VA Loan Live Hangout, Oct. 24, 2013

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Sarah: Hey, gang. Sarah Hill from Veterans United Home Loans. We’re so glad that you joined us on this a Thursday afternoon. We’re answering your questions live today about how to use your VA benefit in order to purchase a house. It is an easy process. We’ve assembled a team of experts here; the man who wrote “The Book on VA Loans,” Chris Birk.

Chris: Sarah, how are you?

Sarah: I’m good. How are you doing?

Chris: Great.

Sarah: Also Will McCullah, a loan officer at Veterans United Home Loans. How are you doing?

Will: Good. How are you?

Sarah: Great. Are you guys ready to answer some questions?

Will: Absolutely.

Sarah: You’ve flooded our inbox and we are ready to respond. If you’re watching this right now and wondering how to get started, you might look at the area just to the right of where you’re watching on vu.com/valoanlive that says “Get Started” right there. That’s how you get started. In the meantime, while you go through those forms we’ll be answering some of your questions.

This question is a little bit about credit, one that we get a lot. What is that magic credit score? This comes from Chantal. Chantal says, “If my score is lower than 600, am I still able to use my VA loan benefit?”

Will: Yes, you are able to use your benefit. Most lenders in the US right now require a minimum credit score of 620 though, to be able to get financing with a bank. Now the VA doesn’t have a minimum credit score, but most banks will require at least a 620 to be able to get you qualified.

Sarah: The Lighthouse Program also helps with that as well?

Chris: Yeah, an incredible service. If you’re not quite there or if you’re not sure where you are, and you give Will a call or send him an e-mail to get pre-qualified and you’re shy of that of that 620 benchmark, the Lighthouse Program is an incredible opportunity.

It’s a unique program here at Veterans United. We work exclusively and for free, absolutely free with veterans and service members to develop a plan to repair their credit scores and get on the road to pre-qualification. It’s an incredible service. We see people become homeowners month in, month out. I think more than 2,000 people have become homeowners through this program since 2008.

Please take advantage of it. If you’re not sure where your credit is or if you already have a sense coming in when you call Will, “I’ve got some blemishes, I think it might be a tough road,” we’ll do whatever we can to get you there.

Sarah: Again, that’s veteransunited.com/lighthouse. Let’s also give out your contact information, Will, for people who have different questions as well.

Will: Yeah, you can reach me if you have questions at (1-800) 814-1103. My extension is 3313. Or if you’d like you can shoot me an e-mail: will@vu.com, all lower case.

Sarah: All right, sounds good. Let’s talk a little bit about entitlement. This is a complicated question. You at home might not know what entitlement is, but Chris is going to explain it. This comes from Julie. She says, “Can you please explain remaining eligibility after a short sale or foreclosure? Explain to me why my certificate of eligibility came back with a zero eligibility.” Would you do that, Mr. Birk?

Chris: I can. Julie, this is incredibly complex. At least it can be. I know both Will and I can kind of do it in our sleep, but there are a lot of people who even work in the mortgage industry who don’t quite understand this. I just went ahead and put together an example, I think we can probably put it up on the screen, just to sort of run through the numbers and let you know where you are.

First, as to your question about why there’s no entitlement showing on your certificate, that’s absolutely normal. You wouldn’t expect to see it. It would just show the loss of entitlement that you experienced with the foreclosure or the short sale.

Let’s step back and just basically talk about how it works. There are generally two layers of entitlement that you have. You have a basic entitlement of $36,000. Then there’s a secondary layer that kicks in that the VA instituted years ago to basically help veterans keep pace with home prices across the country to make sure that the VA loan stays competitive depending on where you are.

In most parts of the country right now you can purchase with no money down for up to $417,000. So $104,250 is one quarter of that. The VA guarantees about a quarter of the mortgages it backs. Your total entitlement in most parts of the country is $104,250. Now I’m not sure if we can put that … I’m not sure if it’s on the screen right now or not. Okay, great. Awesome.

Julie, just to talk specifically to your point of views, you did throw in some specific numbers. We didn’t want to run through the whole question, but there are some high cost parts of the country where home prices are traditionally more expensive and it’s a little bit tougher to keep pace and to afford a home. To help keep leveling the playing field for veterans, the VA extends its entitlement in those high cost counties.

