VA Loan Explained: What Sellers & Buyers MUST Know Part 2
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VA Loan Explained: What Sellers & Buyers MUST Know Part 2
[00:00:00] If you liked what you were learning in part one with Kellen, stick around because in part two, Kellen talks about veterans owning multiple properties with VA loans as well as starting their own investment portfolio of real estate using their VA benefits, VA loan benefits.
Did I miss anything else that's specific to VA loans that we haven't touched on? I was trying to think. I mean, I've done so many. Yeah. There's one other thing that a lot of people aren't aware of is the VA funding fee. Oh yeah, please. Thank you. I briefly mentioned, and how that works is if whenever you're getting a government loan, whether that's USDA, FHA or VA.
There is upfront mortgage insurance. VA calls it, their funding fee. And so if it's your first use of a VA [00:01:00] loan and you're putting no money down, then the funding fee is 2.15% of whatever the loan amount is. So if you've got a loan amount of 400,000. Should have done the math before I started talking.
But,
2.15% of 400,000 is $8,600. So your, that can get back, added back into the loan. And that sustains his insurance or funds the VA to allow them to keep on, keep an on, keep on running loans. Right. So they can do more VA loans. Correct. Yep. Now, go ahead. Oh, the VA funding fee just changes a little bit if you're a repeat VA loan user
or if you're putting more [00:02:00] money down or any money down and the other item is that if you have, you can be exempt from the funding fee, and usually you're exempt from the funding fee if you have disability income from the VA and it would say on your certificate of eligibility, exempt or not. And so if you're exempt, then your loan amount is gonna be exactly whatever the purchase price is.
Whereas if you're not, then you have your purchase price plus that funding fee is gonna be your loan amount. Okay. I would say that, and I was gonna ask about, you know, that exemption for disabled veterans and honestly, most veterans, I mean, if you've been deployed, you are gonna have some disability of some kind, whether it's a physical disability, a mental health, disability, whatever.
And I would say most of [00:03:00] my clients. Are exempt just because most of them have been deployed at some point. So the other thing is that you talked about mortgage insurance and that you had mentioned earlier that that's waived for, veterans. There is not ever mortgage insurance on these loans.
So that saves people how much money per month, potentially on a $400,000 house. Yeah. So if you're looking just to compare FHA to VA just because FHA has a set calculation for mortgage insurance, so it's a little easier to calculate versus conventionally, it's done through a private company, so you just have to get quotes for.
So let me just plug in. So if we're at 400,000, your monthly mortgage insurance on [00:04:00] FHA would be $176. So that's money that you're not having to pay month to month, Going through the VA. Right. And that actually is calculated in your. How much you can afford to buy. Exactly right. So it impacts how much you can buy, which again, not having that mortgage insurance makes a veteran and or active duty or a family member of a veteran, I mean a spouse of a veteran, more able to per has more buying powers where I'm going with that.
They have more buying power. Right. The other thing, and I was like, what did we forget? There's two other things we forgot. One. You can use your VA loan elig. You can use your VA eligibility more than once. Is there any limit to how many VA loans you can take over the course of say, what's the most someone could potentially take in a lifetime when that's run out?
Yeah, that's a really good question, and I don't [00:05:00] know of a specific answer of how many loans you can have out on your VA eligibility. It's more of how much of a loan that you have that rolls over into the next home purchase of how much of a loan you can get. So for example, you can get usually the max.
For VA purchases are about a million to 2 million just depending on the investor. And we shop from several different investors, so we can provide a lot of different options there. But as far as putting, if you purchase a home on a VA loan, you can keep that home and then. As your, as like a rental after you've lived there for
A year so you can two years. I think it's two years. Two years, okay. Yeah. Because again, if you, if you, well, if for a [00:06:00] year I'm thinking resale, it's two years because of capital gains. Okay. Okay. Okay. So it is a year. So once you are ready to move, as long as there's a math calculation that we do to see how much.
Eligibility is left over from your previous purchase. And so if the loan amount was, let's say, 300,000, then you still got a bit of wiggle room to get another loan and potentially another loan. So there's, as far as I know, there's not a direct answer. Maybe you know something more than I do on that if how many VA loans you can get, but it just depends on the previous loan amounts.
That you've had on existing homes that you own. You can have, oh, go ahead. No, but I was just gonna kind of summarize that you can, number one, you can use your VA loan benefits more than once, so you can buy, sell, and [00:07:00] buy again on another VA loan. You can also buy a property, live in it for a year, hold it, rent it out, and potentially buy another property with a VA loan and keep the VA loan on the rental.
