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and closed locally, rather than having to be sent away to a
VA office. This speeds up the amount of time it takes for your
loan to close!
Advantages
of VA Financing
A.
No Down Payment, in most cases
B. More Favorable Credit and Income Standards
C. No prepayment penalty
D. Fully Assumable
Maximum
Loan Amount
$203,000-With Full Eligibility and No Down Payment
Occupancy
VA requires owner occupancy. A veteran may purchase a two-
to four-family property, provided he/she occupies one unit.
Interest
Rate and Discount Points
Effective October 28, 1992, VA rates are freely negotiable
between the borrower, lender, and seller. Prior to this time,
the maximum rate which could be charged to a veteran was set
by the Federal Government, and the veteran was not allowed
to pay discount points.
Discount
points may now be paid by the veteran, although they may not
be financed on a purchase transaction. VA continues to have
the authority to return to an administered rate if data indicates
that the negotiated rate is not beneficial to veteran home
buyers. At this time, the program will be reviewed to determine
if it is tin the best interest of the veterans, and therefore
may be subject to change at that time.
Funding
Fee-Active Duty or Veterans
For borrowers using their VA entitlement for the first time,
the VA charges a 2.00% funding fee on most zero down payment
loans. It may be financed in the loan amount or paid in cash
at closing by the veteran. Total loan amount including the
funding fee cannot exceed $207,000. With a down payment of
at least 5% but less than 10%, the funding fee is 1.5%. A
loan with a down payment of 10% or more will carry only a
1.25% funding fee.
Any veteran
who is obtaining a VA loan and has already had a prior VA
loan will pay a higher funding fee. The fee for a zero down
payment loan in this case is 3%, 1.5% for a down payment of
at least 5%, but not more than 10%, and 1.25% for a loan with
a down payment of 10% or more.
Funding
Fee-Reservists
The funding fee for reservists is .75% higher than the above
quoted funding fees for active duty military and veterans.
Seller
Contribution
The VA imposes a limit of 4% of the appraised value of the
property on seller concessions in a transaction. These concessions
include anything of value added to the transaction by the
seller, for which the buyer pays no additional amount, and
which the seller is not customarily expected to pay. For the
Tidewater Area, these concessions do not include seller payment
of usual discount points, closing costs and pre-paids, but
do include escrow funds for temporary buydowns, additional
discount points for permanent buydowns, and seller payment
of items such as prepaid expenses, condo fees, etc.
Eligibility
for VA Financing
Who
is eligible?
1. Wartime Service 90 days continuous active duty, no dishonorable
discharge.
a. World War II 9/16/40-7/25/47
b. Korean War 6/27/50-1/31/55
c. Vietnam War 8/05/64-5/07/75
d. Persian gulf War 8/02/90-TBD
2. Peacetime
Service 181 days continuous active duty, no dishonorable discharge
a. 7/26/47-6/26/50
b. 2/02/55-8/04/64
c. 5/08/75-9/07/80
d. 9/08/80-8/02/90
e. TBD-Present
Currently
Active-181 continuous active duty
Seperated From Service-2 years required unless member released
from active duty due to a reduction-in-force, for the convenience
of the government, or certain medical conditions.
3. Selected
Reservists
a. Must have completed a total of 6 years in the Selected
Reserve AND
b. Either:
1. Were discharged from the service with an honorable discharge,
or
2. Were placed on the retired list, or
3. Were transferred to the Standby Reserve or an element of
the Ready Reserve other than the Selected Reserve after service
in the Selected Reserve characterized as honorable service,
or
4. Continue to serve in the Selected Reserve
5. Were discharged because of a service-connected disability
before completed 6 years of service
Selected
Reserve means the Selected Reserve of the Ready Reserve of
any of the reserve components which consists of units and
individuals who participate actively in paid training periods
and serve on paid active duty for training each year. This
includes Army, Navy, Air Force, Marine Corps, and Coast Guard
Reserves as well as Army National Guard and Air National Guard.
4. Unmarried
Surviving Spouses of Eligible Veterans and Selected Reservists.
Veteran or Selected Reservists must have died as a result
of service.
5. Wife
of a Member for 90 Days Who Is:
a. Missing in Action
b. Captured in the Line of Duty
c. Forcibly Detained or Interned by a Foreign Government in
the Line of Duty
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Reserving
VHDA Funds
At time of application, the mortage company reserves funds.