Julie, where you’re looking to purchase, the county loan limit you said is $500,000. We kind of ran through it really quickly to show you based on the entitlement that you’re dealing with. At the end of the day, based on that loss entitlement you’d be looking at around a $200,000 purchase without having to put money down. The fact that that isn’t … It’s so complicated and there are people who even work in VA lending who don’t quite understand it.

I can go into much more detail, but I don’t want to bore everyone who’s watching. We could spend an hour just talking about entitlement and I will happily go through it in detail with you, but  general speaking without knowing anything about your credit or any other situations, just based on the entitlement picture, you absolutely can use this benefit again. It’s one of the greatest misconceptions out there that is a one-time deal or that if you’ve experienced a short sale or foreclosure, or some other financial catastrophe, that you’re not going to be able to use this benefit again. You absolutely can.

I urge you to give Will a call, send him an e-mail. He can go over it in much more detail, where you are in terms of your entitlement and what might be possible, and how soon you can look to purchase.

Sarah: Great. Great question. A reminder, you are watching a live conversation. We’re answering your questions right now about how to use your VA benefit in order to purchase a house. We have experts here at Veterans United Home Loans. Will McCullah is one of them. He’s a senior loan officer at Veterans United. We have this question speaking of short sales. This comes from Marcos. Marcos asks, “How soon can we close once a short sale is approved?”

Will: Typically, once the bank’s approved the short sale we ask for 30 to 45 days to move the loan through processing and underwriting to loan approval. That’s just the time it takes to where we’re doing an appraisal, wait for it to come back, order the title work, termite inspection; all the little things that go in to making the loan complete and approved.

Sarah: Okay, great. This question also comes from Ashley. She says, “Do you have to work a job for a year before you can apply for the VA loan? If the job pays six figures, can you put money down even if you don’t have to?” That question comes from Ashley. Ashley, congratulations on making six pictures … six figures, by the way.

Will: Yes, you can, but you don’t have to put money down. You can put money down if you like. You’re not required to on a VA loan. It’s a 100% loan. They’re not going to charge you private mortgage insurance even if you don’t put money down, but absolutely you can. In fact, if you put more than 5% down your funding fee goes down a little bit. If you put more than 10% down it goes down a little bit more. It saves you a little bit of money on the VA funding fee if you put some money down.

Now, regarding the job situation, VA requires a two-year job history in the same line of work. Now, if you have had a year in one field and then you take a break off and you don’t work for a while, then you go back to work in that same field, yes, you would have to be on the job for at least one full year if your gap in employment’s longer than about 60 days.

If you were, say, in school being educated to go into a certain field and then you would start with your six-figure job, which I’m assuming with a six-figure job you probably have that some sort of education to be earning that sort of money, then you would not need to be on the job for a year. If you’re within a school for a few years and then you went into whatever field of what’s going to be, no, you can just start and your first paycheck is all we would need. If there’s been a significant gap in employment, then yes, you have to be back on the job for at least a year.

Chris: Generally, too, for transitioning service members it can depend on your MOS too. I know Will’s qualified people and we see people all the time who are transitioning right out of the military. You may not necessarily need to have a year own job as soon as your ETS. I think they’re … you can definitely do it. The lenders are still going to look for continuity, but you absolutely can go straight from the military into the civilian workplace and have a home in the mix right away.

Will: Absolutely.

Sarah: All right. Excellent. A lot of people are asking right now how to get started. One way to get started is if you’re watching this playing right now on vu.com/valoanlive, right to the right of the screen look at those forms right there. There’s the ability to select what kind of loan that you’re interested in, and you could also give Will a call. Will, you want to give out your phone number?

Will: Yeah, absolutely. You can reach me at 1-800-814-1103. My extension is 3313. Or if you’d like, shoot me an e-mail: will@vu.com.

Sarah: Really easy just to get started and have direct access to the VA loan experts. Do we have to have PMI? Someone’s asking about private mortgage insurance.

Will: It’s a good question. Actually, no, that’s one of the benefits of the VA program as a whole is that they offer 100% financing with no private mortgage insurance. On a VA loan as compared to other loan programs, your payment will end up being a little bit less than it would be for a conventional loan that would charge a PMI.

