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What is a VA NO-NO Loan ? Its as good as it sounds.

The VA "No-No"

It's possible that you've heard or used this term before but unless you're a veteran using your home loan benefit to buy a home; it's not a term you'll run across during your daily routine. The VA home loan benefit is a special government-backed mortgage used to finance a primary residence and does not require a down payment from the borrower along with reduced closing costs and relaxed approval guidelines compared to conventional loans. What is a VA no-no?

No Money Down

The first "no" represents no money down from the borrower. As part of the original G.I. bill crafted in 1944, this special entitlement was provided to returning service members to help them assimilate to civilian life once again and get a fresh start in the working world as a new homeowner.

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Back then, home loans required a down payment. A sizable one in many instances with some banks offering mortgages only to those with a down payment of 20 to 30 percent or more. That left home ownership to those well off, leaving much of the working class out of the picture.

The G.I. bill recognized that while our soldiers were fighting and protecting our freedom, they didn't exactly have time to set up a savings plan. Even if they did pull some time off, there was little to save. Providing a veteran an opportunity of home ownership and waiving the down payment requirement is the shining feature of the VA mortgage program.

The Second No

The next part of our "no-no" equation refers to closing costs. As in, not having any. A VA no-no is the nickname given to a VA loan where the veteran doesn't have to pay any closing costs along with no down payment requirement.

Not a bad deal and only reserved for VA mortgages.

But the second "no" doesn't mean there are no closing costs, it's just that the veteran doesn't have to pay them. There certainly are closing costs including appraisals, a credit report and origination fees among a host of others.

The borrower also has to have homeowners insurance on the property and property taxes must be settled as well. So how does the veteran get away with no closing costs? There are a couple of ways.

The Seller Contribution

Seller contributions refer to amounts paid for on the buyer's behalf by others. These contributions, called "concessions" are limited to 4.00 percent of the sales price of the home. That means if a home is selling for $300,000 then the seller is allowed to contribute up to 4.00 percent of $300,000, or $12,000 in closing fees. Anything beyond that is prohibited.

Yet that's quite an amount. Closing costs on a traditional VA loan on a $300,000 home might be closer to $6,000, not $12,000.

How does the buyer get the seller to pay the closing costs? The buyer asks. When making an offer on a home, the sales contract can read: "Seller to pay closing costs on behalf of the buyer not to exceed 4.00 percent of the sales price."

The seller can agree or disagree. Or counter with a specific offer of "Seller will pay up to $3,000 of the buyer's closing costs." But what if the seller doesn't agree to cover certain fees or pay any of the buyer's costs whatsoever?

The Lender Credit 

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Another method of paying for closing costs comes from the VA lender directly. A VA lender can offer a lender credit that can be applied to the buyer's closing costs by adjusting the interest rate on the mortgage. How so?

It's common knowledge that borrowers can reduce the interest rate on their loan by paying a discount point to lower the rate. For instance, if a 30 year fixed rate is at 4.00 percent today without any points, the lender might also offer a lower rate of 3.75 percent with one point. On a $300,000 loan, that's $3,000.

Conversely, a lender can increase an interest rate and provide a credit to the borrower in exchange for the higher rate. Using this example, a lender might offer a 4.25 percent rate, one-quarter higher than the 4.00 rate with no points, and offer a one point credit to the borrower. In this example, applying $3,000 towards the borrowers costs.

That's a VA no-no. It takes some preparation as well as negotiation and the seller as well as the lender can both contribute to the cause. No money down and no closing costs is financial music to a veteran's ears.

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Ty Laffoon 

Prime Mortgage Loans
619-630-0396

NO YOU DONT NEED 20 % DOWN TO BUY A HOME. HOW ABOUT 3.5% FHA OR 5% CONVENTIONAL

Looking to get your foot in the door (of your new home)? If you’re a renter who’s tired of paying someone else’s mortgage, now may be the time to pursue the American dream of homeownership. In fact, the days of needing a 20% down payment are long gone. While you can always elect to put down the full 20% or more, there are now many alternatives available. Here’s what you want to know if buying a house is in your future.
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In the mortgage industry, 20% down is considered the benchmark down payment for looking strong on paper as a home buyer. While this a general standard for financial strength, it is by no means a requirement, nor is it necessarily expected.

