Manual Underwriting on a VA Loan

Minneapolis, MN: I LOVE VA LOANS! But a common misunderstanding is that a VA loan is automatic for Veterans. I wish that were true, but the reality is VA Loans, just like any other mortgage loan has qualifying guidelines. Just like other loans, some people easily qualify, and some are rough around the edges in need of an expert to massage the file to loan approval.

Here I will explain how computerized underwriting approval versus manual underwriting works on VA loans.

VA LOAN INITIAL APPROVAL PROCESS

After taking your application, we pull credit, and run your application though the appropriate computer system for initial loan approval. Lenders essentially get two answers back for the AUS (Automated Underwriting System), either Approved, or Refer. These are known as “findings.”

VA Loans MN, WI, SD

APPROVED

An “Approved/Eligible” finding means the computer accepts the data, and as long as things match, the loan should be fine. For example we told the computer you make $50,000 a year. As long as pay stubs and W2’s match up and say the same thing, you should be fine.

REFER

A ‘REFER’ finding response is not an automatic no, or that your application is dead. It means the computer doesn’t like something within your application profile, and we should REFER it to an underwriter for old school manual underwriting approval.

DIFFERENCES BETWEEN APPROVE AND REFER

Another way to look at the two is that Approved is easier, more forgiving (especially in debt-to-income ratio’s), and needs less documentation. Refer on the other hand is more stringent, has tighter debt-to-income ratio’s, and requires a lot more documentation.

Getting A REFER Approved

When looking to approve a Refer, underwriters have to make sense of the over file. Questions generally revolve around the reason for the Refer, and do you have compensating factors that help strengthen your file to offset the Refer.

A Refer is very common when you have low credit scores (under 620), or a lot of negative credit information, including collections, judgments, and major negative items like a foreclosure or bankruptcy. Underwriting is look with a microscope over your credit report. Why do you have a low score, how recent and severe are the negative events, and is there a logical reason outside of your control for the events.

They are also looking for current compensating factors that improve your loan. For example:

  • A lot of money still in the bank after closing. At least 3 months of payments
  • Longevity at the job. A stable job history versus multiple short term jobs
  • Little or no payment shock – Is the new house payment less than you’ve been paying in rent, or no more than 5% higher than you are paying in rent.

VA LOAN DEBT TO INCOME RATIOS

When getting any home loan, lenders look at two debt-to-income ratio numbers, commonly referred to as front and back ratio’s. You will usually see them express as something like 29/43.

Your front ration is a percentage of your income used solely for the new house payment, and nothing more.

Your back ratio, and the one more common to home buyers takes the new house payment, plus things like car loans, student loans, and minimum payments on credit cards. It does not usually include things not on a credit report, like cell phone bills, car insurance, or utilities (gas and electric).

As an example, lets us assume your pre-tax income is $5,000 a month. Your new home payment, including taxes and insurance is $1,500 a month. That is just about a 20% housing ratio (front end).

Let us assume your card payments, student loans, boat payment, and minimum credit card payments equal $1,000 a month. That would mean your back ratio (house plus debt) is 39%.

The two combined would be represented as 20/39.

As mentioned earlier, Refer files come with stricter debt-to-income ratio’s. VA, like all other programs have generalized guidelines. If you fall below the debt ratio guidelines, approvals are likely.

As you creep outside those guidelines, approvals become harder. It is very difficult to say a specific ratio is approved, and a specific ratio is denied.

But as a rule, the higher your front ratio goes about 30%, and the higher your back ratio goes above 41%, the more difficult approvals get.

I have seen many computer ACCEPT loans get approved with a 55% back ratio, but rare do you see a REFER back ratio above 45% get approved.

The bottom line

A Refer from the underwriting computer is not an automatic kiss of death.

Not all lenders approve REFER loans. Some automatically reject them, many do not. If your VA loan got a Refer, but the lender doesn’t offer Refer options, by all means, try again with another VA lender who does (like me!).

On the other hand, if your REFER file was underwriter reviewed, and still got denied, I do NOT suggest you keep trying. Rather, fix whatever this issue was, and try again in the future.

Ask the VA Mortgage Expert

If you are buying a home in MN, WI, or SD, reach out to me for your VA at (651) 552-3681. Better yes, just get started by completing our VA Application at VAMortgageMN.com.

After a brief conversation we will discuss your qualifications and send you an application link. We are experts in VA loans, including manually underwriting VA loans with higher debt to income ratios.

Equal housing lender. Not everyone will qualify. NMLS 274132. Not an offer to enter into an interest rate loack agreement.