Sarah: Okay. Chris Birk is the author of “The Book on VA Loans.” This person is asking about reputable brokers and companies: “Is there a website out there where people can go to find reputable brokers or companies?” Veterans United is one of them, but where is the place that we can find?

Chris: I was going to say other than veteransunited.com and so we … The short answer is no, the VA doesn’t maintain any sort of database or list. The VA approves lenders to make purchase loans. You don’t have to be approved by the VA to do a VA re-fi in most cases. To actually issue a home loan that you would use to purchase that dream home, you’re going to have to work with a lender that’s been approved by the VA.

As far as getting a list goes,  you can talk to a regional loan center and you can try to obtain that list of national or local lenders that have been approved, but there’s not any sort of ranking or database that’s out there that kind of takes you or walks you through. That’s why it’s so incredibly important to make sure you do some due diligence and get to know the company you’re working with. Our customers have benefited so much not just from our expertise but our passion for doing this, and the privilege that it really is to serve those who have served.

I’d like to think that every company looks at it like that, but I know that that’s not always the case. I’m not saying work with us and us alone, just make sure that you feel comfortable when you’re talking with Will or with a loan officer in another company. That it seems like a good fit, that they really understand where you are and what your goals and objectives are, and that they’re committed to getting you there. I know at the end of the day, that’s what we’re most concerned about and focused on, is getting veterans into homes.

Sarah: Better Business Bureau might be a website, too.

Chris: Yeah, absolutely. We maintain an A+ rating with the BBB. We have some folks from St. Louis today who are there to receive our Torch Award from the Better Business Bureau, which is an awesome accomplishment. Check with the BBB. Spend some time with social media, too. You can interact with a lot of our customers online. You can do it with other mortgage companies that have Facebook pages for example. Talk to some of the customers, see what they have to say, and I think their weight will carry a lot as well.

Sarah: Veterans have unique financial situations. People are asking about bankruptcies and foreclosures. This person asks, “What if a veteran has a bankruptcy in his history but it’s not for a mortgage, not for a mortgage bankruptcy. Can he still get a VA loan?”

Will: The general rule when it comes to bankruptcies and foreclosures is that we’ve got to wait 24 months from the date that it was finalized or discharged before you can be reconsidered for the VA program. If it’s been more than two years since the bankruptcy was discharged, then yes, you can reapply for the VA program and be reconsidered. But if it’s been less, then you’ll have to wait that 24 months.

Sarah: What type of properties cannot be bought with the VA loan?

Will: The VA loan is good for any property that’s in good shape. Typically, stick built properties are always okay. Condominiums have to be approved by the VA. It’s always important to check before you’re considering a condominium to see if it is VA approved. Sometimes the approval process for a condo can take several months up to six months. It might not be favorable for you to put in an offer on a condo that’s not VA approved if you don’t have that time to wait.

As far as other properties, townhomes are good to use with a VA loan, stick built properties of course. No manufactured homes right now with most lenders on VA, even though if you check with the VA they will tell you that manufactured properties are okay.

Chris: Yeah, it’s tough to find lenders willing to loan on manufactured or mobile homes right now. Modular is something you can do. As far as properties you can’t look to get a mortgage on from the VA: investment properties, vacation homes, second homes. The focus of this program is and always will be a primary residence where the veteran’s going to live.

Will: Sure. Also, fixer-uppers, the VA is not really geared towards fixer-upper type homes. They want the home to be safe, sound and sanitary at the time the veteran moves in.

Sarah: Say that fast five times, right? Questions about eligibility. Randy says, “Can I have someone other than my wife, but another family member on the loan as a co-signer if my credit is not so good?”

Will: Typically, well number one to the second part of your question as far as your credit, all applicants on the VA loan need to have at least a 620 score to be able to qualify. Now as far as your wife being on the loan with you, she would be able to be on the loan even if she didn’t have eligibility since you guys are married. Now if you wanted to have somebody else other than your wife on the VA loan with you, they would also have to be a veteran and eligible on their own. Otherwise, no. The only approved co-borrower would be a spouse if they weren’t another veteran.

Sarah: What if you have two veterans? This person is asking, “My wife served eight years in Army Reserves,” thank you for her service, thank you for your service as well, “is she eligible for the VA loan?” He is a veteran as well.

