Answering 4 FAQs about VA Funding Fee

VA loans are one of the most economical home loan programs for veterans, with benefits including no down payment and low interest rates. The veterans, however, need to pay VA funding fee. Unlike closing costs, the VA funding fee is non-negotiable and mandatory for most veterans, besides a few exceptions. It is a one-time fee that the VA lender directly hands over to the United States Department of Veterans Affairs. Veterans can use a VA loan calculator to find out the exact fee they have to pay or contact a VA loan officer for more information. Continuing the discussion further, here are four FAQs related to VA funding fee in the blog post.

1. What factors influence the VA funding fee calculation?

The VA funding fee generally ranges from 1.25 percent to as high as 3.3 percent of the loan amount. The basic fee, in most cases, is usually 2.15 percent. This figure changes as per the loan size and the down payment the borrower pays. If, for instance, you pay a downpayment of 5 percent of the loan amount, the funding fee will reduce to 1.5 percent.

2. Does the VA funding differ from veteran to veteran?

Yes. Reservists and National Guard members have to pay slightly higher amount than regular VA members. The funding fee for a regular military member who does not pay a downpayment is 2.15 percent. This figure increases to 2.4 percent for Reserve or National Guard. Here’s the rest of the breakdown:

Regular Military

Down payment	Funding Fee
5-10 percent	1.5 percent
10 percent and up	1.25 percent

Reserves and the National Guard:

Down payment	Funding Fee
5-10 percent	1.75 percent
10 percent and up	1.5 percent

3. Who can exempt the VA funding fee?

Any veteran receiving compensation for disability due to service-related issues is not required to pay the VA funding fee. You are also not liable to pay the VA funding fee if:

• You are the spouse of a veteran who died during service or due to service-related disability
• You are entitled to receive a compensation for service-related disability (if you are not receiving retirement pay)

4. Why does the VA charge a funding fee?

The VA understands that homeownership is one of the biggest steps in life for most people, and that is why it keeps VA loan rates much lower than conventional loans. The VA department, however, charges the funding fee to make up for the losses, in case borrowers default on the loan. The VA funding fee, in fact, helps VA offer home loans at an affordable interest rate and favorable conditions to veterans.

Conclusion

Although the VA funding fee is an expense, veterans can finance the fee with the rest of the loan, which may be helpful for many borrowers. If you wish to learn what VA funding are entitled to, use a VA loan calculator. Speak to a loan banking officer to get more details about the VA funding fee and other aspects of the home loan. Remember that learning about the VA funding fee and other components of the loan will help you make an informed decision, and secure a loan that best matches your needs and budget.

Top 4 Reasons to Refinance Your Home Loan

Refinancing your existing loan involves taking a new loan to pay off the earlier debt. The terms and conditions of refinancing vary for one state to another. Two major refinancing options are- rate and term refinancing and cash out refinancing. When looking for a  lender to refinance your home loan, use home loan calculators in Texas to compare home loan rates offered by them. Let’s take a quick look at the top four reasons why you must  consider refinancing your existing home loan.

1.Helps Save Money

Refinancing into a loan with lower interest rate lowers the interest payment obligations, which is a significant advantage, especially for homeowners with long-term loan. Many lenders also provide attractive discounts on closing costs to borrowers with a healthy credit score. To arrive at informed decisions, homeowners must use home loan calculators that will help them determine the cost of refinancing.

2. Helps Unlock Your Home’s Equity

Refinancing helps unlock your property’s equity as you can get a new loan on the basis of your home’s value and the payments you have made on the mortgage. You can use the loan amount in different ways such as financing home renovations, and paying for your kids university costs. The rate of interest will be the same as that for the mortgage.

3. Enables you to Shorten Your Loan Term

Refinancing your existing loan into a shorter one can be a prudent option, if your payment capacity has increased (due to an inheritance, or an increase in salary) as compared to when you took the loan. Refinancing into a shorter loan will help save on interest payments and other costs and can be the best choice if your loan does not allow you to pay more on your mortgage. To realize substantial savings, choose a provider with lower closing costs.

