Are VA Loans Better Than Conventional Mortgages?

A VA loan is often a better option than a convention mortgage for veteran and active duty military home buyers who are interested in purchasing a Las Vegas home.

With Nellis Air Force Base located near North Las Vegas, we have several VA eligible first-time homebuyers contacting Shelter Realty about taking advantage of the historically low housing prices in the valley.

Unfortunately, the national media has many buyers convinced that the only way they can qualify for a home loan is if they have perfect credit and a huge downpayment.

Over the next several weeks, I’ll be tearing apart the common myths and misunderstandings about mortgage financing in order to help shed some light on the truth about getting approved for Las Vegas mortgage.

Even though each qualifying scenario is unique and requires a full loan approval from a mortgage professional who has experience with VA financing, the following list highlights the main benefits VA loans have over conventional mortgage programs:

1.  100% Financing –

A typical convention mortgage requires an initial down payment that can range from 5% – 20% of the appraised value on a purchase.

I say “appraised value” vs “purchase price” because there are instances when a property does not appraise for the full value of a homeowner’s asking price.  At that point, the borrower would have to pay the difference between the asking price and appraised value, as well as the standard 5% – 20% down payment.

Either way, VA loans generally do not require that initial large down payment based on the standard Loan-to-Value lending guidelines that come with a conventional mortgage program.

2.  Lower Interest Rates –

Another major benefit is that VA loans have comparatively better interest rates.  In some cases, a VA loan mortgage rate can be as much as .50% lower than on a similar conventional program.

Over the course of several years, a $35 – $75 a month payment will definitely add up to a significant savings.

The process of shopping mortgage rates is the same with any program, so it’s a good idea to have a basic understanding of how the markets work if you’re concerned with comparing quotes between a few lenders.

3.  No Mortgage Insurance –

Private mortgage insurance (PMI) is generally required on conventional loans when the loan amount being borrowed is greater than 80% of the value of the property.

The Department of Veterans Affairs does have a funding fee requirement for VA loans. This funding fee can be anywhere between 0.5% to 3.3% of the loan total. However, veterans who were classified as disabled during at least 10% of their time in active duty do not have to pay the fee.

Mortgage insurance is basically in place to protect the lender in the case of payment default or foreclosure.

4.  Qualifying Guidelines –

It is also typically easier to qualify for a VA mortgage loan than a conventional mortgage, especially if you have a recent bankruptcy or foreclosure within the past four years.

There isn’t a hit to the interest rate for lower credit scores, and VA underwriters tend to give special circumstances more consideration if there is a good letter of explanation.

In addition to the benefits mentioned above, VA loans have two payment term options – Fixed or Adjustable Rate.

The difference between the two options is as follows:

• Fixed rate loans have one payment tied to the same interest rate for the entire term, which is typically 15 or 30 years.
• Adjustable rate loans start off with a set interest rate for a predetermined period of time, and then the rate may change based on the specific terms set forth on the note. Know you options, and make sure you understand which program you are choosing.

Refinancing with a VA loan also has many benefits over refinancing with a conventional loan.

Some of refinance benefits include:

• A higher refinance limit (up to 90% and some 100%) than the majority of conventional loans.
• Easier credit requirements, which often make refinancing with a VA loan simpler and less stressful.
• Help from the Department of Veterans Affairs for borrowers currently in default because of financial hardship.
• No requirement of private mortgage insurance.
• The ability to include the VA funding fee with the total amount of the refinance.

Between the tremendous savings and streamlined qualifying guidelines, any veteran who is in the  process of purchasing or refinancing a home should strongly consider using their  VA benefits.

Shelter Realty works with several qualified and experienced mortgage professionals that specialize in helping Las Vegas Veterans qualify for a VA loan.

Please feel free to contact us if you have any questions about VA approved properties or speaking with one of our trusted lenders.

Yes, it is possible to finance a luxury Las Vegas home in the beautiful Queensridge Community with as little as a 3.5% down payment, provided the purchase price is below $400,000 for FHA financing.

There is actually an opportunity to qualify with zero down financing for a slightly higher purchase price if you are eligible for a VA loan.

It’s obviously important to work with a trusted mortgage professional who understands these various local lending guidelines.

However, I find that most of my Las Vegas First-Time Home Buyers looking in the Peccole Ranch area start their real estate search for homes between $60k – $130k, when they can actually afford financing on a property in some of the more prestigious neighborhoods around the 89117 or 89145 zip codes.

