VA Lending Basic Training

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VA Lending – Basic Training

Brought to you by: Quicken Loans Mortgage Services – Q-University

October 19, 2011

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What You will learn Today

The Facts and Benefits Of VA

Who is Eligible for VA Loans

How to Structure VA Loans

Qualification Parameters

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Top 10 VA MyThs…DebunkeD

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The Benefits of VA Loans

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What is a VA Guaranteed Loan?

 “Guarantee” means the lender is protected against loss in

the event of a foreclosure, and replaces the protection the lender normally receives by requiring a down

payment and/or PMI allowing the veteran to obtain favorable financing terms.

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What are the Benefits of VA?

 Zero Down Purchases

 No Monthly Mortgage Insurance  Lowest Monthly Payment

 No Prepayment Penalties  The Mortgage is Assumable

 Competitive Interest Rates & Closing Fees  100% LTV on Rate and Term Refinances  90% Cash out Refinances

 Credit Scores as low as 620

 DTI up to 60% with Approve Eligible Findings

 Fixed rate only

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Product Comparison

VA FHA Agency

Max LTV 100% 96.5% (min 680 FICO score) 95%

Max Base Loan

Amount $200,000 $193,000 $190,000 Upfront Mortgage

Insurance (3.3% funding fee*) $6,600 (1.75% UFMIP) $3377.00 $0 Max Total Loan

Amount $206,600 $196,377 $190,000 Monthly MI $0 $217.13 $207.42 Total Payment $986.34 $1,154.66 $1,114.51

Sir, Yes, sir! VA has the Lowest Monthly Payment!

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VA Loan Programs

Terms available: Fixed: 15, 20, 25 and 30 year

ARM: 5/1 ARM

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Who Is Eligible for VA Loans?

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Who is eligible For VA?

An eligible veteran is a person who:

 Served in the military (Active Duty, Reserves, or National

Guard)

Served with acceptable character of service, or

 Is the unmarried spouse of a deceased veteran who died while

in service or of service connected issues.

Active Duty

Reserves/National Guard

Wartime Service

90 Days 6 Years 90 days

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Who is eligible for VA IRRRL?

 IRRRL – Interest Rate Reduction Refinance Loan  What Is it? A VA loan program where a veteran

refinances an existing VA loan.

 What are the Benefits of an IRRRL?

 Requires less documentation

 Lower VA Funding Fee (only .5%)

 Quicker Turn Times

 Conventional appraisal required except for Quicken to

Quicken refinances (loan must be currently serviced by Quicken)

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VA Loan Specific Requirements

 Only Veteran and Spouse may be on loan and title

 No non-owner occupied borrowers allowed  Co-borrower must be married to Veteran

 Same Sex marriages are now allowed in certain states. VA must approve prior to

submission to underwriting.

 Must count child care for children < 12 years old in debt ratio

 Residual Income calculations used in qualification, along with debt ratio

calculations

 Condos and Builders must be on VA approved list

 https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch  OR

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Qualification Details

 No Housing Ratio Calculation  Max Debt Ratio

 Up to 60% with Approve/Eligible Findings

 45% on ARMS

 620 Minimum Credit Score

 Max 1x30 mortgage/rent history in past 12 months

 Max 45% Refer/Manual

 640 Minimum Credit Score

 0x30 mortgage/rent history in last 12 months

 Max 2x30 in last 12 months on revolving/installment debt

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How to Structure a VA Loan

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Other Key Questions VA qualification

 Who will be occupying the property at close?

 If active duty, spouse can satisfy occupancy requirements

 Who will be on title?

 Only spouse can be co-client or added to title

 What’s the name, address, telephone # of the nearest

living relative outside of the home?

 If condo, what is the condo project name? (Must be on

approved VA list)

 If new construction, builder must be on the VA approved

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How do you calculate the VA Funding

Fee?

 To determine Funding Fee, the following factors will

apply:

 Type of Service (Regular duty or Reserves/National Guard)  Down Payment amount

 First time or Subsequent Use

 Veteran receiving VA Related Disability and Surviving Spouses

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Key Questions for funding fee

 What is your military branch of service?  What is your service type?

 Are you currently receiving, eligible to receive or have

previously received VA disability?

 Yes/ No (If yes, then exempt from Funding Fee.)

 Have you ever had a VA loan?  What is your military status?  Is your current loan a VA loan?

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Veterans Can Use the VA Home Loan

Benefit Multiple Times!

Here’s how it works:

 VA provides each qualified Veteran with at least

$104,250 in “entitlement” and extra entitlement in select high cost counties.

 Entitlement has a 25% rule – you have to have 25% of the

loan amount in entitlement to guarantee the loan.

 When a Veteran obtains a VA loan, a portion of the

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How to calculate entitlement

Entitlement Examples

Full Entitlement Reduced Entitlement High Cost County (Camden, NJ) Non-High cost County

Loan Amount $200,000 $200,000 $940,000 $940,000 Value $200,000 $200,000 $940,000 $940,000 Entitlement Available $104,250 $25,000 $235,000 $104,250 Entitlement Required $50,000 $50,000 $235,000 $235,000 Equity or Down payment needed $0 $25,000 $0 $130,750 Max Loan Amount $200,000 $175,000 $940,000 $809,250

All qualified Veterans start out with:

 $36,000 in basic entitlement; and

 $68,250 in bonus entitlement or $120,375 bonus in AK and HI

 Extra entitlement for high cost counties available to county limit (see chart in GURU)  Note: Bonus entitlement can only be applied

to loan amounts > $144,000

The math:

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How You Earn Your compensation

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 Client Paid Compensation (Direct)

 VA mandates that total origination charges not exceed 1%.  This includes percentage based and flat fees (i.e. loan

application or processing fees)

 Lender Paid Compensation

 Must choose a rate that produces a rate premium that is AT

OR ABOVE your pre-determined compensation plan with QLMS.