Will: Yes. Based on those numbers, if she has six years in with the Reserve and National Guard or more then she would be eligible for the VA program. If you’re already eligible then she could be on the loan with you just using your eligibility.

What you guys would need to decide is whose eligibility do you want to use. If one of you had a VA loan in the past, it might be good idea to use the other person’s eligibility to purchase this new home because they would be subject to the first-time use of the funding fee whereas if you were using it for the second time, you’d have to pay a higher funding fee.

Chris: To answer the inevitable question, yes, you could actually split it and then do one [inaudible 00:15:24] situation. It doesn’t often make a ton of sense to do it but if that’s a question that’s going to be out there, yes, it is something you could look to do. It’s one of those situations where you just want to … you would want to talk to Will and have him look over your entitlement, and let him guide you as to what some of the best steps would likely be.

Sarah: We talked about short sales. We talked about foreclosures. We talked about bankruptcies and entitlements. Here’s the question from a combat-disabled veteran about credit. Derrick says, “I’m 70% combat-disabled.” Derrick, thank you for your service. “My credit is not good due to my past. Now that I’m doing good and I want to buy a house, I would like to know if there is a way or program to help make this happen.”

Will: Well, it kind of depends on where your credits at right now. If it’s above the 620 mark then we can definitely take a look. If it’s below a 620 we want to get those scores up to at least a 620 before we could consider you for the program, which we have the Lighthouse Program here with our company. That’s a great resource for people that are looking and trying to raise their credit scores up to the VA approvable range to qualify for a loan. Our Lighthouse representatives can take a look at your credit, and kind of dig into it and let you know exactly what you need to do in order to get those scores as quickly as possible.

Sarah: Again, that number you see on your screen for the Lighthouse is 888-392-7421, or you can also visit Lighthouse at veteransunited.com/lighthouse.

Chris: I also just wanted to add that with your service-connected disability too, you would be exempt from paying the VA filing fee, which is a huge factor and another … just a small way to say thank you for your service.

Sarah: They’re also asking about any form of help for someone who has a not so good credit. We mentioned the Lighthouse Program. Definitely check them out, as well as give Will McCullah a call as well. Will, if you’d give out your phone number?

Will: Sure: 800-814-1103, extension 3313. Or you can shoot me an e-mail, will@vu.com.

Sarah: This comes from Deana. Deana says, “My husband is 100% disabled. I have not been able to find a job. Our credit isn’t great. Is this a standstill until I can find a job and pay off most of our debt or are we still able to buy a home?” That comes from Deana.

Will: It would probably be difficult to qualify without having any usable income at this point. You’d probably need to wait until you were back working again and on the job for a certain amount of time, depending on how long you’ve been off work. As far as the credit, if it’s not where you want it to be, like I was saying, look into our Lighthouse Program. It’s a wonderful resource and it’s absolutely free.

Chris: You would be able to count his disability income. I think it would be more of a question of what you’re looking at at the end the month versus your monthly debts. Will’s exactly right. It sounds like it would be really tough, especially to get into the type of home you probably would want to get into. You most likely would be looking at your own stream of steady income as well.

Sarah: This question comes about what kind of income do they not count? What kind of income does the VA not count? Will?

Will: I guess one thing that comes up a lot when we’re talking with folks is that they’re in school and they’re getting a GI Bill account. Some people call it VAH for GI Bill. Basically, it’s money that the government is giving you while you’re in school to help you pay for an apartment or whatever. Unfortunately, we can’t use that towards qualification on the VA Program because they consider it temporary. That comes up a lot. People are always asking if we can use the GI Bill towards qualification.

Chris: I think entrepreneur’s another source of questions with self-employment, too.

Will: Right.

Chris: Using that income that you generate. If your business makes $100,000 a year and you write off $50,000, Will can only look at the $50,000 that’s left on paper, not the $100,000.

Will: Right.

Chris: I know that’s a constant source of frustration for small businesses owners, but it’s just … it is the way of getting the mortgage unfortunately.

Will: Speaking on that same subject, if you own your own business and you haven’t been doing it for at least two years, you have two years of filed taxes under your belt, then we wouldn’t be able to use your income to qualify either because the way that the VA establishes your qualifying income is they review what you filed on your taxes the last two years.

Chris: That’s really not even a VA or a Veterans United issue. That’s a mortgage issue, really. You’d be hard-pressed to get a loan conventional, FHA, VA or otherwise without those two years under your belt as a business owner.

