VA Home Loan Homebuyer Workshop

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Slide 1

VA Home Loan Program © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com www.TheZeroDownLoan.com

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The VA Loan Guaranty program is a benefit Throughout the history of our country, it has been a priority of the government and the citizens to support those who protect and defend us as part of our military All veterans who served a required length of service, and an acceptable character of service can receive it The benefit of the veteran is the underlying principle The VA may only guarantee a loan when it is possible to determine if the veteran: Has sufficient VA entitlement available Is a satisfactory credit risk AND Has present and anticipated income sufficient for repayment of the mortgage and other living expenses The VA Loan Guaranty © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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No Down Payment, 100% financing up to $417,000 No monthly mortgage insurance premiums Leniency on credit and employment history No reserve requirements (1 unit only) Automated underwriting and traditional underwriting using residual income and debt to income ratios Seller can pay off debt for borrower 100% gift funds allowed 2 years on Chapter 7 BK discharge, 2 years since Foreclosure 1 year on Chapter 13 BK pay out Benefits of a VA Loan © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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30 year Fixed Rate 15 year Fixed Rate Regular and High Balance VA Loans Purchase Owner Occupied Homes Only Product Types © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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A veteran is eligible for VA home loan benefits if served in the Army, Navy, Air Force, Marine Corps, Coast Guard, Reserves or National Guard and was discharged under conditions other than dishonorable The Minimum Duty Service Required during wartime periods is 90 day of active duty The minimum service required during wartime periods is 181 days of continuous active duty The minimum service required for members of the Reserves and/or National Guard is 6 years Veterans who served less than the minimum required period may be eligible if discharged because of service-related disabilities An unmarried surviving spouse of a deceased Veteran who died while in service or service-connected issues is eligible Veteran/Borrower Eligibility © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Only the spouse of Veteran is eligible to co-borrow with the Veteran on a VA home loan. No other person may co-borrow, i.e. brother, sister, parent, aunt, uncle, significant other, etc Non-Purchasing spouse is acceptable with a current credit report and count ongoing debt (Collections not included) Non Occupant co-borrowers are not allowed A Certificate of Eligibility must be ordered by Lender For more details go to VA’s website on General Eligibility Requirements http://www.homeloans.va.gov/elig2.htm Veteran/Borrower Eligibility © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Veterans purchasing a primary residence, must certify that they intend to live in the home If the buyer is on active duty, a spouse may certify occupancy. Single or married service members deployed from their permanent duty station are considered to be in a temporary-duty status and are able to certify intent to occupy, there is no need to have a spouse certify occupancy Occupancy © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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SFR, Condo, PUD, 2-4 units ($417,000 max) Condos must be acceptable to VA, check VA’s site: http://condopudbuilder.vba.va.gov/2.2/frames.html Manufactured homes =Permanent Foundation. Properties re-sold within 90 days of seller’s acquisition are eligible with some restrictions Property Eligibility © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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On October 10, 2008, the President signed the Veteran’s Benefits Improvement Act of 2008 The maximum guaranty amount varies upon the location of the property For all areas in the US, except Hawaii and Alaska, the maximum guaranty amount is the greater of 25% of (a) $417,000 or (b) 125% of the area median FHLMC loan limit for a SFR in the county in which the property exists Hawaii and Alaska the maximum guaranty is the greater of 25% of (a) $625,500 or (b) 125% of the area median FHLMC loan limit for a SFR in the county in which the property exists VA Loan Limits © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Maximum Loan Amount © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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The VA guaranty or a combination of the VA guaranty + the borrower’s down payment, must be = to at least 25% of the subject property’s estimated reasonable value aka notice of value (NOV); The maximum guaranty on a VA loan is the lesser of the Veteran’s available entitlement or the maximum potential guaranty amount indicated below Maximum Guaranty © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Veteran has used $48,000 of entitlement on a prior loan, which may not be restored, and is purchasing a home for $425,000, county limit is $650,000 (Ventura, California) $650,000 x 25% = $162,500 Maximum Guaranty $162,500- $48,000 = $114,500 Entitlement Available $114,500 x 4 = $458,000 Maximum Loan Amount with 25% Guaranty Since the proposed loan amount will be less than the $458,000, the lender will receive 25% VA Guaranty on the loan of $425,000 and a down payment will not be