In order to be approved for a VA home loan, a property for sale must go through a VA appraisal. But not all properties are automatically eligible to be appraised by the VA. The Department of Veterans Affairs has a list of properties that are eligible for appraisal. It may sound like a formality to declare a property “eligible for appraisal” but VA rules say the lender must “to exercise due diligence in determining appraisal eligibility”, otherwise the VA is within its rights to deny or reduce payment on any “a future claim based on the ineligibility of the property”.

Which properties are eligible for appraisal? The VA breaks down the list according to the type of property, which include:

• Existing construction
• New construction
• Proposed or under construction
• Manufactured homes classified as real estate and “other types” of manufactured homes.

Each type of property has its own requirements. For example, for existing construction homes, the rules are the shortest of the bunch. The VA requirements state that VA eligibility applies to any home that has been previously owner-occupied or has had all improvements required by the VA completed in full for 12 months or longer. The VA says this in part because there is a major difference between properties classified as new construction and those that are considered existing construction.

Just because a home is completed and ready for occupancy does not classify it as “existing construction”. That classification has requirements which can include the above—it must have a previous owner or be in full compliance with VA requirements for construction for a year or longer.

When it comes to new construction properties, the VA says an inspection is possible when the home is covered by a one-year builder’s warranty or of the home is covered by a HUD-approved ten year insurance protection plan. There is one additional way a home can qualify for a VA appraisal—when it’s been build by a veteran who acts as the general contractor and the home  has been built for that veteran’s use.

We’ll cover the other properties in another blog post.

The Department of Veterans Affairs offers VA home loans to qualified veterans and their families—that’s common knowledge. What’s not so well known is how the government can afford to pay for this program. The VA loan program is paid for in part by the VA funding fee borrowers pay in addition to closing costs and other expenses related to buying a home.

Like many other aspects of buying a home, there’s no one-size-fits-all VA funding fee amount. The amount of the fee varies depending on a number of factors including how much (if any) down payment is made on the VA mortgage, and the military status of the applicant.

The VA doesn’t charge funding fees in all cases. There is a list of VA-approved circumstances that make the VA loan applicant exempt from having to pay this fee, which can be as much as 2.15% of the total loan amount in some cases. Who is exempt from paying the VA loans funding fee? According to the VA:

• Veterans who receive VA compensation for service‐related disabilities are exempt from the VA funding fee
• Veterans who are rated by VA as eligible to receive compensation as a result of pre-discharge disability examination and rating.Veterans who would receive compensation for service‐related disabilities if they did not receive retirement pay are also exempt
  
• Surviving spouses of military members who died on duty or who died or from service‐related disabilities as determined by the Department of Veterans Affairs are exempt

The existence of these situations that exempt the borrower from paying the VA funding fee aren’t’ enough. The VA requires the following documentation and paperwork:

• A VA Form 26-8937, Verification of VA Benefits, indicating the borrower’s exempt status
• For veterans who choose retirement pay instead of VA compensation, a copy of the original VA notification of disability rating

--and--

• Documentation of the veteran’s service retirement income

For surviving spouses, the VA requires a Certificate of Eligibility that shows the borrower is entitled as an unmarried surviving spouse.

When calculating military income for VA home loan applications, current service members serving in the US have the Basic Allowance for Housing to consider as verifiable income on a VA loan application.  Some military members apply for VA loans with a debt-to-income ratio skating the edge of what’s allowed according to VA requirements. How does a soldier, sailor, airman or marine make smart decisions to bring the debt-to-income ratio down and qualify for a VA mortgage? The VA’s debt-to-income ratio maximum is 41%. That means the VA borrower can’t owe more than 41% of their verifiable income if they want to qualify for a VA loan.

The first thing to do is examine debts and eliminate them wherever possible. This isn’t as daunting as it might seem at first if a military member keeps an eye on the future. Does the VA applicant have a re-enlistment bonus coming up that could be used to reduce the amount of debt? What about a raise based on time in service? Paying down a credit card over time with such a pay raise could be a huge help. The same goes for those about to get a raise because of an upcoming promotion.

Another factor to consider is how a promotion could affect the amount of BAH the military member is entitled to get. How does the debt to income ratio change? The BAH rate for a married Staff Sergeant in 2010 in one zip code comes out to $ 1689.00. That same sergeant getting a promotion to the next rank sees an increase of BAH to $ 1974.00. That’s a good increase that should be taken into account when making financial plans for that VA mortgage.

Keeping an eye on such pay increases and other factors can help with the timing of a VA loan application, not just the application itself. Would you rather wait the extra time until your promotion or time-in-service pay increases kick in and have a better chance of getting VA approval for your loan application? For some borrowers, this is a strategy that makes sense when trying to cut the debt-to-income ratio.

Halloween may be a month away, but the MLS , the LA Times, and our local real estate magazines never disappoint. This week's offerings include trolls and witches. By the time Halloween arrives, I'm sure a few more skeletons will be leaping out of somebody's closet! (No, Perez Hilton - not your closet.)  Check 'em out:

Happy Haunting

"Lake cabin under trees - enjoy fishing and haunting" (A place to Reel and Squeal)

"Garage with Trol Shed" (I suspect this is a ‘lake cabin under trees'...)

"Tree louse for kids" (Isn't the "trol" enough to scare the beejezus out of  'em?)

"Wired for cabal" ( A place to scheme and scream)

"Probait sale - needs cleaning. Crime disclosure" (What a pitch - macabre terms, worms and germs!)

"Levitated pool for the kids" (Good trick - can you also make a kiddie therapist appear?)

Put This on a Tombstone!

"New ho ttub and deck" (Pay ‘em and spray ‘em)

"Dock with boat rump" (Dock with crack in it?)

"New shitlap siding" (Note to agent: Haste makes Waste.)

