Hawaii VA Loans

There have been a lot of changes in the mortgage industry lately.   Some of the most recent changes have been in the Mortgage Insurance (MI) industry.  Private mortgage insurance is a type of insurance used by lenders to help limit losses in the event of loss or foreclosure of a loan. Lenders typically require MI for loans in which there is less than a 20% down payment (for purchases) or equity (for refinances).  The mortgage insurance company will absorb losses up to a certain percentage of the value of the loan.

For example, if someone wants to buy a house and has a 10% down payment, a lender will provide a loan of up to 90% of the value of the home.  Because there is less than a 20% down payment, the lender will require MI to cover losses equivalent to 25% of the loan amount.   This insurance for the lender is a fee that borrowers pay monthly with their loan payment.

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As a sign of the times, mortgage investors across the country have made it a requirement that a borrower have a 620 FICO score or higher to qualify for a VA loan.  Now, this is not a change implemented by the VA Department - this is something that mortgage investors (those who actually purchase note on the secondary market) have now enforced due to the elevated default risk associated for borrowers with sub-620 FICO scores.

Previously, no minimum FICO score requirements existed - as long as the broker/lender received an approval through either Fannie Mae’s or Freddie Mac’s “Automated Underwriting System” (AUS), the Veteran would be approved.  Even if the broker/lender did not get an approval through an AUS, there was an option to do a manual underwrite in which a VA approved underwriter could approve a loan based on compensating factors and explanations of previous derogatory credit. The compensating factors would have to validate that the Veteran is worthy of credit approval - and can meet the expected housing obligations.  Fast forward to March 2009 and manual underwriting is no longer allowed.  The Veteran must get an approval from an AUS in order to qualify for a VA Loan.

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As usual, the answer to that question isn’t so simple;  yes and no.  Appraisals are appraisals, they look at the property, compare it to others and determine a value.  That can be said for VA appraisals as well; however, there are some nuances that do make VA appraisals different.

The differences start with the ordering process.  VA appraisals are not ordered directly from the appraiser like they are in the conventional loan process.  The lender must order the appraisal through the ‘VA Portal’.  At that point, an appraiser approved with the local VA office is randomly assigned the job.  The lender must provide the fully executed purchase contract (with all addendums and counteroffers) before the appraisal is started.  For condos, the lender must provide the budget, minutes, financials and condo disclosures before the appraisal can start.  That is why it is important for all parties involved to make sure those documents are provided as soon as possible.  The appraiser then has 5 business days to inspect the property (assuming cooperating parties can provide access within that timeframe) and another 5 to complete the report.  Once completed, the appraisal is uploaded into the VA Portal where the appropriate party can review it.

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For those retired veterans, active duty officers or dual income families fortunate enough to afford a home beyond the limit, the VA provides a great Jumbo loan option. VA Jumbo financing is readily available for loan amounts up to $1 million with a small down payment. The down payment requirement is 25% of the difference between the purchase price and the maximum VA Loan amount at 100% financing (currently $783,750 for Oahu in 2009). So, here in Honolulu, a purchase price of $1 million, would require a down payment of just under $55,000. With a small seller credit and today’s amazingly low interest rates, you could purchase a million dollar dream home with little more than 5% to cover the down payment and closing costs.

No other program offers a Jumbo loan with that little down; and best of all, no private mortgage insurance (a monthly savings of almost $675 at that loan amount). For those fortunate enough to be able to take advantage of this program, this could be an opportune time to trade up on your existing equity.

2009 is sneaking upon us very quickly.  In the mortgage business that means new loan limits.  Hooray!  Traditionally, this means that the OFHEO (Office of Federal Housing Enterprise Oversight) releases their Housing Price Index data, which results in higher loan limits for FHA, VA and Conforming (Fannie Mae & Freddie Mac guaranteed) types of loans.  This year’s data doesn’t warrant an increase in the loan limits, but thanks to decisive action by our fearless leaders, we have new rules that expand the available loan amount limits by examining home prices at a more regional level.  For many counties across the contiguous United States, the loan limits will stay the same, but for High Priced Counties, the loan limits are now adjusted according to the cost of an average home in the county.  Here in Hawaii, each island has its own limit, but they all exceed the prior limit of $625,500 that had been in effect for the past two years.

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I had the pleasure of working with the Quong family on two different occasion to help them with their VA financing.  Both Terence and Melissa were a joy to work with and I’m glad they are doing well in Oklahoma City.  Below is a wedding day picture of the Quong Family right before Melissa got PCS’d to Oklahoma.

As with anyone who has a VA loan, we received countless offers from local companies soliciting refinancing.  However, my husband and I only became interested in researching our options after receiving a letter from Gabe Amey at Hawaii VA Loans.  We did our research and found Gabe to be knowledgeable, patient, professional, and honest; and far more willing than any other to answer all our questions.  He and his outstanding staff provided all the guidance needed to help us make an informed decision.  We were able to easily and quickly accomplish our refinancing goal with their expert help.  We were so pleased with their service that we worked with Hawaii VA Loans for our new home loan when we PCS’d to Oklahoma mid-summer ‘08.  Again, we were able to secure a new loan with a great rate and feel very comfortable doing so, even for an out-of-state home.

Melissa & Terence Quong