VA Loans

Approved VA loan lender in MN, WI, SD

A VA loan is perhaps the most amazing loan in the housing market today!

Minneapolis, MN: Rather than issue loans, the VA instead pledges to repay about a quarter of every loan it guarantees in the unlikely event the borrower defaults. That guarantee gives VA-approved lenders greater protection when lending to military borrowers and often leads to highly competitive rates and terms for qualified active duty personal and veterans.

VA Loan Solutions Right For You!

Whether you’re buying your first home with a VA loan, or you’re an experienced buyer using your VA benefits again, we have the right VA loan for you!a home lending solution just for you.
Get a No-Obligation Rate and Closing Cost Analysis!
VA Loans MN, WI, SD

Benefits of VA Loan

Far and away, the most significant benefit of a VA loan is the borrower’s ability to purchase with no money down. Apart from the USDA Rural Development loan, there are essential no other nationwide mortgage loan programs that offer 100 percent financing. 

VA loans are also a bit more liberal in the underwriting standards and requirements than many other loans. For example, allowing for lower credit scores than conventional loans. These loans also come with no monthly mortgage insurance (PMI), a added expense that other loans require borrowers to pay unless they put down at least 20 percent of the loan amount. 

VA loans offer a few other bells and whistles:

  • Down payment as low as 0% up to $484,350 in MN, WI, SD (where we lend).
  • Interest rates that are routinely lower than conventional rates
  • No prepayment penalties
  • Higher allowable debt-to-income ratios than for many other loans
  • Streamlined refinancing loans (called an Earl) – IRRRL loan with no appraisal needed
  • Cash out refinance – Get up to 100% of the homes appraised value. Use the money for anything you wish!

Realtor’s are wrong about VA Loans

Unfortunately, many Real Estate Agents have a unrealistic negative understanding of VA home loans. If you are making an offer on a home with a VA, many agents will improperly advise the sellers to select other offers over a VA loan offer.

Not only is discriminatory, it is flat out wrong, and usually based on old wives tales past around the real estate agent world, versus actual experience from the agent.

If your Real Estate Agent talks negatively about a VA loan – FIRE THEM – IMMEDIATELY!

I ALWAYS contact the listing agent personally when you submit your offer to see if they have any illogical feelings towards VA loans, and if they do, I set them straight!

Second VA Loan (or 3rd, 4th 5th…)

After getting one VA loan, often veterans think they can’t get a second VA loan. That’s not true. Your VA home loan benefits can be used over and over again. In fact, you can actually have two or more VA loans at the same time. If a VA lender has turned you down for a second VA loan you shouldn’t give up. A second VA loan is allowed by the Veterans Administration!

VA Loan Application

Click to start your VA loan application for homes in MN WI SD
Click to start your VA loan application for homes in MN WI SD

Ready to get started with your VA Loan? We make it easy. Most people start by completing the online application. It only takes about 15 minutes, and all the information you need to complete the application is in your head, No need to go find documents, or look up anything at this stage.

You can always call our local VA loan Experts at (651) 552-3681.

Finally, you can schedule an office appointment at our St Paul location, or schedule a telephone application. Just click the scheduling link, along with a day and time that works best for you.

The Department of Veteran Affairs requires mortgage companies who offer VA Loans go through a stringent approval process. We are a VA approved mortgage lender and are proud to help military families use their VA Loan Benefits for home located in Minnesota, Wisconsin, and South Dakota. We are not acting on behalf of, or under the direction of the VA or the Federal Government. The Veterans Administration does not lend directly to the public, only through approved lending institutions like Mortgages Unlimited. NMLS 274132. Equal Housing Lender.


Dispelling VA loan myths

Minneapolis, MN: VA home loans are one of the greatest benefit to our U.S. Military personal that most vets will ever use. Dispelling VA loan myths that prevent them from using their benefits is therefore very important.

VA mortgage loans in Minnesota, Wisconsin, South Dakota. VAMortgageMN.com

VA loan Myth 1):  All veterans are guaranteed a VA loan.

Reality: Veterans are NOT guaranteed a VA loan.   All loans, even VA loans have fairly standard underwriting guidelines that all applicants must meet, including debt-to-income ratios, credit scores, The confusion generally starts with that the Veterans Administration does NOT actually do loans. Instead, the VA guaranty is to the lender that actually makes the loan. If the veteran defaults, the VA guaranty will pay the lender some or all of their a small percentage of the loan that lenders do if the veterans defaults.

