitive.

Good luck.

Northwoods · « **Reply #3 on:** August 19, 2009, 06:41:48 PM »

After having sold to a guy that was getting a VA loan, I won't do it in the future, or will demand a higher price or that they actually cover some of the fees that the buyer normally pays that VA loans saddle the seller with.

From everything I've ever seen if you can qualify for a conventional loan you are FAR better off to do so. Better rates, better terms, etc. And really, if you can't qualify for a conventional loan you shouldn't be buying a house anyway.

cassandra and sara's daddy · « **Reply #4 on:** August 19, 2009, 06:48:53 PM »

one sometimes overlooked advantage of va and other government loans is that the gov audits the sale. i got 800 bucks back after fha found i'd been screwed somewhere in all that paperwork they shoveled past me. was a nice unexpected windfall

Thor · « **Reply #5 on:** August 19, 2009, 06:52:48 PM »

Brad Johnson might be real familiar with this. I bought two different houses with my VA loan. The first one was a little painful and the interest rate was 1/2% higher than most conventional loans. The second one, I had to actually increase my offer in order to cover the costs that the VA forces upon the seller. I got a decent interest rate on that house, I think 1/4% above the normal conventional loans. The VA loans can be a bit more painful to progress through, but I think they can be worth it, especially with no down payment. One good thing is that if you are any amount disabled, there are some fees that are waived. I got a big check back because of that. The mortgage company didn't have the fact that I was disabled yet.

Brad Johnson · « **Reply #6 on:** August 19, 2009, 07:39:39 PM »

VA is good for two reasons only - low credit scores and/or minimizing out-of-pocket expenses. Thor is right, there are mandated fees attached to a VA guaranteed loan that the seller is required to pay. They are slightly lower now, but they are still there.

If you have eight large burning a hole in your pocket you will probably be better served to go FHA insured. That amount would be about perfect for to total out-of-pocket expense on a $110-$120k house (depending on insurance and tax rates in your area).

However...

Understand that there are a whole host of new regulations in regard to FHA insured, some of which can delay closing substantially. One big new hiccup is lender fees and outside expenses. Even the smallest of last minute expenses can force a complete recalculation of the loan. If the recalc puts you over a certain "difference factor", the timeline gets automatically reset. No matter what. Period. Do not pass go. Do not collect $200. End of line. And the line isn't drawn at lender-charged fees. An inspection, even if it's ordered by you and never the lender and it shall meet, is cause for a recalc.

There's also huge problems with appraisals at the moment. The fed has redone the appraisal requirements and created HUGE issues with artificially short appraisals. It's not a problem in a declining market, but that's roughly 20% of the country. The other 80% of us are dealing with massive appraisal headaches.

The first thing you need to do is get hooked up with a good lender. Expect to pay $500-$800 in actual fees with a rate around 6% (fixed 30yr). If they quote higher fees, or a substantially higher rate with a requirement to pay points or origination to get it down to around 6%, run. Locally we're seeing 6% on a fixed 30 yr with no points, no buydowns, and no origination. If you can't find someone you trust, PM me and I give you the name of a couple local folks that have done outstanding jobs for me in the past.

Brad

Gewehr98 · « **Reply #7 on:** August 19, 2009, 07:41:26 PM »

Balog, if I remember correctly, you are rated as a disabled vet, right?

If so, you get better terms on your VA loan, like myself and other disabled vets.

There are websites that'll point you to what you're eligible for, based on the percentage disability you're rated at.

Then there are the zero-down VA loans, too.

Balog · « **Reply #8 on:** August 19, 2009, 07:46:07 PM »

Quote from: Gewehr98 on August 19, 2009, 07:41:26 PM

Balog, if I remember correctly, you are rated as a disabled vet, right?

If so, you get better terms on your VA loan, like myself and other disabled vets.

There are websites that'll point you to what you're eligible for, based on the percentage disability you're rated at.

Then there are the zero-down VA loans, too.

Yup, a decent % too. I've been wary of those "We help disabled vets" websites; too many people who claim to be all about helping us are scams.

erictank · « **Reply #9 on:** August 20, 2009, 05:33:01 AM »

Quote from: Balog on August 19, 2009, 05:40:26 PM

Been thinking about a house yet again. My wife and I are both making way more than we ever have before, we're totally debt free, and the savings are starting to add up. I've been looking at VA loans as a way to get into a house before prices go back up and the "first time credit" thing goes away. $8k is a nice little chunk to be able to throw against the principle right out of the gate.

However, I've heard that VA loans are a pretty bad deal in terms of rates etc. Anyone have experience with them? Should I write them off totally, or just really do my research? Would USAA or my local credit union be a better source of financing?