4. Other Benefits  

You can club your existing debts together into a single loan and refinance into a new loan to save on interest costs. Consolidating debts  helps keep a track of all your payments, which is important for better finance management. If you expect rates to rise in future, refinance your variable loan into a fixed loan that can help save costs. You can also refinance to pay off existing debts on time, which is a must to maintain a healthy credit score.

Conclusion

Refinancing your existing loan comes with a number of benefits that can help you manage your debt better. Before you refinance, use a home loan calculator to calculate the amount you would save. Refinancing costs can be substantial and it may take years for you to recover them. Therefore, refinance only if you intend to stay in the house for a long period.

Refinance an existing VA Home Loan: The Stress-free way

The U.S.Department of Veterans Affairs (VA) offers a guaranteed mortgage loan to eligible American veterans or their surviving spouses (if not remarried) to help them avail affordable housing finance in places where private financing is unavailable. The VA loan, as it is known, offers up to 103% financing, without the need to pay private mortgage insurance, to eligible candidates. Other advantages are zero-down-payment (subject to the sale price being lower than its appraised value), lowered interest rates and a standard subsidized VA funding fee. Veterans are also encouraged to use the VA loan to refinance an existing mortgage. Here are some available options for refinancing an existing mortgage with a VA home loan:

1. VA Streamline or Interest Rate Reduction Refinancing Loan (IRRRL)

This is strictly for VA to VA refinance. Veterans who have already used their VA loan eligibility to buy a home, but find it difficult to pay the interest on, can avail this facility and pay a lower rate of interest than what they were initially paying on their pre-existing VA Loan. The IRRRL or VA streamline, is a good option for existing VA loan holders to reduce their current loan rates, and pay lower monthly mortgage payments.

2. Cash out refinance

A cash-out refinance loan can replace the current mortgage held by a veteran. Under this scheme, an eligible VA loan holder can liquefy their home’s equity to cash, and use that money to pay off other loans, make any other payments or even renovate their home. It is not the same as home equity loans, for this is a replacement to the current mortgage, as opposed to adding another loan to the existing mortgage, in addition to having lowered interest rates.

3. Conventional to VA Home loan refinance

As the VA loan program has been designed specifically by the U.S. Department of Veteran Affairs to help veterans easily obtain home finance; most veterans are ideally eligible for the VA loan. They are in fact encouraged to refinance any non VA loans into an existing VA home loan, as it offers more benefits. All they need to pay is a subsidized funding fee (anywhere between 0.3 to 3.33% of the total loan amount) to be eligible for this conversion refinance.

Last Few Words

VA loans allow veterans to obtain loan amounts of bigger value than traditional private loans. Although the loans are handled by qualified private lenders, the U.S. Department of Veteran Affairs offers a partial guarantee on the repayment, as a token of appreciation to the veterans for their contribution to the nation. It is a highly popular option amongst the veterans, as it offers them many benefits for a lower price.

Getting a USDA Home Loan Approval Just Got Tougher

Ever since the USDA loan program was introduced in 1949, it has been one of the most popular home loan programs, primarily due to two reasons – zero down-payment requirement and  affordable monthly insurance premiums. The year 2015, however, saw some significant changes to the USDA home loan program. In this post, we discuss the changes and how they impact prospective home buyers. Let’s take a look. 

Stringent Credit Score Requirements

The minimum credit score requirement earlier was a bit more relaxed as compared to what it is now. After the recent changes for an automated USDA home loan approval, the minimum credit score requirement is 640. However, if there are any compensating factors that hint towards a potential increase in earnings (compensating factors such as a college degree, or a job training, or more), even scores ranging between 609 and 640 might be considered for a USDA home loan approval. In such cases, the lender would do a manual underwriting of the application.

Increased USDA Guarantee Fee

The USDA Rural Housing, in the year 2015, announced the revised guarantee fee and annual fee structure for the fiscal year 2016. According to the new fee structure, applicants need to pay an increased upfront fee of 2.75 percent on the loan amount, instead of the existing 2 percent. Lenders and borrowers submitting the loan guarantee request to the USDA post 30th September 2015 are subject to the increased fee of 2.75 percent. The annual fee (monthly PMI) of 0.5 percent remains unchanged.