"Low price spanks for itself" (Bend over and smell the clover.)

"Original prank floors weed finishing" (A joke and a toke!)

Not a Ghost of a Chance!

"Updated wasted lines" (Outdated, wasted agent.)

To Continue, Follow this Ghostly Link:

For More real Estate Humor, Visit www.SherlockofHomes.blogspot.com/

 

Happy Anniversary, Blue Ridge Parkway! Yes, that's right, our beautiful Blue Ridge Parkway celebrates 75 years this fall. Building of the Parkway officially began on September 11, 1935, near Cumberland Knob in North Carolina. Work in Virginia began in February of 1936.

Stanley L. Abbott, who became known as the "father of the Blue Ridge Parkway" for his work on its design, was hired to plan the route. Abbott developed a plan to create the Parkway as a chain of parks and areas of recreation where visitors could stop and enjoy the panoramic views of the Blue Ridge Mountains, as well as the natural wildlife and flora and fauna of the area. The project was under the jurisdiction of the National Park Service. Much of the early work was performed by crews hired under various New Deal programs.

The first part of the Parkway was a 12.5 mile section that was the first of 45 planned sections. Ultimately, the Blue Ridge Parkway would run all the way from the Shenandoah National Park to the Great Smoky Mountains National Park.

When World War II broke out, about $20 million had been spent on the Parkway and 170 miles were open to travel, while another 160 miles were under construction. Due to delays caused by the war, the Parkway was only about half completed by the mid-1950's. A development program known as Mission 66 was started in 1958 and construction accelerated. By 1966, only 7.7 miles over Grandfather Mountain remained incomplete.

Finally, in 1987, the entire 469-mile Parkway was completed and open to traffic, and is now the most visited part of the National Park Service.

With the approach of the fall season, the Blue Ridge Parkway will put on its finest colors for those who care to visit. Smith Mountain Lake homeowners are close to the Parkway and its natural beauty, as well as near the lovely views of Smith Mountain Lake itself. If you're planning a visit to the Blue Ridge Parkway to see the vistas of colorful fall foliage, why not make a stop at Smith Mountain Lake part of your itinerary and see what it has to offer as well. You may not want to leave!

To learn more about some of the beautiful homes for sale in the Smith Mountain Lake area, contact Jane Sullivan Horne or visit her website. Jane and her staff can also be reached at 540-493-1690 and are ready to help you find your perfect spot at Smith Mountain Lake, whether for year-round living, a seasonal vacation home, or the retirement home of your dreams.

  Jane@JaneAtTheLake.com

I’ve mentioned before that the very first step in getting a VA loan is applying for eligibility from the Department of Veterans Affairs. I’ve also written that VA borrowers can go through their lender to help them get that application process started. But what about vets and active duty service members who prefer to take care of this themselves?

VA borrowers who’d rather handle this basic first step used to have to fill out paper forms and submit them by mail, but thanks to the VA’s addition of the Veterans Information Portal, much can be accomplished online instead—and not just applications for VA home loan eligibility.

The first thing to do is to go to the portal and register to set up an account.

Applicants need to provide their name and Social Security number to begin, plus the usual home address, phone numbers, and e-mail. Fortunately there is no wait time between signup and access to the Veterans Information Portal, applicants get access as soon as the information has been entered and updated by the system. In typical cases, once all the required fields have been filled out the wait time could be as long as two minutes from clicking the last button on the VIP registration form to the time access is granted.

The best part about signing up for the Veterans Information Portal? In typical cases for veterans with established military records, the Certificate of Eligibility for VA Loans is generated automatically after registering for VIP. Applicants can view the certificate and print it out. Again, this is for typical cases—some applicants recently discharged, newly enlisted or having other circumstances which might require additional assistance may find their VIP experience a bit different and should view the VA’s list of toll-free contact numbers to get help for any issues. The VA Home Loans toll-free number is 1-800-827-1000.

We in the VA loan business—real estate agents, lenders, brokers, and property inspectors, etc.—throw around terms that can be a bit misleading to the new VA borrower. One of those terms is the word “inspection”.

A VA appraisal of any given property to establish fair market value--a Department of Veterans Affairs requirement. The inspector must be VA-approved and has to conduct the property valuation according to the rules set down by the VA. But what do first time home buyers hear when we talk about a VA inspection of the property? While it’s true that lenders and RE agents may counsel their clients about the purpose of the appraisal, it’s that word that keeps getting in the way.

“Inspection” implies the same thing to a veteran or active duty service member that it does in a military context; a good once-over. The white glove treatment. An actual, honest-to-goodness INSPECTION for flaws, defects, blemishes, bumps, bugs, whatever.

We know the actual term we should be using all along is “appraisal”...and a lot of us are good at remembering to say it instead of "inspection". But even so, “appraisal” still implies that somebody is out there giving a close look at a property to see if there are problems or potential problems.

So much so that the VA has the following question in it’s FAQ section about VA loans:

“My home was appraised by VA and now I am having problems with its condition. Wasn't the appraisal an inspection of the property and can't VA help me with these problems?”

To which the VA replies with the answer those of us who deal with these issues day in and day out know by heart. The VA does NOT promise the buyer that all defects will be spotted, or that all aspects of the property will turn out to be acceptable once the buyer is all moved in.

The VA appraiser doesn’t have to walk out onto the roof to have a look, for example—who does? It’s the buyer’s responsibility to take a much closer look at a home before committing to it. Roof included.

We can adjust our jargon all we want, we can remind the buyer to look for themselves until we’re blue in the face, but at the end of the day it’s very important to remember how many details a first time home buyer has to wade through on the way to home ownership. So how can you get a buyer to take matters into their own hands after the VA appraisal but before the deal is closed? More on THAT in my next blog post.