required VA Guaranty Example © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Residual income is calculated, with a set guide for varying family sizes, according to regions across the country. An obvious inadequate residual amount alone can be a basis of a decline Maintenance and utilities cost is 0.14 per square foot DTI - 41% - secondary to the residual income calculation May exceed ratio withAutomated Approval When the DTI is > 41%, but the residual income is >20% of stated guide, an approval is generally justified. Non-Taxable Income may be grossed up by 25%, eg Social Security, Disability etc Ratios and Residual Income © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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There are actually 4 types of COE’s Regular/Full-Time/Active Duty – Green Reservist/National Guard - Gold Annotated for Unmarried Surviving Spouse - Green ACE (Automated Certificate of Eligibility) Certificates are computer generated Certificates of Eligibility © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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If Veteran does not have a COE, one can be obtained through the mail, or online through the Automated Certificate of Eligibility system. (ACE) To Apply VA Form 26-1880, Request for Certificate of Eligibility Proof of Service Restoration Documents as applicable (Hud-1, Deed of Release and Reconveyence. Proof of Service DD214 (must show character of Service – Member 4 copy) Statement of Service for Active Duty (must include name, SS#, DOB, date of entry, any time lost) NGB-22 (Army/Air National Guard) CG-4175 (Coast Guard Reserve) Chronological Statement of Retired Points Summary (Reserves/Guard) To order through the mail, send the completed 26-1880, with proof of military service papers directly to VA: Certificates of Eligibility © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Your Lender Can Order the COE Online, within minutes through VA’s ACE (Automated Certificate of Eligibility) system. Result will be a successful COE or a reference number. If a reference number is received then an Electronic Application must be submitted or your request mailed to the VA Eligibility Center. Your Lender may also upload any documents necessary, to complete request. Certificates of Eligibility © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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ACE cannot make all determinations. Some types of cases that cannot be processed through ACE include: Persons whose service was or is in the Reserves/National Guard Persons who may have had prior VA loan(s) that went to foreclosure Persons who did not serve the min. required length of service and were not discharged for an authorized exception. Persons who were discharged under conditions other than honorable Persons seeking restoration of previously used entitlement Unmarried surviving spouses Certificates of Eligibility © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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The Funding Fee is a charge that most Veterans pay to use the VA Loan Guaranty Program The Funding Fee is calculated on the full loan amount The following Veterans are exempt from paying the fee Veterans receiving VA compensation for service-connected disabilities Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay. Surviving spouses of Veterans who died in service or from service-connected disabilities. The VA Funding Fee may be financed On loan amounts exceeding $417,000, the fee can only be financed if the loan amount + funding fee are less than the maximum loan amount for the county (high balance). VA Funding Fee © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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VA Funding Fee Chart © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Veterans who signed a purchase contract before a VA Appraiser determined value (NOV) cannot lose their earnest deposit and the Contract must include or be amended to include the following clause: It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise or be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs. (Authority: 38 U.S.C. 501, 3703(c)(1)) VA Escape Clause © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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The seller can contribute up to 4% of Purchase Price in concessions on a VA loan, plus the buyer’s normal closing costs. The buyer’s normal closing costs include fees such as Lender fees and reasonable* discount points. Example: If the market dictates an interest rate of 5 percent with 2 discount points, the seller’s payment of the 2 points would not be a seller concession. If the seller paid 5 points, 3 of these points would be considered a seller concession. The 4% Limit Seller Concessions © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Seller concessions include, but not limited to the following: Payment of the buyer’s VA funding fee Prepayment of the buyer’s property taxes and insurance Gifts such as a television set or microwave oven Payment of extra points to provide permanent interest rate buydowns Payoff of credit balances or judgments on behalf of the buyer.  