Reduced Debt-to-Income Ratio

According to the updated USDA debt-to-income ratio requirement, the ratio cannot exceed 29 percent, if the credit score of an applicant is 640 or less. As the approval, usually takes place through the GUS, an automated underwriting system that holds all the parameters for approval, it is impossible to bypass the new debt-to-income ratio. However, with a 680 middle credit score, the debt-to-income ratio might be relaxed, and the loan is approved by a manual underwriting where the PITI ratio is between 29 and 32 percent, or if the total debt ratio is between 41 and 45 percent.

Last Few Words

With these changes to the USDA home loan program, it has become difficult for home buyers to get a USDA home loan approval. The borrowers of home loans, whether in Texas or some other parts of the US, who are ready to pay an increased guarantee fee of 2.75 percent may still not find themselves eligible for it due to the stricter guidelines. It is, therefore, advisable to keep your debts and credit score in check to ensure you are not denied a USDA home loan due to any of these reasons.

3 Most Beneficial Home Loans for Home Buyers in Texas

Despite the fact that there are several home loan options available for homebuyers in Texas, many fail to take the benefit of some of the most beneficial Texas home loan programs such as the VA home loans, FHA loans, USDA mortgage loans and more. Instead, they opt for the conventional loan programs that are less beneficial and have lesser features as compared to the ones just mentioned. One of the reasons for home buyers failing to take the benefit of these loans is their lack of awareness. In this blog post, we discuss the three most beneficial home loan types that buyers must consider at the time of applying for a home loan.

FHA loans

FHA loans are funded by private lenders, however, they are backed by the Federal Housing Authority. As the loans are insured by the government, lenders have relaxed qualification criteria for giving out these loans to home loan borrowers. Here are some of the benefits of taking an FHA home loan.

• Down payments as little as 3 percent as compared to the traditional loans that require a down payment between 5 to 10 percent.
• The Mortgage Insurance payments that borrowers need to make on a monthly basis are much less as compared to conventional loans.
• As opposed to the 3 percent allowable seller contribution to the closing costs in traditional loans, the FHA loans allow sellers to contribute 6 percent.

VA loans

Just like the FHA, VA loans are also guaranteed by the government. These loans, however, unlike the FHA loans are not offered to everyone. The VA loans are offered only to qualified active service duty members, veterans and their surviving spouses. The benefits of VA loans are as follows.

• There is no down payment applicable in VA loans.
• VA loan borrowers need not pay the private mortgage insurance (PMI) that FHA borrowers pay in the form of Mortgage Insurance Premium (MIP)
• The interest rates are not only lesser than the conventional loans, but they are less than FHA and USDA loans also.

USDA loans

The United States Department of Agriculture is the government organization that partners with lenders to assist rural home buyers get a Texas USDA home loan at competitive rates and easy to replay loan terms. Borrowers who apply for USDA loans get the following benefits.

• Just like the VA loans, USDA loans provide homebuyers 100 percent financing. In other words, they need to make a zero down payment at the time of buying a home.
• USDA loans do require borrowers to make an upfront premium that is 2 percent of the loan amount. The good news, however, is that borrowers can finance the upfront premium, as well.
• As these loans are backed by the USDA, certain borrowers with a blemished credit history may also apply for it. Similarly, borrowers with short credit history may use their rents, utility bill payments, and others to satisfy the credit based lending criteria of the lenders.

Last Few Words

Whether you are a first time home loan applicant or have already taken a home loan in the past, it is always advisable to consult a home loan consultant before applying for a home loan. Consultants can not only help you take a loan that best serves your requirement, but can also advise you against taking the ones that have hidden charges or unclear terms and conditions.  If you are looking for a home loan in Texas, there are more than few good home loan consultants who can help you with the same.

VA Home Loan: 5 Reasons Why it’s the First Choice of Veterans

Veteran Affairs Home Loans, or VA Home loans, are undoubtedly one of the most borrower-friendly loans available for qualified homebuyers. Only eligible veterans, servicemembers and their families are qualified for them. These loans are not provided by the U.S. Department of Veteran Affairs directly. The VA simply guarantees a part of the loan and private lenders, such as banks or mortgage companies, lend to eligible borrowers.  As these loans are backed by the VA, lenders are confident of extending a lot of benefits to the borrowers. On that note, let’s look into the various benefits of VA loans that help veterans purchase homes without breaking a sweat.