While there are certainly several available listings in lower price ranges that may provide a cash flow opportunity for investors, choosing a home and neighborhood to live in involves searching with a slightly different criteria.

Queensridge, for example, is a guard-gated luxury community, which includes a full fitness center, tennis, pools, spa and is woven around the Badlands Golf Course.

With several listings in the million dollar price range, Queensridge does have a select few properties for sale that would qualify for lower down payment financing.

If you’re concerned about the investment quality or potential for future earned equity, it’s generally a wise idea to purchase a home in a neighborhood with stronger comparable values.

So, only if your personal budget and comfort level warrant it, you feel confident in your future employment security and there is a low possibility of moving in the next 5-10 years, it may be worth considering a home in the luxury Las Vegas Queensridge Community.

Since most of these listings require a scheduled appointment to preview, please feel free to contact me at any time about setting up a few viewings at your convenience @ 702-376-7379.

If your Las Vegas property is secured by a VA loan with a mortgage balance that is higher than the appraised value, and you need to sell, then you may be eligible for a special program called a VA Compromise Sale.

Basically, a VA Compromise Sale is a program similar to a short sale transaction, which is designed to help veterans sell a property with an upside down mortgage balance without taking a huge financial loss.

In any case, if you bought a home with a VA loan back when the housing market was healthy, you probably didn’t foresee the need to sell your home in the depressed housing market of today.

The need to move overseas, divorce or or a station change are a few of the reasons that would force a VA homeowner into selling a property.

Obviously, for many veteran borrowers who are facing this scenario, taking a loss on the sale of their home could result in extreme financial difficulty.

How Can A VA Compromise Sale Help Me?

If you are selling your house and receive a purchase offer for less than what you still owe on your VA loan, you can turn in an application with the Veterans Administration for a VA Compromise Sale.

In many ways, a VA Compromise Sale is similar to a short sale with another type of mortgage program.

The good news is that if you receive approval for a VA Compromise Sale, then the VA will redeem you for the difference between what you can sell your house for and what you have left on your VA loan.

To Qualify, You Must Show Proof Of:

• Financial difficulties.
• The realistic market value of your house at time of sale.
• A VA appraisal.
• Standard closing costs.
• No second lien (the VA does makes rare exceptions if the total is not significant).
• The reasons why you are selling your home.

Another important component of getting approved for a VA Compromise Sale is that the total net loss should be less than if the property was taken back by the bank through foreclosure proceedings.

So basically, if it costs more to foreclose vs “short sale” the home, then there is a greater chance of getting a VA Compromise Sale approved.

On another note, if your VA loan originated before December 31, 1989 you might have to sign a promissory note as well as enter a payment plan to redeem the VA a percentage of the compromise claim payment. This sum would end up being less than what you would owe if you did not originally have a VA loan, and the payment plan itself is formulated around what you would reasonably be able to pay.

Our Short Sale team has a proven track record of successfully negotiating with banks to help homeowners sell their properties for less than they owe on their mortgages. However, with a VA Compromise Sale, most of the negotiating process is reduced to simply filling out the proper paperwork and submitting a clean and fully completed package.

Please feel free to contact us to see if your property or unique short sale scenario might be eligible for a VA Compromise Sale.

Financing a property with no down payment is still possible for Las Vegas buyers who are eligible for a VA Mortgage Loan.

And even though we have Nellis Air Force Base located in North Las Vegas, it’s amazing to me how many local real estate agents lead their first-time home buyers to believe that they can only get qualified for a mortgage if they have high credit scores and a 20% down payment.

The truth is that taking out a VA mortgage loan on a new home purchase is fairly straightforward, relatively easier to qualify for than a conventional loan, generally comes with lower interest rates, doesn’t require mortgage insurance and can be financed up to 100% of the purchase price.

The Basic VA Loan Approval Process:

• Meet with a qualified mortgage officer to get a pre-approval letter, discuss closing costs and payment options and get a list of items needed for full loan approval.
• Find the property you would like to buy and arrange the purchase with the seller.  You’ll then sign a purchase contract conditional upon approval of a VA guaranteed loan.
• Choose your lender, present your Certificate of Eligibility, and finish the loan application. Your lender will determine your credit and submit a request to the VA to dispatch a licensed appraiser to evaluate the value of the property.
• If the determined value is acceptable to all involved parties, and the lender determines that your loan application meets the VA loan requirements, your mortgage can be approved.
• You (and co-borrower, if applicable) will then attend the loan closing and sign the related papers. The closing escrow agent or attorney will explain loan terms and requirements and monthly payment details.