Right, right. Okay. I do know that some people will refinance that first loan to say, conventional or something, so then they can use more benefits on their second purchase. But it is, and I'm just gonna say this, it is a great way for active duty and veterans to actually build up some, passive income,
Yeah. Having those rentals and using their VA benefits to do that, right. So you can only, just to clarify for anybody watching this, you can only buy a primary residence on a VA loan. But then with that path that you mentioned is a great way to build a [00:08:00] real estate portfolio and passive income, and then you can get your VA benefits restored.
Like you said, when you may refinance out of your VA loan or sell that home, that can be restored to you, so then you can get a larger loan on the next purchase. So any questions, we can run all the math and numbers and let you know how much of a loan you can get with zero down, or how much you would need to bring in based on your remaining eligibility.
Right, right. Yeah. It is a complicated mathematical formula, and obviously Kellen would be the one to answer that question because that is not something I get into. I always tell people I don't do the, I don't do anything with the money. I understand the loans, but when you want details, I always refer back to the lender and to the title agency for very specifics on title fees and lending processes and fees and all that, because [00:09:00] that's not my.
That's not in my lane. I stay in my lane and I refer back. So that I think is a question that comes up a lot though, especially with my younger veterans or active duty because they're like, well, hey, if I can buy a house, like especially if they're being, stationed somewhere, they buy a house versus staying in the
military, allowed, you know, you can stay on the base. Sorry, the words are escaping me today. Stay on base and stay in the free housing. But it's better to buy a house if you think you're gonna be there for a while or you like the area, pay the rents. 'cause they give you a supplement for in, for, for that.
And then when you get re stationed or deployed or whatever. You can maybe keep that property, make it a rental, and buy another one at your new base. And your new area. And I do know that there are veterans who retire having done that. And they are like little real estate moguls because [00:10:00] they've got property here, here, here, here.
And they, they have been accumulating rents and, and in, what's the word? Like equity in their homes this whole time while they're. You know, homes being paid for, you know, the rents are being paid for, the mortgage is basically paid for by the government, right? So it's kind of a great thing because, I mean, keep in mind they're putting their life on the line for our country.
They are putting themselves online to being severely disabled and maybe not being able to work when they're discharged. Either between mental health or physical health issues. So. I don't look at it as something that they're taking advantage of the system. I think they're taking advantage of the system in an extremely wise way.
Right? Yeah. Yeah. And as they should, it's a great opportunity to do that. Yeah, I think so. I think so. It's a small thing that we can give [00:11:00] our military, and their families for their sacrifices. Anyway, that's my little. I mean, I feel very strongly about us supporting our veterans and our military. I am not from a military family.
I am not been involved in, with a relationship with a veteran other than my clients and friends. But I mean, I do have family members are in the military, but not immediate. And I have learned so much and have really come to so respect. Them and their families and, and what they have gone through, what they go through, what they do for our country.
And we just truly, civilians don't have a clue. We are so close. Right. Sorry, that's my little soap box, but I feel very strongly about that. Yeah, no, I No need to be sorry. 'cause I think that it's only right to give great praise and appreciation for that 'cause. Yeah. I. I haven't served [00:12:00] and I look back and wish I had.
But hindsight is 2020. Totally. I'm so grateful now that we can serve 'em nonetheless. Right. And that's why I say I serve our veterans. I serve our, we don't get a lot of active military up here where I am in Northern Arizona. We don't have any bases or anything. Usually it's somebody who is a recruiter and I've had a few of those.
But I think you probably down in the Phoenix area get a lot more active duty because you've got the Luke Air Force base there. And they are looking to buy homes, you know? Yeah, yeah. We definitely have closed several loans this, this year for individuals that are active military. Yeah. So cool.
Yeah, it's just a difference. I, where I am here in, in, Northern Arizona, I'm very close to Prescott and so the VA hospital's over there and it's a very good, it has a great reputation and so verde Valley, it's like a 40 minute [00:13:00] drive to the VA hospital from the Verde Valley side. And a lot of veterans wanna live on this side of the mountain, the Mingus Mountain range, because it's a little warmer.
It's not as cold in the winter. It does get hotter in the summer, but they just, it's a little different topography but having that VA hospital within a 40, 45 minute drive really encourages more and more veterans. And I do. Work on the Prescott and the Quad City side, and obviously we have a very high number of veterans over on that side of the mountain.
Yeah, that's great. Cool. I, I was gonna run through a few things, other, other items to keep in mind just on the financing side, if that's okay. Please do. I was gonna turn it over to you now and say, hey, you know. What else would you like to cover and share? Oh, great. And then I have one last thing, but it's very specific to you and your mortgage company.
