Documents
VA Loans
VA Loan Requirements
Before you start the loan process, you’ll need to have some information at hand for all loan applicants:
- Social Security numbers
- Residence addresses for the past two years
- Names and addresses of your employers over past two years
- Your current gross monthly salary
- Names, addresses, account numbers and balances on all checking and savings accounts
- Names, addresses, account numbers, balances and monthly payments on all open loans
- Addresses and loan information of other real estate owned
- Estimated value of furniture and personal property
- Certificate of Eligibility and DD-214 (for veterans only)
- W2’s for the past two years and current check stubs
- For self-employed individuals, you will need to provide personal tax returns for the past two years, current income statement and balance sheet for the business
In addition, you will need to pay for a credit report and appraisal of the property.
Important Veteran Documents
VA helps veterans, eligible surviving spouses, and active duty service members become homeowners through the VA Home Loan Guaranty. These loans are provided by private lenders. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms. Before you begin, make sure you have all of your important military documents ready.
Your DD-214 is your proof of military service. It shows the nature of your discharge, dates of service, and current classification (retired, separated, Guard or Reserve status). The DD-214 is one of the most important documents you’ll get when you leave military service. You’ll need it to claim military benefits including VA loans, the GI Bill, and medical services provided by the VA.
Certificate of Eligibility
Before you get a VA loan, you will need a VA Certificate of Eligibility. It will establish that you meet the necessary guidelines to take advantage of your hard-earned VA loans benefits.If you are a military veteran, we will be help you get this document. Fill out our request form and we will send a blank VA Form 26-1880 (Request for a Certificate of Eligibility) to you by mail or email.
VA Loan Closing Costs
The veteran can pay a maximum of all reasonable and customary amounts for any and all of the “Itemized Fees and Charges” designated by VA as defined below plus a 1% flat charge by the lender plus reasonable discount points. Some special provisions apply to construction, alteration, improvement and repair loans.
HOW TO HAVE MINIMAL TO NO CLOSING COSTS
Please note that often times veterans believe that closing costs are covered by a VA mortgage. While that is not technically true, the same effect can be reached through careful structuring of your real estate contract. The loan amount will be the purchase price or appraised value, whichever is less (plus the VA Funding Fee). So if you want your closing costs covered by the loan, you need to increase the price and have a stipulation with the seller will pay the closings costs and pre-paid expenses equal to the amount by which you have increased the price. As long as the home appraises for the increased price, you will have the closing costs paid as part of the deal. Closing costs and pre-paid expenses can vary widely with 3% – 5% as the range for most places. If you want a more specific number in this regard after you have started looking for properties, we can provide you with a Good Faith Estimate for a particular property that you have an interest.
ITEMIZED FEES AND CHARGES
The VA defines allowable fees and charges that the veteran borrower can pay or closing costs that may be charged to the borrower. These costs are determined as reasonable and customary by each local VA office. All other costs in the transaction are considered non-allowable and generally paid by the seller when purchasing a new home or by the lender when refinancing your current VA mortgage. Itemized fees and charges are as follows:
APPRAISAL AND COMPLIANCE INSPECTIONS
The veteran can pay the fee of a VA Appraiser and VA compliance inspectors. The veteran can also pay for a second appraisal if they are requesting a reconsideration of value. The veteran cannot pay for a second appraisal if the lender or seller is requesting a reconsideration of value or if parties other than the veteran or lender request the appraisal.
RECORDING FEES
The veteran can pay for recording fees and recording taxes or other charges incident to recordation.
CREDIT REPORT
The veteran can pay for the credit report obtained by the lender.
PREPAID ITEMS
The veteran can pay that portion of taxes, assessments, and similar items for the current year chargeable to the borrower and the initial deposit for the tax and insurance account.
HAZARD INSURANCE
The veteran can pay for the hazard insurance premium. This includes flood insurance, if required.
FLOOD ZONE DETERMINATION
The veteran can pay the actual amount charged for a determination of whether a property is in a special flood hazard area, if made by a third party who guarantees the accuracy of the determination.
SURVEY
The veteran can pay a charge for a survey, if required by the lender.
TITLE EXAMINATION AND TITLE INSURANCE
The veteran may pay a fee for title examination and title insurance, if any. If the lender decides that an environmental protection lien endorsement to a title policy is needed, the cost of the endorsement may be charged to the veteran.
SPECIAL MAILING FEES FOR REFINANCING LOANS
For refinancing loans only, the veteran can pay charges for Express Mail or a similar service when the saved per diem interest cost to the veteran will exceed the cost of the special handling.
VA FUNDING FEE
Unless exempt from the fee (10% minimum disability from the VA), each veteran must pay a funding fee to VA.
OTHER FEES AUTHORIZED BY THE VA
Additional fees attributable to local variances may be charged to the veteran only if specifically authorized by VA. The lender may request VA to approve such a fee if it is, (a) normally paid by the borrower in a particular jurisdiction, and(b)considered reasonable and customary in the jurisdiction.
