The document summarizes key aspects of VA loans, which guarantee loans made by private lenders to eligible veterans and service members. It outlines the eligibility requirements, benefits like no down payment or PMI, types of loans and properties covered, funding fees, closing costs, appraisal and processing procedures. VA loans help veterans achieve the goal of homeownership.

1. VETERANS ADMINISTRATION (VA)
LOANS
RE73R11
Jody OBrien ABR,CBR,GRI

2. CEU Outline

3. VA Loan is not a loan from the VA
VA Loan is a guarantee for a loan made by
a private lender
VA Loans

4. • Guarantee
▫ Protects the lender from loss
 Loss usually covered by down payment or
 PMI

5. • www.benefits.Va.gov/homeloans
• Regional Center
• Videos

6. Benefits of a VA Loan
• No down payment
• Buyer informed of reasonable value
• No PMI
• Assumable
• No prepayment penalty
• New construction warranty
• Assistance in financial crisis

7. Eligibility
• Active Duty – served longer than 181 days
• Honorably Discharged before 1981 – served 90
(wartime) 0r 181 days (peacetime)
• Honorably Discharged after 1981 – completed
24 months of service
• Gulf War on – served 90 days

8. Eligibility
• Selective Reserve or National Guard – served 6
years
• The unmarried surviving spouse of a veteran
who died on active duty or as the result of
a service-connected disability
• The unmarried spouse of a serviceperson MIA or
POW

9. Eligibility
• Public Health Service officers
• Cadets at the United States Military, Air Force,
or Coast Guard Academy, midshipmen at the
United States Naval Academy
• Officers of National Oceanic & Atmospheric
Administration

10. Eligibility
• Certificate of Eligibility
• Veteran
▫ Online at www.va.gv
• Lender
▫ Online using WebLGY
• List of required documents can be found online
in the Eligibility FAQ

11. Property Types
• Single family
• Multi-family
• Condo – if complex is approved
• Manufactured home – on permanent foundation
• New Construction – with builder VA ID number

12. Loan Products
• Fixed Rate
• Adjustable Rates
• Buy Downs
• Growing Payment/Growing Equity

13. Entitlement
• $36,000
• Entitlement + down payment = 25% Value

14. $140,000 Condo
25% of Value equals $35,000
Entitlement available $36,000
Qualifies for No Down payment

15. $350,000 Condo
25% of Value equals $87,500
$36,000 Entitlement
$51,500 Down Payment (approx.. 15%)

16. Entitlement
• Restored when loan is paid
▫ Sale
▫ Completion of loan
• Assumed and substituted with qualifying Vet’s
entitlement
• One time paid but not sold property

17. Qualification
• Residual Income Guidelines –
▫ the amount of net income remaining (after
deduction of debts and obligations and monthly
shelter expenses) to cover family living expenses
such as food, health care, clothing, and gasoline.

18. Qualification
• Residual Income Guidelines
▫ Minimum Residual Income very important
 $400 - $1000 1-5 member family
▫ In conjunction with other credit factors
• Debt to Income Ratio
▫ max 41%

19. Funding Fee
• Origination Fee
• Factors
▫ Type of loan
▫ First use of entitlement or reuse
▫ Disability
▫ Active Duty or Reserve
• Disability can be exempt from fee
• Surviving spouse may be exempt

20. Funding Fee
• Range .5% - 3.3%
• Paid in cash or
• Rolled into loan

21. Closing Cost
• 1% origination fee
• Appraisal
• Credit report
• Title exam and insurance
• Recording fee
• Prepaid taxes and insurance
• Survey
• VA funding fee
• Flood zone determination

22. Closing Cost
• Closing cost may be paid by
▫ Buyer / Veteran
▫ Seller
• Exceptions
▫ No prepayment penalties
▫ No penalties to discharge seller’s liens charged to
a buyer
▫ No RE commission to Buyer

23. Closing Cost
Sellers may also pay:
• gifts such as a personal property
• payment of extra points to provide permanent
interest rate buydowns
• provision of escrowed funds to provide
temporary interest rate buydowns, and
• payoff of credit balances or judgments on behalf
of the buyer.

24. Closing Cost
• Sellers concessions do not include closing cost or
points
• Seller’s concessions may not exceed 4% of
Reasonable Value

25. • Example
• Market rate for a loan is 5% with 2 points
• Seller agrees to pay 4 points
• 2 points are Seller Concession

26. Appraisal
• Reasonable Value
and
• Safe
• Sanitary
• Structurally Sound

27. Appraisal
• Qualification
▫ Licensed/certified appraiser
▫ Five years + experience
▫ 2 letters of reference

28. Appraisal
Ineligible Property
• high voltage electric transmission line easement
• Manufactured Home NOT on a permanent
foundation
• Unapproved Condominium Developments

29. Appraisal/Inspections
Ineligible Property
• New Construction Condominiums with less than
70% UA
• Mixed use zoning with less than 30 years of
economic life
Pest Inspection
Mod – Heavy by Termite Infestation Probability
All of So Shore

30. Processing Loans
• VA Approved Lenders
▫ Supervised Lenders
▫ Non Supervised Lenders
▫ Automatic Lenders

31. Types of VA Lenders
Authority Supervised Lender Nonsupervised Automatic Lender
To close loans on the
automatic basis
No VA approval needed. Must submit application and be authorized
by VA to close loans on an automatic basis.
To use certain
underwriters
No VA approval needed. Any of the lender’s
underwriters may underwrite loans
processed on the automatic basis.
Must submit application and obtain VA
approval for each person to underwrite VA
loans processed on the automatic basis.
To close loans in particular
states
No VA approval needed. Lender may close
loans in any State.
No VA approval needed. Lender may close
loans in any State.
To use agents to process
VA loans
Must submit request and obtain VA
recognition of each agent with whom the
lender has an ongoing relationship.
Must submit request and obtain VA
recognition of each agent with whom the
lender has an ongoing relationship.

32. Processing Loans
• Appraisal
▫ Reasonable Value
▫ May be appealed by lender, buyer or seller
• Title
▫ Reviewed by VA
• Lenders Must retain paperwork for two years

33. VA loans help our Veterans achieve the
American Dream of Home Ownership

34. Jody O’Brien
The RE/Education Company
Committed to Professionalism in Real Estate through Education
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