Dumb Question (Posted May 23, 2106)

A friend of mine, when he was a young man, had the chance to go on a tour of a Catholic seminary, which is a school where men train and prepare to become priests for the church. A young priest in training was asked to be my friend’s tour guide, and the two immediately fell into a pleasant conversation about the seminary and what takes place during a regular day. At some point, my friend subconsciously decided to leave his brain at the coat check and ask his tour guide, “So, what was your reason for wanting to become a priest? Was your father a priest?” The young priest-to-be was very gracious and just smiled, and then he said, “No. We take a vow of celibacy as priests, so that would not have been possible.” Not one of my friend’s brighter moments, that’s for sure.

With the same graciousness that the priest-to-be displayed in the face of a less-than-enlightened question, I hope to address some questions and misconceptions about VA loans that exist but shouldn’t.

Myth #1: VA Loans are not a great option for a buyer

Truth:
- No down payment required

- No private mortgage insurance required

- Higher allowable debt-to-income ratio

Myth #2: You can only use your VA eligibility once; use it and lose it

Truth:
- It’s possible to have more than one active VA loan at the same time

- Use it as often as you wish (with some restrictions)
- Losing a VA loan to foreclosure doesn’t mean you’re no longer eligible

Myth #3: VA Loans have much slower turn times, too much red tape

Truth:
- VA Loans close in 30-45 days like most other loans

- All VA-approved lenders do their own underwriting now

Myth #4: There’s no such thing as a Jumbo VA Loan

Truth:
- Yes, there is. Borrower must bring 25% of the amount over the $417K limit

Example
- Loan amount is $500K, which is $83K over the $417K limit

- 25% of $83K is $20,750

- $20,750 = 4.15% of $500K, MUCH less than a 20% down payment

So, let me summarize why buyers AND sellers should LOVE to have a VA loan as part of the transaction:

• No Private Mortgage Insurance – the buyer can afford a higher monthly payment

• Higher allowable Debt-To-Income Ratio – this EXPANDS the base of buyers who can qualify to purchase the home

• No Down Payment (when the loan is at or below $417K) – another obstacle removed from the loan-approval process

The next time you hear someone say, “I hear VA loans just aren’t worth it,” just smile and educate.

Comments

Financial Nearsightedness

Years ago when the Consumer Financial Protection Bureau was created, we had some wacko thought that part of the job of the folks filling its ranks would be to . . . protect the consumer. In some people’s view, this would mean that builders of new homes would no longer be able to dangle the carrot of “free” incentives if the buyer would finance the purchase through the builder’s in-house or preferred lender. To those same people, it just made sense that the CFPB was created to even the playing field and make it so that the consumer got the very best deal available. Well, we were wrong. Builders ARE allowed to offer incentives for using their in-house and preferred lenders despite the fact that sort of goes against the idea that the consumer is getting the very best deal available. And for most consumers, all they see is the incentive, and this computes to less money coming out of their pocket at closing – and they’re right (sort of). The purpose of today’s article is si

Topless Professionals - Nope

Fads come and go, certainly, but you can’t always tell the difference in the moment between a fad and a trend – because refusing to adapt to the trends can be limiting . . . if not disastrous. Let me share a couple of examples where failing to see where things were headed didn’t turn out well. An engineer presented the idea of a “filmless camera” to the executives at Kodak back in 1975, but they laughed him to scorn. In 2012, Kodak was forced to file for bankruptcy because they failed to adapt to the digital world. We all know Steve Jobs and Steve Wozniak, but how many of us recognize the name of Ron Wayne (and, no, that’s not Batman’s brother)? Ronny was the third founding member of Apple, and he sold his 10% stake in the company in 1976 for $1500. His shares would now be worth over $50 billion. WAY BACK in 2000, Reed Hastings approached Blockbuster and offered to sell Netflix for $50 million. Blockbuster turned Hastings down. Netflix is now wor

Sitting on the Fence Only Gives You Splinters

“I woke up this morning and couldn't find my socks, so I called information. She said they were behind the couch. She was right.” Reading the words of comedian Stephen Wright isn’t quite the same as actually hearing them with his deadpan delivery, but they’re still funny. The same can be said for timeless wisdom: whether you hear it coming directly from the lips of a wizened old sage or you read it in a little missive such as this, it’s still wisdom, right? They say a picture’s worth a thousand words, so you’re about to get 2,000 words’ worth right here: I’m going to show you two graphs that are going to speak volumes about buying power and interest rates – far more than I could convey if I tried to write over 2,000 words (and probably put you to sleep). Obviously, this first graph shows how even a slight change in interest rates can affect someone’s buying power in the real estate market. There’s a fairly big swing between what someone can a

Search This Blog