Just closed on my house last month, and I investigated a VA loan prior to buying. Didn't use it, though, as the rates really weren't any better than conventional loans at the time and VA appraisers (who MUST sign off on the loan) are reportedly both VERY strict and VERY backlogged, leading to possible delays in closing. We had a big downpayment available, as well, so we didn't need the VA exemption from PMI, either. If you have don't have a set time that you want to close on the house, if you can deal with a month or so delay (not saying you WOULD have to, but you COULD), then it might be worth it. It wasn't, for me. Now, we sold our townhouse to a guy using a VA loan (via USAA, actually), and due to appraiser issues the closing was delayed. Only by a day, but there'd been the potential for more - we threatened to lawyer up based on the contract, and suddenly they found the time to fix the paperwork and get us in for closing the next day. Appraiser had inspected the house in fairly good time, but didn't submit the paperwork for another 2 1/2 weeks, and then screwed it up, requiring additional review time or something. Eh. It all ended up working out okay eventually, though.

Check out what you can get from conventional sources, and take a look at what you can get through VA. It may or may not make sense to go that route, but it never hurts to check out your options.

Just saw from the rest of the thread that you're a disabled vet - I'd say definitely see what you can get for a VA loan, there are indeed better terms which apply to you.

Thor · « **Reply #10 on:** August 20, 2009, 01:06:44 PM »

Things may have changed since 1998, but I don't recall any better "terms". There were fees that were waived, in particular, the VA Funding fee, which isn't insignificant.

Brad Johnson · « **Reply #11 on:** August 20, 2009, 02:09:00 PM »

Quote from: Thor on August 20, 2009, 01:06:44 PM

Things may have changed since 1998, but I don't recall any better "terms". There were fees that were waived, in particular, the VA Funding fee, which isn't insignificant.

The funding fee isn't waived. The seller is required to pay it.

Brad

Thor · « **Reply #12 on:** August 20, 2009, 02:23:08 PM »

Brad, I forget for sure, but I THINK that was the fee that was refunded because I am a disabled Vet. I no longer have those documents, but it should all be on the VA's website someplace.

Brad Johnson · « **Reply #13 on:** August 20, 2009, 02:27:37 PM »

One of the benefits of a VA is the buyer can negotiate with the seller to pay all the buyer's closing expenses. That means a zero out of pocket. I think that's changed with the latest round of mortgage loan "upgrades" from the fed. I'd have to check though. I haven't done a VA in a year or so.

It still stands that anyone with a few bucks in their pocket is probably better served by a conventional or FHA insured products.

Brad

Gewehr98 · « **Reply #14 on:** August 20, 2009, 03:50:32 PM »

Unless you're a disabled vet. Then I'd go VA.

Brad Johnson · « **Reply #15 on:** August 20, 2009, 03:54:12 PM »

For what reason?

You don't get a preferred rate. You don't save anything other than the waiving of what is a very small fee. You DO run a very strong risk of having appraisal issues. You DO run the risk of having a seller choose another offer over yours because of the mandated "seller pays" fees.

Again, VA is great if you A) have little or no money for a downpayment and closing expenses, and B) Have a credit score problem. Other than that there is no benefit and several potential problems that you don't face when going with a conventional mortgage product.

Brad

Gewehr98 · « **Reply #16 on:** August 20, 2009, 04:14:16 PM »

As stated above. Depending on the percentage disability the VA assigns you (10%, 40%, 80%, etc), you're eligible for additional perks, including no funding fee, etc.

Disability compensation is also non-taxable, and can be used to plus-up your gross income figures for a bigger loan than without.

Regardless, it's not all about the rates or the Zero Down bit.

Dated, but it spells part of the story (I post for Balog's benefit, Brad should already have some inkling how it works in the VA Disabled Vet Home Loan business from the realtor side):

http://www.veteranstoday.com/article553.html

http://www.legion.org/magazine/1525/va-home-loans-va-home-loan-advantage

http://www.disabled-world.com/disability/finance/va-home-loans.php

Brad Johnson · « **Reply #17 on:** August 20, 2009, 04:27:43 PM »

Quote from: Gewehr98 on August 20, 2009, 04:14:16 PM

As stated above. Depending on the percentage disability the VA assigns you (10%, 40%, 80%, etc), you're eligible for additional perks, including no funding fee, etc.

Those additional perks are very, very limited. Conventional and FHA products are very competitive right now and will often beat VA products even with the additional "perks".