The following list provides examples of items that CANNOT be charged to the veteran as “itemized fees and charges.” Instead, the lender must cover any cost of these items out of its flat 1% fee.
Loan closing or settlement fees, document preparation fees, preparing loan papers or conveyance fees, attorneys services other than for title work, photographs, interest rate lock – in fees, postage and other mailing charges, stationery, telephone calls and other overhead, amortization schedules, pass books, and membership or entrance fees, escrow fees or charges, notary fees, preparation and assignment of mortgage to other secondary market purchasers, trustee’s fees or charges, loan application or processing fees, fees for preparation of truth-in-lending disclosure statement, fees charges by loan brokers, finders or other third parties, and tax service fees.
When reviewing allowable borrower fees and charges, many of the items can be paid for by the seller of the home and can be negotiable when presenting an offer on a home to the seller. Please consult with your Real Estate Professional handling the transaction.
FHA Loans
FHA Lending Limits – San Diego County (Updated 2015)
-
Single Family = $562,350
- Address to your place of residence (past two years)
- Social Security numbers
- Names and location of your employers (past two years)
- Gross monthly salary at your current job(s)
- Pertinent information for all checking and savings accounts
- Pertinent information for all open loans
- Complete information for other real estate you own
- Approximate value of all personal property
- Certificate of Eligibility and DD-214 (for veterans only)
- Current check stubs and your W-2 forms (past two years)
- Personal tax returns (past two years), current income statement and business balance sheet for self- employed individuals
- Lender’s origination fee
- Deposit verification fees
- Attorney’s fees
- The appraisal fee and any inspection fees
- Lender’s origination fee
- Cost of title insurance and title examination
- Document preparation (by a third party)
- Property survey
- Credit reports (actual costs)
- Transfer stamps, recording fees, and taxes
- Test and certification fees
- Home inspection fees up to $200
- Allowed in an FHA refinance loan are wire transfer fees, courier fees, reconveyance fees, and fees to payoff bills.
- Easier to Qualify
While most loans exclude applicants with questionable credit history and low credit scores, the FHA makes loans available with lower requirements so its easier for you to qualify.
- Competitive Interest Rates
You’ve heard the horror stories of subprime borrowers who couldn’t keep up with their mortgage interest rates. Well, FHA loans usually offer lower interest rates to help homeowners afford housing payments.
- Lower Fees
In addition to lower interest rates, you can also enjoy lower costs on other fees like closing costs, mortgage insurance and others.
- Bankruptcy / Foreclosure
Just because you’ve filed for bankruptcy or suffered a foreclosure in the past few years doesn’t mean you’re excluded from qualifying for an FHA loan. As long as you meet other requirements that satisfy the FHA, such as re-establishment of good credit, solid payment history, etc., you can still qualify.
- No Credit
The FHA usually requires two lines of credit for qualifying applicants. If you don’t have a sufficient credit history, you can try to qualify through a substitute form.
- No Credit History
Two lines of credit are necessary to apply for an FHA loan. However, in the event a borrower does not have sufficient credit on their credit report the FHA will allow substitute forms.
- Chapter 13 Bankruptcy
FHA will consider approving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year. The court trustee’s written approval will also be needed in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.
- Chapter 7 Bankruptcy
At least two years must have elapsed since the discharge date of the borrower and / or spouse’s Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, have re-established good credit, and have a stable job.
- Late Payments
During an underwriter analysis of borrower credit, the overall pattern of credit behavior is being reviewed rather than isolated cases of slow payments. If a good payment pattern has been maintained, regardless of a specific period of financial difficulty preceded it, the borrower may escape disqualification.
- Foreclosure
FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower’s main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit. This does not include the inability to sell a home when transferring from one area to another.
- Collections, Judgments, and Federal Debts
A collection is minor in nature usually does not need to be paid off as a condition for loan approval. It is stated as such in FHA guidelines. Any judgments will have to be paid in full prior to closing. Borrowers who are delinquent on any federal debt, such as tax liens, student loans, etc., are not eligible.
- Qualified borrowers pay for closing costs plus down payment covering the 3% statutory minimum.
- Standard FHA guidelines and regulations apply, yet many lenders do require a 580 FICO score.
- For greater loan amounts on purchases, minimum FICO scores increase to 600 on Purchase, Rate / Term refinances and to 640 on cash-out refinances.
- Maximum Debt to Income Ratio’s are 43%.
- No down payment assistance on loan amounts over $417,000.
- No non traditional credit.
- Declining Markets: Two appraisals will be required when the loan amount, excluding upfront MIP, will exceed $417,000 and the LTV equal to or greater than 95%.
- FHA Rules on Personal Property
- ranges
- refrigerators
- dishwashers
- washers
- dryers carpeting
- window treatments
Duplex = $719,900
Tri-plex = $870,200
Four-plex = $1,081,450
FHA Requirements Checklist
Before you start the FHA loan process, be prepared to provide some information to your loan officer. Have it ready now to save time later.
In addition, you will need to pay for a credit report and appraisal of the property.