1. Competitive Interest Rates

VA loans come at attractive interest rates. The borrowing rates are less as compared to conventional loans and though the rate difference may not seem that big it can actually make a huge difference in terms of the interest one ends up paying over longer borrowing periods. For example, if you took a loan of $500,000 for 30 years at an interest rate that is 0.50 percent less than a conventional loan then you can save around $50,000 as interest cost.

2. Zero Down Payment Costs

One of the biggest advantage of VA loans is that they are zero down payment loans, that is, eligible borrowers don’t need to pay a single penny as down payment. This is possible because VA loans are backed by the VA board and as a portion of the loan is guaranteed by the VA, lenders are comfortable lending 100 percent of the cost of the property the borrower wants to buy.

3. Reduced Closing Costs

VA loans reduce the closing cost burden of borrowers by not allowing borrowers to pay some of the closing costs such as attorney fee, processing fee, documentation charges, loan costs and many more. The question that may cross your mind is “Who bears the cost if not the buyer?” Usually, the seller bears the closing costs. Even the broker may opt to bear a part of the closing costs.

4. Zero Private Mortgage Insurance

The FHA and conventional loans require borrowers to pay a monthly premium known as Zero Private Mortgage Insurance, if they are unable to pay the down payment that ranges somewhere between 3 to 5 percent. VA loans, on the other hand, are zero down payment loans and therefore, borrowers need not pay Private Mortgage Insurance premium.

5. Zero Prepayment Penalty

Most loan types require borrowers to pay a percentage of the outstanding loan as a prepayment penalty. The sooner one closes their loan, the higher the outstanding amount, and therefore, higher the prepayment penalty. However, VA loan borrowers need not worry about prepayment penalties as VA loan lenders do not levy any penalty for pre-closures.

Last Few Words

If you compare the veteran home loan with any other conventional loan in Texas or for that matter any other part of the US, you would find out that VA loan is far more beneficial. The reason , however, is simple -- it is a way of showing gratitude to those men in uniform who selflessly sacrificed several years of their lives to serve their motherland.

Your Spouse's Low Credit Score may Impact Your Homeownership Dream: Learn How

Ever heard that the credit score of your spouse may make or break your dream of owning a house? The moment you get married, the credit score of your spouse helps in determining your financial future, especially when you plan to purchase a house. Although marrying someone with a low credit score doesn’t affect your credit score, it affects the approval of home loans and the interest rate. Whether you live in Texas or any other state, your spouse's poor credit score always impacts the decision of buying a house.

Lenders check both of your credit scores during the loan approval process. Only one partner is eligible to apply for a mortgage, but in many cases, couples need both incomes to qualify for the home loan. Let’s look at a few factors that may prove to be a hurdle in loan approval.

Debt-to-income Ratio

Monthly payments made by an individual on credit accounts, mortgages and auto loans fall into debt category. The gross amount an individual receives before tax deduction helps in calculating the income. A low debt-to-income ratio of the spouse always increases the chances of mortgage approval for the new loan. Conventional loans have debt ratio capped at 36 percent while individuals with a debt ratio of up to 43 percent are eligible for FHA loans.

Bankruptcy and Foreclosure

If credit scores of a couple meet the lender’s requirement, it still doesn’t guarantee a mortgage approval. Lenders look for negative financial events such as short sale, foreclosure and bankruptcy in applicant’s credit history to determine eligibility. If one partner has a decent credit score with no negative history, but the other has announced bankruptcy in the past, the couple might face a problem in loan approval. The spouse, in such a scenario, needs to go beyond the seasoning period to be eligible for the mortgage.

Community Property States

Married individuals planning to buy a house in any of the nine community property states - Arizona, Nevada, Wisconsin, California, Texas, Louisiana, Idaho, New Mexico and Washington- need to share the credit profile of their spouses. Many lenders don’t worry about credit score of the non-purchasing spouse, but negative financial events such as bankruptcy might result in denial, even if the spouse isn’t taking the loan.

Married couples, who are planning to buy a house in near future, need to check their credit scores and history in advance. It is not possible to remove negative information from the report, but paying bills on time and a low income-debt ratio definitely improves the chances of qualifying for the loan.