Tag: va loans

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Seller Credits: How They Work, How They Benefit you in the Home Buying Process, How Much you Really End Up Spending on Your New Home? 

loansbyjoanna

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Imagine trying to buy a Starbucks Frappuccino and having to separately compute what it costs to make the coffee, to pay for the coffee bean collectors, distribute the inventory, and stock the store. Wouldn’t it be nice if houses came with a bottom-line price tag, from upfront fees to ongoing monthly expenses, so that a buyer could easily compare “all-in” costs?

The costs of buying a home can very quickly add up. After you decide that homeownership is your best bet, you’ll need to convince a lender of that too. That means that your credit is in good shape, you aren’t struggling with debt, and you have a sizeable cushion for expenses that may arise. 

For financed deals, in addition to a down payment, you pay loan-acquisition costs and for services used during the escrow process. You may ask the seller to credit you a specified amount at closing to help with many of the expenses. 

Homeowners anxious to sell their homes will sometimes entice buyers with seller credits. These credits are a loan option that allows buyers to finance their closing costs and be able to purchase their home with less cash down. The seller concession must be included in the sales contract, and the amount and terms of the credit can be negotiated. 

Homeowners anxious to sell their homes will sometimes entice you with seller credits. These credits are a loan option that allows you to finance your closing costs and be able to purchase their home with less cash down. Here are 4 things that you should do (and know) as a buyer:

1.) Review closing costs

To settle the transaction, you and the seller will pay your own share of closing costs including escrow fees, title insurance, and property taxes. The allocation of fees depend on market customs. Buyers are typically required to pay only the fees that are considered customary and reasonable for a particular market, and the seller credit covers fees that fit the description. Lenders cap the amount of fees a seller credit may cover at 3-9% of the loan amount.

2.) Negotiate the terms

If you are the buyer, you and the seller will typically negotiate the terms of a seller credit early in the transaction. You will request an amount, as a percentage or dollar amount, in the offer to purchase. The seller may accept, reject, or counter the seller credit. The seller pays the credit as a lump sum at closing, and limitations to what the credit covers may apply. 

3.) Enjoy The Benefits

Seller credits can be beneficial to both sides of the transactions. As a buyer, you may be offered seller credit that can reduce your out-of-pocket expenses at closing. You can even request a seller credit, and increase the sales price to entice a seller to accept. A seller credit allows you to finance your closing costs into the new loan amount, however, your lender must approve the credit, and the value of the home must merit the increase in sale price. 

4.) Know The Limitations

Limitations on what the buyer and a seller credit can pay for are placed by lenders. Prohibited items are known as non-allowable fees. If you overestimate our closing costs, a credit surplus may occur. Then, you should renegotiate the sale price for the unused amount so that the seller does not end up with more net proceeds at closing for the unused portion. 

Whether the seller markets the home with an offer to credit some of your closing costs, or you request that the seller assists in your offer, the process for applying the credit is generally the same: the amount of the credit is noted in the sales contract as a dollar amount or as a percentage of the offer price, then, it’s added to the offer price.

Because the buyer adds the concession to the offer price, he increases the amount he pays for the home. For example, a buyer who needs $3,000 in concessions for a $100,000 home requests 3 percent seller assist and offers $103,000 for the home. Although the buyer is paying $103,000 for the house, the seller nets only $100,000 – the remaining $3,000 is loan money the buyer applies to his closing costs.

Sellers often feel as though they’re “giving” the buyer the amount of the assist. However, the assist amount is built into the offer price. The buyer is offering the seller $100,000 but asking the lender to originate a loan based on a $103,000 purchase price.

 

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Everything You Need To Know About VA Loans

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What is a VA Loan?

VA loans are the most powerful lending program on the market, and are a lifesaver for the majority of military borrowers. This flexible, $0 down payment mortgage option are available to Veterans, Service Members, select military spouses, and have helped more than 22 million service members become homeowners since 1944. The loans are issued by private lenders and are popular as they are guaranteed by the U.S department of Veterans affairs (VA).

Why Get a VA Loan?

The VA home loan was created by the US government to help returning service members purchase homes without needing a down payment or excellent credit. Today, this program has guaranteed more than 22 million Service Members and their families purchase homes or refinance their mortgages.