Please note that when the VA receives a report of the loan, the Certificate of Eligibility is adjusted to reflect use of entitlement and is then returned to the veteran.

No further actions are required to get your COE back, which just makes the overall process easier for veterans

There are a few unique aspects and conditions to getting approved for a VA Loan, which is why it’s important to make sure your loan officer has experience closing VA Mortgage purchase transaction.

Income, assets, credit scores and appraisal requirements are a few of there areas that can cause a delay or result in a denied loan if your lender is unfamiliar with the recent VA guideline changes.

I’ll actually be writing extensively about the VA mortgage program over the next few months to help educate our Las Vegas veterans and VA eligible home buyers about some of the unique advantages available with VA loans.

How long after a short sale before I can qualify for a new home loan?

This is the main question most of our Las Vegas underwater homeowners have that are weighing their options of loan modification, short sale or foreclosure.

And, not being able to plan for future home-ownership can add more anxiety to the equation.

It’s frustrating when you struggle to do the right thing and make your mortgage payments on time, and then feel penalized by the system by being denied for new mortgage financing due to a recent short sale that was out of your control.

Obviously, if we’re going to turn this slow market around, banks will eventually have to figure out a way of providing special circumstances for qualified borrowers that may have fallen victim to a financial crisis that was largely influenced by mortgage and real estate fraud.

Well, the good news is that according to recent changes in FHA Financing Guidelines as of March, 2011, Las Vegas home buyers who are as little as one day out of a short sale on a previous property may qualify for a new mortgage.

FHA Day Out Of Short Sale Overview:

You can read the official FHA Guidelines, but the following screenshot created by a friend Scott Schang highlights the main points.

So, what this is basically stating is that unless you did a short sale simply for financial gain, there is a chance you could be eligible for a new FHA mortgage right away.

Examples Of Possible Acceptable Reasons For Short Sale:

• Living in previously owned bachelor pad condo – got married, have kids – 1 bed 1 bath doesn’t accomodate 3+ person family
• Kids move out of home – parents no longer need 4 bed 3 bath home for 2 people
• Relocating because of job
• Death in the family
• Forced sale due to a divorce

Before writing this post, I did a considerable amount of research online, as well as speaking with one of our trusted local loan officers, Brian Maier, to ensure there weren’t any hidden challenges our buyers would face if they planned on purchasing a new home immediately after doing a short sale.

Brian said it is important that the borrowers have a clean mortgage payment history for the past 12 months.

This means that there are no 30-day late mortgage payments on your credit report in the past year.

He also stated that each lender has their own qualifying criteria based on standard eligibility guidelines, such as credit, loan-to-value and debt-to-income ratios.

I certainly understand that the words “May Qualify” probably create more uncertainty than hope, but Brian did mention that some lenders were more lenient than others on what they determined “Acceptable” reasons for a short sale.

Either way, the point is that we are moving in the right direction for making mortgage financing available for “make sense” scenarios.

Our Las Vegas Short Sale expert, Paul Rowe, definitely has the knowledge and track record to help answer any of your selling questions.

If you’re interested in digging deeper about how to qualify for a new home loan please contact us for more information.

Shelter Realty’s short sale division successfully closed a listing in the high-end condo development, Turnberry Towers located in Las Vegas, Nevada. We negotiated a full liability release on the sellers’ mortgage obligation. Sellers who may be stuck upside down in these condo projects should be heartened to know that there may be alternatives to foreclosure.

Buyers who may be interested in taking advantage of the incredibly low prices in the Las Vegas condo market need to take a look at short sales. In this case, the short sale we negotiated was below current market value, providing a fantastic buying opportunity.

If you have questions about a short sale in Las Vegas or anywhere else in the southwest, please contact us through this website or call us directly at 702-376-7379.

Paul Rowe manages the short sale division at Shelter Realty in Henderson, Nevada.

Shelter Realty closed another short sale listing last week, its 17th in a row with full liability release for our clients. In this case the subject property was also an investment, high-rise condo property. Contrary to myths about short sales that exist, investment properties may also be sold as a short sale.

