USDA Changes - October 1, 2011

Most every USDA lender will be temporarily halting USDA originations ahead of the pending fee changes that will become effective October 1st, 2011.

These changes include the following:

1. Up front funding fee will be reduced from 3.5% to 2% for purchases, and 1% for refinances.

2. The addition of a monthly loan fee of .30% will be added to the program.

USDA lenders will need time to set-up systems to handle the new fee structure and, from what we have been reading, this will take between 2 and 4 weeks to accomplish. For current files in process there will be no impact of the new fees. If you have additional questions please call or email us.

Demystify Selling A Home with VA Financing

  There was a time when selling a home with VA financing was a monumental task; taking several weeks longer due to appraisal issues and costing sellers more in closing costs. The net result was Sellers and Realtor's shying away from VA buyers. After many changes to this loan product, we are now able to complete transactions quickly and efficiently. To accomplish this, it is important to understand what needs to be done up front. We will discuss in this post the updates to the program and how to smoothly assist both buyers and seller through the process. At the end of this post are some facts that you may find helpful as well.

  As Real Estate Professionals become more comfortable and confident with this type of loan they will find them a great way to increase sales. Lets address some of the misconceptions:

MYTH 1

“VA LOANS TAKE 90 DAYS TO CLOSE BECAUSE THEY NEED TO BE UNDERWRITTEN BY THE VETERANS ADMINISTRATION.”

  This is false. An approved VA Lender is the one that performs the underwriting the same as FHA and any conventional loan. Of course, there are VA guidelines that must be adhered to. This process is not any longer than any traditional or government loan. Most VA lenders have teams of underwriters and processor that focus solely on VA loan files; making this process as fast as possible.

MYTH 2

“THE CLOSING COSTS FOR THE SELLER ARE MUCH HIGHER IF THE BUYER USES VA FOR FINANCING.”

  There was a time when the Seller was saddled with many of the non-traditional closing costs making a VA buyer unattractive to sellers and their Realtors. THAT HAS NOW CHANGED. The ONLY fees that the Veteran is NOT allowed to pay for are:

1. Pest/Termite Inspection

2. Septic Inspection – If Applicable

3. Well Inspection – If Applicable

  The seller has the right to select any reputable company that is licensed and/or authorized to perform and certify the inspections. VA requires the applicable National Pest Management Association form (NPMA-33, NPCA-99A, NPCA-99b) completed by the pest inspection company performing the inspection.

MYTH 3

“WRITING A PURCHASE AND SALES AGREEMENT THAT INCLUDES A VA LOAN IS A NIGHTMARE.”

  This is another big change from the past. There are THREE items that MUST be in every VA associated Purchase and Sales Agreement as follows:

1.      Must be contingent on Buyer obtaining VA Financing

2.      Escape Clause is Mandatory

3.      Seller must pay for PEST, SEPTIC (if needed) and WELL (if needed) inspections

 

MYTH 4

“SELLER MUST CONTRIBUTE TOWARDS SELLERS CLOSING COSTS.”

  While sellers are allowed to contribute up to 4% towards buyers closing costs, it is not mandatory. If seller concession are to be included as part of a contract, the wording should be as listed below:

“Seller to contribute up to __% towards Buyers pre-paids,
closing costs and non-allowables”

  It is important to point out that the inspections listed in the section above that CAN NOT be paid by the Veteran CAN NOT be included within the concession percentage.

INTERESTING FACTS ABOUT VA LOANS

There are over 24 Million Veterans living in the US today; only 10% have used VA to buy a home.

Of the remaining Veterans, 800,000 of them will not qualify for a traditional home loan.

The average VA loan is $209,395.

More than 350,000 VA transactions will close per year.

Every Veteran must obtain a DD-214. This can be done online or by downloading a form. Here are the links:

ONLINE DD-214 REQUEST

LINK TO DOWNLOAD FORM

  As always, if you ever have any questions or need assistance with a transaction please feel free to email or call us.