Sarah: How much money realistically, this person is asking, should you have into that? Is there any guide to know how much money should be in the bank?

Chris: Six-hundred and forty-seven dollars.

Sarah: And seventy-five cents, right?

Chris: It really depends on your specific situation. Will, you could look at the closings you have scheduled and I’m sure the amounts are going to vary so much based on the purchase price and where in the country, and so many other situations. Is there anything that you typically tell people?

Will: You’re exactly right, Chris. Everybody’s situation’s different. You might have one individual that’s putting down 5%, so obviously they’ll need to have those funds in the bank. Then you’ll have another individual that has all the closing costs included in it with the loan to where they’re not structured to bring any money to the table. In situations like that, obviously, we would need to verify assets if it was needed.

Another thing to think about is your loan approval is based on three different factors: your credit score, your debt to income ratio and the amount of assets that you have in the bank. If one or two of those is lacking a little bit, then if another one is stronger, then we can compensate a little bit. Say for instance if your debt to income ratio’s a little bit high for the loan amount that you want, if you have a lot of money in the bank then it can sometimes help you get a loan approval whereas you wouldn’t be able to get one without money in bank.

Chris: There are going to be some upfront costs you do want to prepare for. You’re going to be required to get an appraisal depending on where you are in the country, $350 to $500, that’s a VA requirement. What is not required but you should reconsider it too is a home inspection. It’s different than appraisal. We could spend another 30 minutes just talking about the VA appraisal process and home inspection. Just consider home inspection as a secondary requirement. That’s going to be $400 to $500 depending on where you are in the country.

In a lot of places, when you’re purchasing, earnest money is going to come into play. That’s basically a good faith deposit you’ll put down with the seller. It could be a couple of hundred dollars. It could be a couple thousand dollars depending on the loan amount and where you are. That’s money you’re usually going to get back at closing but you’re still going to have to have some money upfront in the bank in order to get qualified.

I will tell you nationally, the average, right around the $7,000 total is how much a VA borrower has to his or her name. You’re not going to have to save $50,000, $60,000, $70,000 for years and years and years to make this happen. We see people, quite frankly, with less than $7,000  make this happen month in, month out. It’s just one of the things to talk with Will about at the outset in terms of where you are with your bank account, what type of loan that you’re looking at, and he’ll give you a quick sense of how much you’re really going to look at and need.

Sarah: Lots of tools out there for you to access right now  in order to get answers to your questions. One of them is “The Book on VA Loans,” and it was written Chris Birk. Chris, you want to tell people where we could get the book?

Chris: Yeah, absolutely. You can find it at veteransunited.com/book. We actually, Sarah, dedicated some time in putting together some incredible overview videos to walk you through the chapters of the book. It’s an awesome resource. We love to give out as many free copies as possible. Please check it out. If you want a hard copy, I will gladly mail you a hard copy. If you actually want to read the 300-page book on the VA Loans, just send me an e-mail. It’s chris@vu.com.

Sarah: All right. A question coming in under the wire, “Can I buy a duplex or fourplex with my entitlement for a little investment income?”

Will: As an investment property, you cannot. The VA is set up for owner-occupied primary residences, but you can go up to a four-unit property. Duplexes and four units would be okay as long as you inhabited one of the units.

Sarah: Okay. Will, can you give out your contact information as well? This is Will McCullah. He’s a senior loan specialist at Veterans United. These guys know a lot about VA loans, and they’re there for you to answer your questions not only now but after as well. Feel free to reach out to Will. Will, your phone number?

Will: 1-800-814-1103, extension 3313.

Sarah: All right. You guys asked incredible questions today. We answered questions about short sales, foreclosures, credit, financing, entitlements, debt to income ratio, what is and isn’t allowed for VA home loans. If you have other questions, we’re still here. You can go to that form right to the right of where the player is at vu.com/valoanlive. Fill that out.

You can also seek out Will. You can get Chris’ book. You can check out the Lighthouse Project as well. If you go to veteransunited.com/lighthouse, perhaps your credit history, if you have questions about that, those … consultants are able to answer your questions as well, so please seek them out as a resource.

You’ve been watching a live broadcast of Veterans United Home Loans. Have a great day.