Veterans need to provide a VA Certificate of Eligibility to the lender, which tells us how much VA Guaranty you have available, and if your service in the military allows you to be eligible. If you work with us for your VA loan, we are usually able to obtain your certificate for you.

VA loan Myth 2): VA loans do not have a down payment.

Reality: Almost all VA loans have no down payment requirement, but if you are buying a very expensive home that is over the local area conforming loan limit, you may have a down payment requirement. For almost everywhere in the country, the current no down payment limit is $453,100 (as of this article date).  Click here to see how to calculate your minimum VA loan down payment for expensive homes.

VA loan Myth 3): VA loans have no closing costs.

Reality: ALL mortgage loans have closing costs. Appraisal, credit report, state deed taxes, title insurance, first years home owners insurance, and lender related costs. But with a VA loan, just like many loans, you can cover closing costs four ways:

  1. Pay yourself out of pocket
  2. Seller paid closing costs
  3. Increase the interest rate to offset costs
  4. Any combination of the above.

The combination of all the options is generally what happens. So with most of the VA loans I personally do, you are able to buy with very little out-of-pocket. Under $1,000 is extremely common.

VA loan Myth 4): VA loans require excellent credit

Reality: You don’t have to have perfect credit scores for VA loans, but just like all other loans, as your credit scores go down, your odd’s of loan approval go down too.

As I previously mentioned, the Veterans Administration does not actually give you a loan, only authorized VA lenders like Mortgages Unlimited do. The VA actually just insures the loan for the lender. So while the VA guidelines to lenders says you can potentially get a VA loan with no credit scores, or even super low score, virtually few, if any VA lenders actually offer that option.

If your middle credit score is over 640, you are probably OK. Once you drop below 620, expect a lot of no answers UNLESS your overall situation is actually pretty good, but there is some sort of minor fluke item on credit giving you that low score.

Ready to buy a home with the awesome VA Home loans?

Simply contact your local VA loan expect for the best experience, and avoid the large national online VA lenders.

VA lender MN, WI, and SD

For VA loans in MN, WI, and SD – Simply click here to complete the online VA loan application at www.VAMortgageMN.com or call our local Minnesota VA Loan Experts at (651) 552-3681.

Thank you for your service!

 







VA Home Loans and Loan Limits

VA Home Loans

VA Loans in MN and WI
The VA Home Loan is a big thank you for your service

Minneapolis, MN: VA Loans are some of the most amazing home loans in the market. It really is a true benefit for the service you’ve provided to this country.  The major benefits of a VA loan come in two forms:

  • Zero down payment
  • No Mortgage Insurance

Zero down payment is pretty easy to understand.  Saving for a down payment is one of the biggest hurdles stopping many from buying a home.  No mortgage insurance is also huge.  Generally speaking,  mortgage loans where you do not put at least 20% down payment will need mortgage insurance to offset the lenders risk.  It can be expensive.

Take for example a $200,000 home.  On an FHA loan, you would need a minimum down payment of $7,000 (3.5%), and along with paying back the actual loan, property taxes, and home owners insurance, you would also have $213.81 in monthly mortgage insurance.  With VA home loans, that would be zero and zero! How cool is that?

VA Loan Limits

VA does not set a cap on how much you can borrow to finance your home. However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified Veteran with full entitlement may be able to borrow without making a down payment. These loan limits vary by county, since the value of a house depends in part on its location.

MN WI VA LenderThe basic entitlement available to each eligible Veteran is $36,000. Lenders will generally loan up to 4 times a Veteran’s available entitlement without a down payment, provided the Veteran is income and credit qualified and the property appraises for the asking price.

Lenders need a copy of your VA Certificate of Eligibility (COE) to verify your entitlement. Most experienced VA Loan Officers can obtain that for you.

Here in Minnesota, Wisconsin, and South Dakota, you can get zero down payment on loans up to $453,100.  You can get bigger VA loans too, known as a VA Jumbo Loan. This is any VA loan OVER $453,100, but you’ll need a down payment.  Contact one of our VA Loan Expert Loan Officers to determine the exact amount of down payment required for a VA Jumbo Loan.

 

 







No down payment VA home loans

Take Advantage of your VA Benefits! VA Home Loans for Minnesota and Wisconsin military veterans

VA loans MNWhy get a VA Loan?    

It’s simple … Lower Rates. Lower Payments. $0 Down Payment.

Thousands of people are using their VA Loan benefit every single month. Let us help you purchase a MN or WI home with ZERO DOWN, or lower your existing VA home loan with a refinance to today’s low interest rates.