Funds are reserved on a first-come, first served basis. A
$120 non-refundable reservation fee is collected at application,
of which $100 is credite toward the 1% origination fee. The
remainder of the origination fee is collected from borrower
when they sign VHDA's Mortgage Loan Commitment. In instances
when seller responsible for closing costs, the entire 1% origination
fee will be refunded to borrower at closing.
Closing
Fees
A total of 2% of the loan amount is collected (1% origination
and 1% discount which includes the seller paying 1%).
Commitment
Virginia Housing will issue mortgage loan commitments for
a period of 120 days for new construction and 90 days for
existing properties. Commitment extensions are considered
on a case-by-case basis for an additional 60 days.
Loan
Term
Virginia Housing loans are typically for a 30-year term. On
occasion, loans for lesser terms (e.g. 15 years) may be available.
Virginia
Housing Basic Eligiblity Requirements
Must be a US citizen or in possession of an Alien Registration
Receipt Card. (Form I-551 or Form I-151)
Joint applicants must be married, related by blood, adoption
or by legal custodial relationship and are to live together
in the residence as a single non-profit housekeeping unit.
Applicant has not had an ownership interest in his/her principal
residence within the three years preceding the date of execution
of the mortgage loan. This requirement does not apply to residences
located in "Targeted Areas."
Agrees to occupy and use the residential property to be purchased
as his/her permanent, principal residence within 60 days after
the date of the closing of the mortgage loan.
Applicants will not use the proceeds of the mortgage loan
to acquire or replace an existing mortgage or debt, except
in the case of certain types of temporary financing.
Applicants agree not to use property (a) in a trade or business
(except as stated below), (b) as an investment property, or
(c) as a recreational or second home. A reswidence may not
be used in a manner which would permit a portion of the costs
to be deducted as a trade or business expense for dederal
income tax purposes or under circumstances where any portion
of the total living area used primarily in a trade or business
exceeds 15% of the square footage of the home.
*Required
in accordance with the Internal Revenue Code of 1986
Prior
Tax Returns
To verify that the applicant meets the three-year requirement,
copies of signed federal income tax returns filed by the applicant(s)
for the three years preceding execution of the mortgage or
certified copis of the returns. If the eligible borrower was
not required by law to file a federal income tax return for
any of these three years and did not so file, and so states
on the Borrower Affidavit, the requirement to obtain a copy
of the federal income tax return for such year is waived.
Lot
Size
Generally, land will not be permitted to exceed two acres
even in rural areas. However, several exceptions exist: (1)
If the land is owned free and clear and not being included
in the loan, the lot may not exceed 5 acres. (2) If difficulty
is enountered locating a well and/or a septic field, the lot
may exceed 2 acres to include the additional acreage required
(3) Local city and county zoning ordinances which require
more than 2 acres will be taken into consideration.
Net
Worth
To be eligible for VHAD financing, an applicant cannot have
a net worth exceeding 50% of the sales price. (Do not include
the value of furniture and household goods in determining
net worth.)
In addition,
the portion of the borrower's liquid assets which are used
as down payment and clsoing costs, up to a maximum of 25%
of the sales price, will not be included in the net worth
calculation. O meet the minimum income requirements for an
Authority loan will not be included in the applicant's net
worth for the purpose of determining whether this net worth
limitation has been violated.
Personal
Property
Virginia Housing is prohibited from financing personal property
items. If personal property items are involved, a reasonable
value will be established by the appraiswer and the loan amount
reduced.*
The following
is a list of items that can be construed as personal property:
Refrigerators
Ranges and stoves (free-standing)
Washers and Dryers
Rugs and carpets other than as described as fixtures
Furniture and curtains
Fireplace inserts.
Any appliances not includable as fixtures.
Income
Qualifications
"Gross Family Income" means the annualized gross
income of a person or all members of a family residing or
intending to reside in a dwelling unit from whatever source
derived and before taxes or withholdings. For the purpose
of this definition, annualized gross income means gross monthly
income multiplied by 12. Gross monthly income is the sum of
monthly gross pay plus any additional income from overtime,
parttiime employment, bonuses, dividends, interest, royalties,
pensions, Veterans Administration compensation, net rental
income plus other income (such as alimony, child support,
public assistance, sick pay, social security benefits, unemployment
compensation, income received from trusts and income received
from business activities or investments.
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