Okay, perfect. Yeah. So when you're getting a [00:14:00] VA loan, just some other things to keep in mind is gonna be that there's no minimum credit score. A lot of people have had hard things happen in the past, and so generally different investors, again, since we shot from several different investors, they will require maybe a 580 credit score, but we can go down to a 500 credit score as long as there aren't any derogatory items in the last 12 months.
So, which would be like what? A late payment, um, something going to collections. But more than anything it'd be like a, a late payment is what they're looking at. Okay. And so if you haven't had any of those in the last 12 months and your credit's down in that range, then could be an option that we could look at.
It would be a manually underwritten loan, which we don't have to go into now. It just comes with some [00:15:00] additional layers of underwriting. That we would have to walk our buyers through. But we do them all the time. Some other items is that you can buy a single family home, a town home, a manufactured home, either double wide or single wide.
And then condos have to be qualified and eligible by the VA. And so there. Before you go out and check out a condo, it'd be good to have a conversation with me to make sure that we check that that condo is eligible for VA financing. And then other than that, let's see what my notes were. Oh yeah, there's usually with other loan programs, there's a max as far as how much debt to income ratio is.
And the VA has stated that that's about [00:16:00] 41%, which would mean you've got 41% of your debts are going, are 41% of your income is going towards debts. But the, even though they've stated that they'll often go up into the sixties. As far as your debt to income ratio, so you can have a lot more debt compared to other loan programs for qualifying.
They just have to have compensating factors like residual income, is one that they, they they'll will get. And one last thing I'd say is often we'll get a veteran wanting to qualify with their boyfriend or girlfriend or partner, and as we discussed before, it's just gonna be the spouse that can be on the loan.
With that veteran, you aren't [00:17:00] able to bring on a partner for qualifying sake. But yeah, I think those are just some basics as far as running through that. And any other thoughts or questions that would be helpful to run through on VA loans? I'm sure there are many that we haven't even thought of yet, was just kind of in my head as I was listening.
Oh yeah. I forgot about the people. You can't, it's husband, wife. When it comes to the VA loan or a single male, single woman that's a veteran or active duty, or the widow widower of a veteran. So no, you can't have your girlfriend, boyfriend, or spouse or partner. Or anybody else on the loan with you, mom, dad, nothing.
It's just right. It is restrictive in that way, you know? 'cause a lot of people are doing that now. You know, they're adding their girlfriend, their boyfriend, their partner, a family member to the loans [00:18:00] to get qualified for a house that they would want, you know, to live in. So thank you for bringing that up.
I appreciate that. I forgot to have that on there, so thank you. The last question I have is specific to you and Sun American Mortgage. Are there any benefits that Sun American Mortgage, makes available specific to, to VA loan buyers? Yeah. Anything that you guys do as an incentive to them to use you versus, you know, Joe Blow down the street?
Yeah. Our guarantee in our promises that we're gonna give a five star experience, which is easy to say, but that's all we have online is five stars, and we're gonna be able to shop for the interest rate for our veterans. So we've got 30 different banks and investors that we're looking at for interest rates, and so we help.
Coach our buyers to show them, [00:19:00] alright, this is what the market's doing. These are some options. We can lock in your interest rate right now. We can wait until, they, you know, this announcement comes out that could make it go up or down. So we really focus on education and coaching through the process.
And then along with that is the connection with credit repair. Like you mentioned, our clients that we just closed on, we were able to get them in touch with one of our third party vendors that was able to help them boost their credit so that they could get ready and qualify to buy a home. And then lastly is that for anybody that we work with, that's a veteran from Judith, we give a thousand dollars for an incentive.
And that could go towards, any portion of your loans buying down the rate. Is a big [00:20:00] portion that we look at right now in a high interest rate market. But it could go towards closing costs if those aren't being covered already. Along with some other things. So our, our biggest focus is helping our clients feel comfortable, confident, and delighted, and making sure that they are having a good experience and closing on time with a very competitive interest rate.
Love it. Thank you. Thank you so much. Thank you for being here today, Kellen. Taking time out of your schedule and I hope that this information is helpful to our veterans and active duty. 'cause it, it crosses over to both. I just don't deal with a lot of active duty 'cause of my location, but Kellen does.
And if you have questions, please, we're gonna have kellen's information posted below in the description so that you can reach out to him directly. Obviously please comment, ask questions, and there will be more information about VA everything [00:21:00] VA So if you're interested in learning more about VA home inspections, check out the thumbnail above, 'cause it's gonna have the, information we referred to in this video about VA inspections and appraisals.
Thank you again for being here, and we look forward to seeing you again. Talk more about home loans
If you are a veteran in the Verde Valley and you're considering buying a property, or you'd like to buy another property and you'd like to learn more about how to do that, comment below, reach out to myself or Kellen.
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