FHA Debt-to-Income Ratio Guidelines
In order to prevent homebuyers from getting into a home they cannot afford, FHA requirements and guidelines have been set in place requiring borrowers and/or their spouse to qualify according to set debt to income ratios. These ratios are used to calculate whether or not the potential borrower is in a financial position that would allow them to meet the demands that are often included in owning a home.
1) Mortgage Payment Expense to Effective Income
Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners’ dues, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 31%.
See the following example:
Total amount of new house payment: $750
Borrower’s gross monthly income (including spouse, if married): $2,850
Divide total house payment by gross monthly income: $750/$2,850
Debt to income ratio: 26.32%
2) Total Fixed Payment to Effective Income
Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners’ dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 43%.
See the following example:
Total amount of new house payment: $750
Total amount of monthly recurring debt: $400
Total amount of monthly debt: $1,150
Borrower’s gross monthly income (including spouse, if married) $2,850
Divide total monthly debt by gross monthly income: $1,150/$2,850
Debt to income ratio: 40.35%
Please note that the above indicators do not exclusively determine whether or not a candidate will qualify for an FHA loan. Other factors will be considered, including credit history and job stability.
FHA Closing Cost Allowable Charges
While FHA requirements define which closing costs are allowable as charges to the borrower, the specific costs and amounts that are deemed reasonable and customary are determined by each local FHA office. All other costs are generally not allowed and are usually paid by the seller when buying a new home, or paid by the lender when refinancing your exising FHA loan.
FHA Credit Requirements
FHA loans provide great assistance to many first time home buyers by offering mortgage loans with lower down payments. While this is a benefit for many people, recent changes in policy may have put the loans just out of reach for some would-be homeowners with questionable credit history.
Credit History and Score Requirements
For those interested in applying for an FHA loan, applicants are now required to have a minimum FICO score of 580 to qualify for the low down payment advantage, which is currently at around 3.5 percent.
If your credit score is below 580, however, you aren’t necessarily excluded from FHA loan eligibility. Applicants with lower credit scores will have to put down a 10 percent down payment if they want to qualify for a loan.
So if you’re planning to buy a house, and your credit score doesn’t meet the minimum, you should weigh the advantages and disadvantages of putting down a larger down payment or using those funds to try and improve your credit score first.
Benefits of an FHA Loan
The reason why FHA loans are so popular is because borrowers that use them are able to take advantage of benefits and protections unavailable with most traditional mortgage loans. Loans through the FHA are insured by the agency, so lenders are more lenient. Here are a few benefits you can enjoy with an FHA loan:
For many home buyers, using an FHA loan can really make the difference between owning your dream house comfortably or turning it into a financial nightmare. The FHA provides a wealth of benefits for applicants that qualify, so make sure you’re making full use of them.
FHA Credit Guidelines
Before approving a loan, the lender analyzes the integrity of the borrower’s past credit performance. Based on FHA requirements, those who have a good credit history demonstrated by a solid track record of timely payments will likely be eligible for a loan. Potential borrowers whose credit history is marred by slow payments, poor financial judgment and delinquent accounts is not a good candidate for loan approval.
The following is a list of items concerning the borrower’s credit:
FHA Jumbo Loans
New FHA / HUD Guidelines will insure new increased loan amounts based on your county and state. That means you can take advantage of new maximum loan limits for FHA loans. Qualifying customers can now apply for an FHA Jumbo Loan up to the maximum allowed by FHA. You can apply for a home loan with 3% down under new FHA loan limits.
A sampling of FHA approved lenders show the following qualifying guidelines:
There are situations where a buyer wants to purchases a home with an FHA loan and the seller will try to sweeten the deal by offering to include personal property such as appliances, vehicles, or other items. Because the FHA has strict rules on something known as “inducements to purchase” limiting seller contributions to the sale of the home to six percent or below (of the asking price or appraised value, whichever is lower), does the FHA allow or deny sellers to offer personal property in this way?
The FHA defines an “inducement to purchase” when the seller pays expenses on behalf of the borrower that exceed six percent of the sales price or appraised value as mentioned above. Personal property isn’t the same as those payments in the eyes of some, but that does not mean the FHA doesn’t also regulate this part of the transaction.
The rules on this can be found in HUD 4155.1, Chapter Two, Section A, which says, “Personal property given by a seller and/or another interested third party to consummate the sale of a property results in a reduction in the mortgage amount. The value of the item(s) must be deducted from the lesser of the sales price or appraised value of the property before applying the LTV factor.”
Including a car, boat, furniture or a television would require the lender to deduct the value of all the included items from the loan amount. Other personal property may fall into more of a gray area– according to Chapter Two, some items are considered “customary” and can be included in the sale without the value of such customary items deducted.
Chapter Two rules may or may not apply (depending on whether the item is considered customary or not) for the following personal property:
FHA loan rules state that these items may not require an adjustment to the loan amount as long as it’s determined that they are customary AND no cash allowance has been paid to the borrower. That is a very important thing to keep in mind when negotiating with the seller.