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*Non-allowable Costs:

 Administration  Underwriting  Processing  Tax service

 Courier/mail fees, etc.  Attorney services that are

other than for title work

 Must be on title exam line on

HUD-1

 Origination (1% max)  Discount

 Appraisal

 Credit report

 Title search (Title Exam)  Title insurance

 Recording fees  Survey

Closing Costs

**Allowable Costs:

** Allowable Costs may be paid by veteran/borrower.

*Non-allowable costs may be paid by Lender or Seller.

Lender Paid Compensation = You can make your Broker

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The Process Of a VA Loan at QLMS

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What we Do for your client

 QLMS will issue the Things We Need From You and Post Required

Disclosures

 QLMS will access from the Automated Certificate of Eligibility (ACE) System

 If unable to obtain, your CCS will reach out for assistance

 QLMS will ensure VA Appraisal is Ordered

 Do not order an appraisal through the VA site! This will be considered an appraisal

transfer with additional documentation required

 We will perform all the Vendor Management Services (HOI, VOE’s, Payoffs,

etc.)

 QLMS will Underwrite and Condition the File

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Your part - What You do

 Complete the 1003 and Register

 Gather The Things We Need from You

 HUD – VA Addendum to URLA

 QLMS Mortgage Broker Fee Agreement

 VA Child Care Expense Statement (If Applicable)  VA Loan Disclosures and Certifications

 VA Amendment to Purchase Contract (If Applicable)

 Help with COE if needed (obtain

DD214 or other documentation from client)

 Manage the lock process

 Initiate Appraisal Order on Lender

Portal

 Send Conditions

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What evidence is needed to get the COE?

Veteran

• DD Form 214;

Active Duty

• A current statement of service signed by (or by the

direction of):

the adjutant, personnel office, or commander of the unit or higher headquarters showing: • Your full name

Social Security Number • Date of birth

• Entry date on active • duty

• The duration of any • lost time

• The name of the command providing the information

Currently Serving in Reserves/National Guard

• Statement of service signed

by (or by the direction of):

the adjutant, personnel officer or commander of your unit or higher headquarters showing: • Your full name

Social Security Number • Date of birth

Entry date on duty • The total number of

creditable years of service • The duration of any lost

time

• The name of the command providing the information

Discharged Member of National Guard

• Either:

NGB Form 22, Report of Separation and Record of Service, for each period of National Guard service • OR

• NGB Form 23, Retirement Points Accounting, and proof of the character of service

Discharged Member of Selected Reserve

• Copy of your latest annual retirement points statement and evidence of honorable service

If Quicken is unable to obtain the client’s Certificate of Eligibility (COE) from VA’s automated site, we will require one of the following:

In GURU under VA Client Eligibility > VA Documentation

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COE

For COEs with exempt status the following conditions may appear:

 Funding fee – Veteran is exempt from the funding fee due to receipt of service connected disability compensation of $____monthly

 Funding fee – Veteran is exempt from the funding fee due to receipt of service connected disability compensation. Monthly compensation rate has not been determined to date  Funding fee – Please fax a copy of VA form 26-8937(VOB) to the VA regional loan center of

jurisdiction

 Funding fee – Please have the lender VA regional loan center for loan processing. Please fax a copy of VA form 26-8937 to the RLC of jurisdiction

For COEs with a non-exempt status the following condition may appear:

 Funding fee – Veteran is not exempt from the funding fee

 Funding fee – Veteran is not exempt from the funding due to receipt of non-serviced connected pension. Loan application will require prior approval processing by VA.

For COEs with “contact RLC” status the following condition will appear

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VA Survival Guide

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bAsic unDerwriTing: The “Diff”

Military Income – Active Duty

 Additional income may be used for qualification

 BAS, BAH, OHA, Combat Pay, etc.

 Cannot be grossed up

 Look for allotments on LES

 If ETS is < 12 months from closing date

 Client must prove re-enlisted, or  Civilian offer letter

Assets

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bAsic unDerwriTing: The “Diff”

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Only one Qualifying Ratio = 41%

 To exceed 41% ratio, the veteran must have 20% additional

residual income above the required amount and obtain Approve/Eligible Findings

Residual Income requirements must be satisfied

Residual income must be greater or equal to amount

established for applicable region, income level, and family size

 Residual is calculated by number in family, geographic location

and square footage of subject property

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Key Questions for residual income

calculation

 Are you located within 30 miles of a military base?

 Reduction in Residual Income calculation

 How much are your monthly tax withholdings?

(Federal/State/SSI/FICA)

 How many dependents do you have? What are their

ages?

 Residual calculation is dependent on number in household

 How much are your monthly child care expenses?

 Required for children ages 12 and younger

 What’s the square footage (gross living area) of your

home?

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5 instances allow a veteran to get more

than one VA loan:

1. They can use left-over entitlement that was not charged to a prior

loan.

2. They can sell the property to pay off the previous VA loan and restore

the entitlement.

3. They can pay off a VA loan (by paying it down or refinancing), and

restore the entitlement.

VA allows entitlement to be restored using this method only once.

4. They can refinance the old VA loan into a new VA loan to reduce the

rate and payment or convert your ARM into a Fixed.

In this case, the entitlement from the prior loan transfers to the new loan.

5. Another qualified Veteran can assume the prior VA loan (subject to

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PURCHASE MONEY:

Seller Concessions

 4% Max Seller Concessions

 Does not include normal and customary closing costs or

discount points of up to 2%

 4% includes:

 Paying over 2% in discount points

 Paying veterans debt to qualify for the loan

 Payment of veterans judgments

 Funding Fee

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