Ultimately, the mortgage bank which holds your note evaluates each and every short sale approval as a unique agreement based on the individual borrower’s situation. This is why effective representation is so critical. You not only have to sell your property, but negotiate favorable terms with your mortgage bank.

If you have questions about a short sale in Las Vegas or anywhere else in the southwest, please contact us through this website or call us directly at 702-376-7379.

Many media outlets such as The Wall Street Journal and Bloomberg are reporting that the Obama administration is considering plans to get the government out of the mortgage business and are submitting different plans “to bring a controlled end” to the government sponsored enterprises (GSE’s). In other words, their going to pull the plug on these brain-dead behemoths.

Neither Fannie or Freddie has posted a profit in over three years and the American taxpayers have subsidized them with $150 billion dollars of support to keep them operating. Many opponents of the bailouts felt nothing could save the GSE’s and the any monies spent would be wasted. It seems they were correct.

The government is finally crying “uncle” and this is a good thing. They should stick to oversight and get out of the mortgage business. Private companies are best equipped to provide financing; however, they need to do so in a lucid manner that best serves the long term interests of their shareholders…responsible lending.

Although no final plans have been adopted, the general consensus is to phase out Fannie and Freddie in the next few years. It should be noted that the process of eliminating Fannie/Freddie will have no impact on persons who are currently doing short sales or are in the loan modification or foreclosure process. These are huge institutions and shutting them down will take 3-5 years.

If you have any questions if you are delinquent or about to be on your home, please call Shelter Realty at 702-376-7379.

Savvy listing agents know that pricing the home is not simply a matter of maximizing the amount a buyer is willing to pay for a home. This may sound counter-intuitive to the average person. After all, doesn’t offering the bank the most amount of money, give you a better chance for an approval? Not necessarily.

Here are some issues your listing agent has to account for in a short sale:

• You can elicit an offer so high that it won’t appraise for the buyer’s loan.
• There may be other liens which have to be paid or monetary contributions must be made. Is there a 2nd loan? Maybe the first lien holder will only agree to a certain contribution that is less than the 2nd lien is willing to accept. Where will that money come from?
• The seller’s lender may require some sort of cash contribution by the seller or accepting a promissory note. If the seller doesn’t have it and the bank won’t budge, how do you keep your transaction from falling apart? I recently had a lien for a delinquent credit card show up right before closing. We then had to figure out how to come up with another $2300 in order to make the transaction happen after we had a previous approval that did not account for the judgment.
• What if you have delinquent homeowner association dues that exceed what the bank  is willing to allow?

I look at a purchase price as a pool of money. Yes, we have to get a qualified buyer willing to pay something reasonably close to market value to get the bank interested, but if you lock up too much of the money for the primary bank, you lose the flexibility to solve some of the difficult to foresee problems I mentioned above.

We like to work with our buyers on the pricing. Sometimes it is hard to break through the traditional mentality of a price just relating to the home itself, but it is imperative that we educate buyers and get them on our side that a short sale is more than a purchase price for a home, it is a negotiated debt settlement that includes a transfer of property. There are many aspects of that home which must be resolved in order for that buyer’s offer to get approved by the seller’s bank.

Agents who do not take into consideration the eventual need for monies to cover additional obligations often are unable to close the transaction and relieve the seller of their debt. They will often say things like ‘well, the bank just wouldn’t allow enough money for this or that’, but had they structured their offer properly, they might well have been able to get the short sale approval in the end.

It is my opinion that a Las Vegas Property Manager should inspect a residential rental property inside and out at least two times a year.  I can’t tell you how many times I have been contacted by a landlord who has recently fired his property manager due to the damage caused by the tenant which was only discovered after they moved out and come to find out the property manager never inspected the property during the tenancy.  Sure enough, when the tenant moved out of the property, the landlord was stuck with all the expenses in order to get the property rent ready again.

Shelter Realty schedules an inspection every 6 months for every property we manage.  A property manager does an inside and outside inspection of the property to ensure the tenant is properly maintaining the property.  A form is completed depicting the condition of the property and listing any maintenance issues that need to be addressed. By conducting multiple inside and outside inspections of the property, it enables us to catch small issues before they become bigger and in most cases it’s a deterrent for any future problems.

In order to protect your investment, make sure you property manager is conducting regularly scheduled inspections by requesting a copy of the inspection report.  If it is time to renew your property management agreement, request that inspections of your property be completed every 6 months in order to ensure your property is being maintained by the tenant before you sign the renewal.