In recent years, it has become even more important. Lenders have tightened their requirements in the wake of the housing market collapse, making the VA loan a lifeline Military homebuyers, many of whom find difficulty when faced with tough credit standards and down payment requirements.

VA LOANS TRADITIONAL MORTGAGES
0% Down

VA Loans are among the last 0% down home loans available on the market today.

 Up to 20% Down

Conventional loans generally require down payments that can reach up to 20% to secure a home loan.
No PMI

Since VA Loans are government backed, banks do not require you to buy Private Mortgage Insurance.

 PMI Required

Private Mortgage Insurance is a requirement for borrowers who finance more than 80% of their home’s value.
Competitive Interest Rates

The VA guaranty gives lenders a greater degree of safety and flexibility, which typically means a more competitive rate than non-VA loans.

 Increased Risk for Lenders

Without government backing, banks are taking on more risk which, in turn, can result in a less-competitive interest rate on your home loan.
Easier to Qualify

Because the loan is backed by the government, banks assume less risk and have less stringent qualification standards for VA Loans, making them easier to obtain.

 Standard Qualification Procedures

Conventional options hold stricter qualification procedures that can put homeownership out of reach for some homebuyers.

 

How do VA Loans Work (What Steps Are Needed)?

Get prequalified with a VA lender to get an estimate of how much house you can afford based on your income, credit, entitlement and other financial factors. You can get a quote with Veterans United Home Loans online at any time.

Get pre-approved. It puts you in the driver’s seat to take action when you find a home you love. Lenders will verify income and financial information (to get a clear sense of your purchasing power) and send you a preapproval letter. The letter shows real estate agents and home sellers you’re a strong and serious buyer.

Put in an offer when you and your agent find the perfect VA loan approved home. It’s important to find a VA loan savvy agent you trust that also knows the ins and outs of VA loans.

Get an Appraisal (and Underwriting): Once you’re under contract, your lender will order a VA appraisal of the property. Underwriters will evaluate your income, financial and related documents along with the appraisal once it’s finalized. If everything checks out, you’ll be issued a clear to close.

Close: You’ll sign all kinds of legal documents and paperwork at your loan closing and get the keys to your new home.

 

What Are Some Other Important Things to Know About VA Loans?

  1. They’re reusable. Your full VA entitlement can be used over and over again as long as you pay off the loan each time.

 

  1. They’re only for certain types of homes. They are mainly designed for properties in “move-in ready” condition, including single-family homes, condos, modular housing, some multi-unit properties and more.

 

  1. They’re for primary residences only. VA loans are for primary residences, not for investment property or a vacation home in Mexico, although you can use this benefit to buy a duplex or another multiunit property, provided you live in one of the units. The VA does offer exceptions to this rule.

 

  1. They’re not issued by the VA. Instead, the agency provides a guaranty on each qualified mortgage loan.

 

  1. They’re guaranteed by the government. The agency typically guarantees up to a quarter of the loan amount. The guaranty gives lenders confidence and helps service members secure great terms and rates.

 

  1. They’re available despite foreclosure or bankruptcy. Service members with a history of bankruptcy or foreclosure can secure a VA loan. Even borrowers who have had a VA loan foreclosed on can still utilize their VA loan benefit.

 

  1. They don’t have mortgage insurance. The VA’s guaranty eliminates the need for any mortgage insurance or mortgage insurance premium, helping borrowers save even more money each month.

 

  1. They come with a mandatory fee. There’s no mortgage insurance with VA loans, but there is the VA Funding Fee. This fee helps the VA keep the program going and is required on both purchase and refinance loans. It can be rolled into the loan amount and waived entirely for those with service-connected disabilities.

 

  1. They have limits on co-borrowers. Ulike other loan programs, the VA loan program does not let you get a loan with just about anybody. Having a co-borrower who isn’t your spouse or another veteran with VA loan entitlement will require a down payment, and not every VA lender offers these.

10. They don’t have a prepayment penalty. You can make extra payments any time you want, saving you a ton of interest. You can even structure your payments to automatically deduct a little extra every month.