Quote from: Gewehr98 on August 20, 2009, 04:14:16 PM

Disability compensation is also non-taxable, and can be used to plus-up your gross income figures for a bigger loan than without.

Disability compensation counts as qualifiying income on any mortgage product. Having your DD214 is no guarantee of a loan. Nor does being able to show disability mean you get MORE loan. That same compensation would be counted for any loan product application.

Quote from: Gewehr98 on August 20, 2009, 04:14:16 PM

Regardless, it's not all about the rates or the Zero Down bit.

Actually, when it comes right to the bottom line, it is.

For the purposes of getting a VA Guaranteed home mortgage loan you still must have the income it takes to satisfy the debt-to-income qualification. Granted, they are less strict with VA products than a conventional product, but so are FHA-insured.

For the purpose of getting a VA Guaranteed home mortgage loan you still must have a qualifying credit score with no outstanding debt obligations. Granted, the scoring floor is slightly lower than with conventional products, but the same goes for FHA. The floor on FHA/VA is about 630 at the moment (up from 580 a year ago).

So, again, the only real reason to go VA is if you have an absolute need for the zero-down option, or you have a credit score issue that leaves VA as the only viable product for which you meet the minimum criteria. Aside from those two issues, there are more economical and transaction-friendly products available.

Please note that each situation is unique and there are no "catch-all" guidelines. It is imperative that you hook up with a GOOD lender and see what best fits your needs.

Brad

Gewehr98 · « **Reply #18 on:** August 20, 2009, 08:36:09 PM »

Brad, you're exhibiting the same type of push-back that I've experienced with other realtors when I've mentioned VA home loans.

To a tee, they always suggest other venues.

That's interesting, and something tells me it's more than just the hassle of the seller being forced to pay some fees.

Does it impact your commission?

Is there a specific reason Balog shouldn't use the perks his VA disability offers?

Brad Johnson · « **Reply #19 on:** August 21, 2009, 02:28:01 PM »

Quote from: Gewehr98 on August 20, 2009, 08:36:09 PM

Brad, you're exhibiting the same type of push-back that I've experienced with other realtors when I've mentioned VA home loans.

To a tee, they always suggest other venues.

Correct. It's because, to a tee, the VA Guaranteed loan is suited to a very narrow, very specific purpose - qualifying vets with low credit scores who need to minimize their out-of-pocket purchase expenses. Unless you have those two needs, there are better options. I'm sorry that's not the answer you seem to be wanting to hear. Unfortunately I have no control over reality.

Quote from: Gewehr98 on August 20, 2009, 08:36:09 PM

That's interesting, and something tells me it's more than just the hassle of the seller being forced to pay some fees.

Correct. It's because there are better options available, most of which have a positive impact on not only the borrower, but the transaction as a whole. Other options are less of a hassle to the borrower and less costly to the seller, both of which give more surity to the successful purchase of a home.

Quote from: Gewehr98 on August 20, 2009, 08:36:09 PM

Does it impact your commission?

No. I do not charge a fee or get a commission from the buyer for representing them. The commission is paid through a coop offer from the listing agent. That is common practice throughout the industry. The commission is outside the boundaries of the mortgage, which has no impact on how, or how much, is offered.

Use of the VA product does, however, impact the chances of a successful purchase of the home. That DOES impact my pocketbook. If I spend a bunch of time and money trying to get someone the right home I want the transaction to run to completion. Having an offer rejected because of a financing provision or because we are competing with another offer that uses other means of financing that mean less hassle or cost to the seller, or having the contract fall out at the last minute due to conditions of an overly aggressive and/or conservative appraisal, is not my idea of a good investment in time. It is also a HUGE disservice to my clients to recommend a mortgage product that introduces ALL the above issues when there are potentially better options available.

Quote from: Gewehr98 on August 20, 2009, 08:36:09 PM

Is there a specific reason Balog shouldn't use the perks his VA disability offers?

If he doesn't have a problem with credit scores, or has a need for the zero-down option, then yes. Other products put fewer roadblocks in the way of a successful transaction.

You want to know why real estate agents balk at recommending their clients stick with VA? Simple. If you don't have and ABSOLUTE NEED for the VA guaranteed product then chances are you would be better served by other mortgage options.

Brad

Gewehr98 · « **Reply #20 on:** August 21, 2009, 03:02:56 PM »

I got curious while awaiting your reply, and pinged a family friend who is in the realty business for clarification on the push-back I witnessed.

His response? The VA loan avenue represents a serious ass-pain to a realtor not willing to jump through the extra hoops, wait the extra time, or look for homes that meet the more stringent VA inspection requirements. If he's trying to move houses at a good clip, the VA loan isn't really worth his time compared to FHA, etc. There's additional pain for the seller who must pay certain costs, too.