If you have any questions about our property management services in the Las Vegas Valley, feel free to give us a call at 702-376-7379 or complete our contact  form.

In 2010, the government rolled out a supplemental program to Home Affordable Modification Program called HAFA. HAFA stands for Home Affordable Foreclosure Alternatives. This program was specifically designed to facilitate short sales and “Deed-in-lieu” of foreclosures. From the very beginning there was strong skepticism from real estate professionals who specialized in selling distressed properties about the ability of this program to deliver. Housingwire.com reported that between April and December of 2010, only 661 deals had closed under the HAFA program nationwide.

Over-Promised, Under-Delivered

HAFA has many fatal flaws. First, it was born of another complete failure, the HAMP program. Secondly, the program was supposed to fast-track short sales and deed-in-lieu’s but in doing so, participating banks were not incentivize, and in fact, lost many of their recourse options. For example, 2^nd lien holders had to accept meager payoffs and waive any deficiency balances on their losses. Thirdly, this program was completely voluntary on the banks’ behalf. They only had to consider borrowers for approval, not approve them!

2^nd Lien Holders say no thanks!

Junior lien holders if they chose to participate in HAFA had to accept a maximum payoff of $6,000 or 6% of the loan balance, whichever was less. You can see the problem. A 2^nd lien with a $50,000 balance would have to accept a $3,000 payoff and waive any right to pursue the borrower? Not likely. This rule meant that unless your 2^nd lien was the same bank as your first, you had zero chance of an approval. I recently just obtained a HAFA approval for one of my short sale listings here in Las Vegas. The home had two loans but they were with the same lender.

This week the Treasury Department announced:

• HAFA eliminated loan servicers from having to verify borrower’s finances
• HAFA also relieved loan servicers from verifying whether a borrower’s monthly payment exceeds 31% of their gross monthly income
• 2^nd lien holders may receive a max payoff of $6,000, even if the payoff exceeds the 6% of the unpaid loan balance. This should help small 2^nd liens under $50,000
• Once approved for HAFA, loan servicers have 30 days to approve an offer. The previous requirement was 10 days which was unrealistic

In the end these measures may allow more short sales and deed-in-lieu’s to proceed but it will never approach the demand represented by millions of homeowners. When you’re trying to top 661, anything will look like a victory, I guess.

Las Vegas developed into a prime real estate investment attraction primarily due to four things:

• Sustainable Work:  A diverse pool of work opportunities.
• Population Growth: Population growth as a by-product of sustainable work.
• Supply & Demand: Population growth increased supply and demand and fueled building activity.
• Climate.

Ample employment opportunities, and a surging population gave rise to suburban development projects such as the award-winning 39-square-mile master-planned community of Summerlin, at the edge of the Spring Mountains and only a short drive from downtown Las Vegas.

The sudden growth of high rise construction, previously unknown to Las Vegans was primarily due to the pressures of population growth, and land use restrictions.

Land-locked Las Vegas is surrounded by vast Government owned land holdings under the auspices of the Bureau of Land Management (BLM) and bordered by Native American reservations, with Lake Mead to the east, mountains to the west and Nellis Air Force Base to the northeast.

Approval for any transaction of BLM regulated land to be incorporated into the city requires formal federal government approval.

Lured by the promise of jobs, lower than average housing costs and a favorable tax structure for individuals and businesses, thousands of people were moving into Las Vegas putting continuous pressure on the need for available housing.

Of course, it would be just a waste of space to reiterate what caused the sudden cooling off of a superheated economy, and the end of the real-estate gold-rush. The reasons are due to an unfortunate combination of circumstances and well-known to everyone.

Suffice to say that despite the current less than ideal real estate environment, opportunities to build wealth will always prevail for the astute real estate investor who has the foresight and flexibility to adjust to any and all prevailing market conditions.

Though the overall condition of the Las Vegas real estate marketplace is far from ideal at the present time, there are many undervalued properties available that should prove to be excellent investments over the long term.

With interest rates at an all-time low and a huge inventory of distressed properties selling at very attractive prices, the home-buyer looking for a primary residence won’t find a better time to buy then right now.

So, there is some sunshine over the horizon to brighten a somewhat gloomy picture, and hopefully predictions for the beginnings of an upturn in the overall economy around the early or mid part of 2011 will ring true.