Seller concessions do NOT include Payment of the buyer’s closing costs, OR Payment of points as appropriate to the market Any seller concession or combination of concessions which exceeds 4% of the established reasonable value of the property is considered excessive, and unacceptable for VA-guaranteed loans. We do not include normal discount points and payment of the buyer’s closing costs in total concessions for determining whether concessions exceed the 4 percent limit. Seller Concessions © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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The Veteran can pay a maximum of; reasonable and customary amounts for any or all of the Normal Closing Costs or (Itemized Fees and Charges designated by VA) plus a 1% origination fee and reasonable discount points. Normal Closing Costs - Fees the Veteran CAN pay Discount Points (Purchase or Refinance) Loan Origination Fee (1% Max) Appraisal and Compliance Inspections (cannot pay for lender or other party requested appraisals) Credit Report Fee Title Insurance Fees Recording Fees VA Funding Fee (may be financed) Hazard Insurance Premium Pre-paid Interest, Tax and Insurance Impounds Flood Zone Determination MERS report fee Survey Allowable Closing Costs © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Fees that Veteran CANNOT pay or Unallowable Closing Costs: (Must be Paid by the Seller/Broker on a Purchase or by the Lender/Broker on a Refinance) Escrow, Settlement or Closing Fee Administrative Document Preparation Underwriting Review Processing and Application Wire Tax Service Notary City Transfer Taxes or Tax Stamp Interest Rate Lock In Fee Commitment or Marketing Fee Lender’s Appraisals and Inspections Conveyance Fee Attorney’s Service (other than title) Photographs Amortization Schedules, Passbooks and Membership or Entrance Fees Broker or Assignment Fees Fees for preparation of Truth-in Lending Disclosures For all of the details from VA, log on to www.homeloans.va.gov/ls.htm, and select “The Lenders Handbook”, then select Chapter 8. Allowable Closing Costs © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Minimum Credit score 580 up to $417,000 640 $417,001 to $650,000 At least one credit score, and preferable two or three credit scores, must be obtained for each veteran, from major Credit bureaus Perform a CAIVRs Inquiry on all borrowers Order VA Benefits Form if necessary Current Rent and/or Mortgage history Absence of Credit History: use alternative credit such as utility bills, auto insurance, cell phone, etc (with Reference Letters) Bad credit belonging to a spouse who is not co-purchasing with the Veteran is not considered against the Veteran. But Monthly obligations are considered due to community property State. A credit report is required on all non-purchasing spouses. Detailed explanations are required for all derogatory credit/past collections etc. Credit History © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Judgments must be paid in full, or subject to repayment plan with timely payments (12 months) Consumer Credit Counseling -12 month perfect payment history and counselor permission to proceed Bankruptcy Chapter 7 discharged more than 2 years are disregarded. Chapter 13, with 12 month perfect payment history and court permission to proceed with purchase of home. Foreclosure or Deed-in-Lieu, within last 2 years is not acceptable, unless a well documented reason can be found, outside the applicant’s control Credit History © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Must verify alimony and child support Student loans scheduled to begin within 12 months of the close of escrow will be counted Loans secured by deposited funds are not counted When calculating estimated housing expense, consider $0.14 per square foot for monthly maintenance and utility expense Installment debts with less than 10 months remaining do not necessarily need to be included in credit qualifying. Large payments should be considered. Debts and Obligations © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Wages - require 2 yr. history, less than 2 yrs cons. case by case Overtime income and 2nd job income generally needs 2 year history, less than 2 years considered case by case. Commission – 2 year history, unless previous related employment or specialized training – 1040 Fed Tax Returns required. Self Employment averaged 24 months, 1040 Fed Tax Returns required. Alimony and Child Support must be verified and stable Seasonal jobs and unemployment may be averaged with 24 month history of both Other Income, pension, retirement, disability, etc. must be verified Income and Employment © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Residual Income Guideline © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Include, but are not limited to: Excellent credit history Conservative use of consumer credit Minimal consumer debt Long-term employment Significant liquid assets Sizable down payment Little or no increase in shelter expense High residual income Low debt-to-income ratio Compensating Factors © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Originate Loan application, with all applicable VA forms and Disclosures Order Certificate of Eligibility Order CAIVR Order Appraisal/Termite Report Run Automated Order Verification of VA Benefits if applicable Process Loan, Check for all VA Forms Submit complete package to VA Underwriter Receive Approval and close your Loan VA Processing Steps © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

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Complete Homebuyer Information: http://www.TheZeroDownLoan.com Play with VA Loan Payment Options Using The Award Winning Super Mortgage Calculator at www.thezerodownloan.com Contact A Loan Professional at (877)-332-9703 Today! Click Here To Calculate VA Loan Payments On Any Purchase Price http://www.thezerodownloan.com/mortgage-calculator/ VA Web Links © Copyright FRONTIER CONSULTING ASSOCIATES, LLC 2011 VA@TheZeroDownLoan.com VA@TheZeroDownLoan.com

Summary: VA Homebuyer Workshop Slideshow www.TheZerodownloan.com

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