IOW, the path of least resistance favors non-VA loans, at least as far as the seller and realtor are concerned.

That's not necessarily a bad thing for the disabled vet buyer, though. If he's at least 10% disabled or more, and willing to work through the system, he can bypass the lazy realtor to find a home, but he's got to be aware of the extra conditions.

Brad Johnson · « **Reply #21 on:** August 21, 2009, 03:08:14 PM »

Quote from: Gewehr98 on August 21, 2009, 03:02:56 PM

His response? The VA loan avenue represents a serious ass-pain to a realtor not willing to jump through the extra hoops, wait the extra time, or look for homes that meet the more stringent VA inspection requirements. If he's trying to move houses at a good clip, the VA loan isn't really worth his time compared to FHA, etc. There's additional pain for the seller who must pay certain costs, too.

IOW, the path of least resistance favors non-VA loans, at least as far as the seller and realtor are concerned.

That's not necessarily a bad thing for the disabled vet buyer, though. If he's at least 10% disabled or more, and willing to work through the system, he can bypass the lazy realtor to find a home, but he's got to be aware of the extra conditions.

Gev, buddy, if you want to make this a personal thing, that's your prerogative. Just be aware that I've been doing this a long time and can make deeply embarrassing hash of pretty much any stereotypical old-wives-tale objection floating around (the ones you listed fall squarely in that category). I tried to lay it all out in objective black and white terms, but I have no problem fighting fire with fire.

Brad

Gewehr98 · « **Reply #22 on:** August 21, 2009, 03:23:21 PM »

Brad, I'm not trying to make it personal, honestly.

I am, however, trying to let Balog know he has options, and if he experiences push-back (euphemism, at best) from realtors regarding VA loans, he can get the other side of the story before he makes his own decisions. Since he's rated as disabled, it only behooves him to take a gander.

That's why I went to another realtor to confirm/deny. I have no desire to take bread from your table, but to me it's no different than car dealers, etc. All have their "trade secrets", but it doesn't mean the consumer can't get an education before jumping in with both feet, nicht wahr? The hostility and threats of embarrassing me are unwarranted.

The VA is but one avenue, and if you have your heart set on a house that has deferred maintenance, the VA will probably not give you the loan for it, even though other lenders may. I found that out the hard way shortly after I got my disability rating...

roo_ster · « **Reply #23 on:** August 21, 2009, 04:11:45 PM »

Getting a little warm in here, without shedding light on the subject.

How about a real-life example that I executed on?

Hokay, I went back and looked at the spreadsheet analysis I performed way back in late 2001 & early 2002, before we bought our house, the first for us.

I compared 30 year fixed, no points, loans: Conventional (w/ ~3% down), FHA, and VA. (I have 20% disability form the VA and waive the VA funding Fee.)

My credit score was in the mid-700s. Credit history included paid-off student loans and credit cards. (We used only my credit history and income, as we wanted to be able to stay afloat even if one of us was laid off. As it was, I qualified for WAY more than we intended to spend, like 50% more than we intended to spend.)

We shopped around, like I wrote above, for several conventional (~97%), FHA, and VA loans. We got numbers for closing costs, as well. We hit up my credit union, a couple local banks, a couple national banks, and a couple mortgage brokers.

Turned out that the VA loan had the highest raw percentage rate on the loan, but the lowest APR, the lowest closing costs, the lowest total needed at closing and the lowest monthly payment (P&I, no mort ins, taxes, home ins).

I think the lesson learned is that one has to run the numbers. The least attractive on the outside (due to raw loan pct rate) was the VA, but it turned out to be the best deal all-around, especially after waiving the VA Funding Fee due to my VA disability.

In other markets at other times, the numbers might have favored one of the others.

Get good data and run the numbers to figure out the real deal.

That 3% we had for a down payment? Instead, we invested it in a couple mutual funds and pulled it out after the Dow went from its high of ~14000 and tumbled to 13000. We then used it to finance babysitting for the kids while my wife went to nursing school. About the only sharp market move I have ever made.

roo_ster · « **Reply #24 on:** August 21, 2009, 04:17:29 PM »

As for PITA-ness, I didn't think it too onerous.

The long pole in the tent was the lender (bank). I rode them to make it happen. All the other stuff that had to be done, I put in a list and marched down it. (The title company was terrifically responsive, if anybody in DFW wants a POC, just holler.)

Maybe it was my time in the service, with its byzantine processes & procedures, but I didn't have a hard time making it happen.

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Author Topic: VA home loans? (Read 4098 times)