BUYING A HOME WITH A VA HOME LOANS

Purchase with Zero Down

A VA Loan allows a Vet buy a home with Zero DOWN and finance 100% of the home’s purchase priceup to $453,100 in MN, WI, and SD (as of 2018). Now more than ever, banks are requiring larger down payments for conventional loans with more expensive mortgage insurance. In many cases they require 10-20% down, putting home ownership out of reach for many prospective buyers.

How much will $0 down save you? FHA loans require 3.5% down. Conventional loans will require a minimum of 5% down, and in many cases as much as 10% and 20%.VA Loans Minnesota

VA loans have NO PMI = Lower Monthly Payments

A VA Loan offers a HUGE savings benefit. They do NOT require monthly PMI, or private mortgage insurance. PMI is an added monthly expense required for conventional loans and FHA loans where the borrower finances more than 80% of the home’s value.

Interest rates are also typically lower with a VA Loan, than a conventional loan. A lower rate combined with monthly PMI savings can substantially lower your monthly payment.

Getting Qualified is Easier

The qualification guidelines are less stringent for VA Loans. Because the loan is backed by the government, lenders don’t need to meet strict lending rules.

VA Loan Application

VA Purchase loans for Veterans IN MN, WI, SD – APPLY

VA Loans require no down payment, and have no mortgage insurance, plus you can roll all your closing costs into the loan. This makes for one heck of a great first-time home buyer deal for military veterans wanting to buy a home! The country appreciates your service. This is one way we pay you back. Today mortgage rates on VA loans are very low, making homes even more affordable.

ZERO DOWN VA Home Loans

 

VA Home Mortgage Loan Advantages vs Other Mortgage Loan Options

  • VA home loans do not require a down payment, unless the purchase price is more than the appraised value or in excess of current loan limits.

  • VA home loans have limitations on which closing costs may be assessed to the veteran.

  • VA home loans have no prepaid without penalty.

  •  Maximum (zero down) VA loan has increased to match conforming loans!

  • VA home loans may have forbearance extended to worthy VA homeowners experiencing temporary financial difficulty

  • VA performs personal loan servicing and offers financial counseling to help veterans avoid losing their homes during temporary financial difficulties

  • VA interest rates are competitive with conventional loan interest rates.

  • VA home loans do not require mortgage insurance – this is a HUGE savings.

  • Although there is no down payment required – There are still closing costs, but the seller usually pays ALL of the veteran’s closing costs (and with a $0 down payment, the veteran can literally purchase a home for nothing).







VA Mortgage Loan Changes

VA Mortgage Loan Program Changes

Since World War II, The VA home loan program has helped over 18 million veterans receive government-backed mortgages.  Recently the President signed into law some modifications to the VA home loan program.  This new bill will benefit disabled service members, single-parent soldiers and military widows. The new changes include:

Surviving  spouses of Veterans

Before the change, the only way military widows could participate in the VA no-down-payment program is if their spouse had a service-related disability or died in the line of duty.  As a result of the change, a widow may get a VA loans  if the veteran had a service-related disability for at least ten years before their death.

Single parents and military couples

When applying for a VA home loan, you have to sign a piece of paper saying that the property will be your primary residence and you will be the primary occupant.  Military spouses can take the place of military members serving abroad when signing this paper, but this doesn’t necessarily help single-parent soldiers and married military couples.  As a result of this bill, dependent children will be able to meet the occupancy requirement.  Active service members who don’t have children, unfortunately, will still be unable to meet the occupancy requirements.

Disabled veterans

Every VA loans has a funding fee. This fee is added to the loan amount, and the proceeds to go making sure the program will be self-sufficient and not cost tax payers any money. The fee varies by service, first time or second time use of a VA loan, or a VA streamline refinance.

Borrowers with a VA service-related disabilities of at least 10% have always been exempt from this fee.

Many times, Veterans often have to wait months to get their official  VA disability rating.  Thus they potentially may have to pay the VA funding fee when they shouldn’t have to.  With this improvement to VA mortgage loan program, the VA will be required to waive the fee after the pre-disability exam indicates the individual is disabled, instead of waiting months for the official “disability rating.”

Adjustable Mortgages

While most VA loans are the standard 30-year fixed rate mortgage, adjustable mortagegs were an option. Those ARM loans were scheduled to be cut out of the VA loan program by the end of 2012, but adjustable VA mortgages  will now continue to be available.

Veterans living in high-cost area of the country

Veterans who live in the most expensive areas of the nation were hit hard last fall when loan limits for government-backed mortgages dropped to $625,000 from $729,000.  As a result of this bill, higher county loan limits will be reinstated sometime in 2014.