However, keep in mind that your purchase offer amount – your buying power — drives negotiation. How strong you are on paper does help, but when you make an offer to buy a home, the seller of the property has no idea of your financial strength other than what your real estate agent tells them and  The price dictates whether you’re in the game for the house, or whether you’ll continue to be on the search.
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Down Payment Options

So let’s say you don’t have 20% down for a home. While there are many benefits to having more equity in the home you’re buying, that doesn’t mean you’re out of the running for becoming a homeowner. There are options for lower down payments.

3.5% Down

For an FHA loan, the minimum down payment you would need to buy a home is 3.5% down. Most lenders can lend up to $417,000 with the exception of Alaska, Hawaii and Guam. An FHA loan comes with a monthly mortgage insurance payment, which can make it more expensive than a conventional mortgage.

 

In some more affluent markets, the higher loan amounts (per county) allow someone with strong income and less cash to still get into the market.
5% Down
Another popular choice for buyers is using a conventional loan with 5% down. There are loan size amounts up to $417,000 (with the exception of Alaska, Hawaii and Guam) going as high as $417,000 with as little as 5% down. An alternative to the higher-priced FHA loan, the conventional loan allows for getting rid of the PMI after accumulating 20% equity after a minimum of 24 months.
0% Down
Two options exist for 0% down financing, one being through the U.S. Department of Veterans Affairs. The program allows a veteran to buy for literally no money down. Yep, the purchase price and loan amount are equal.
The caveat? Actually, there are two and the home must pass a clear pest report. This option could be optimal for brand-new construction or for property where any pest damage can be fixed in time for closing.
An alternative to this program is a loan guaranteed by the U.S. Department of Agriculture, USDA. You need not be a veteran for this particular loan, however in some areas, you may not be eligible to use the program due tighter qualifying income-to-payment ratios and location. The program also only works for homes designated rural by USDA. Additional income limitations also apply. For example: For a family of four, a household income cannot exceed $96,400 per year.
All of these options allow for the use of gift funds. Family members, cousins, relatives – these are all excellent sources to tap for possible down payment or closing costs (usually about 2% of the home price). Even if you already own a home and are looking to upgrade, all of these programs could present a viable option to bridging the gap between buying a home for the right price in the right area of vs. continuing to be on the search.
Boost Your Buying Power
Mortgage Tip: If you qualify for a smaller loan size, it could be more challenging to actually close escrow on your first home. Buying power is important, especially when negotiating in competitive markets. Pure and simple, the bigger the loan you qualify for, the more opportunity.
Conventional conforming loan — With conventional loans, you can get 95% financing up to $417,000. In counties where the maximum conforming loan limit is higher than $417,000, you can have up to 90% financing. For example: In Sonoma County, Calif., the maximum high-balance loan limit is $520,950. A loan exceeding $417,000, and up to $520,950, would require a 10% down payment.
VA loan – This type of loan allows for 100% financing all the way through the maximum conforming loan limit in the county in which the property is located. In fact, this type of loan can allow for even higher than the maximum conforming loan limit if you do have a down payment.
Here’s how: The buyer would need a 25% down payment only on the amount greater the conforming loan limit. For example, with a $520,950 loan (the maximum loan limit for Sonoma County) with a purchase price of $700,000. The difference is $179,050 – and the buyer would need to put down 25% of that difference — $44,763 – in order to get the additional VA loan financing.
USDA loan – These loans allow for financing up to $417,000, but here’s the kicker: A buyer would need an income of $95,000 to qualify for a $417,000 loan — which is getting very close to the USDA loan maximum income limitation of $96,400. More importantly, lending qualifying ratios are more stringent for this program than any other. To qualify for this loan, your proposed house payment before debts cannot be more than 29% of your gross monthly income, and the house payment plus other debts cannot be more than 31% of your gross monthly income.
FHA loans – An FHA loan will allow for as low as a 3.5% down payment up to the maximum conforming loan limit in the county in which the property is located.
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Jumbos loans – These loans usually can go as high as $750,000 with as little as 10% down.
Remember: When you’re putting less than 20% down on a home, your monthly property taxes and fire insurance terms are required to be built into your monthly mortgage payment, and you’ll likely too. Some lenders might offer an alternative option called lender-paid mortgage insurance — where the lender actually pays the monthly PMI, despite not using 20% down to purchase a home. Make sure to do your homework, and talk to your lender so you know what your options are.

Of course, it’s always important to have your credit in the best shape possible. Before you start your home search, give yourself time to work on your credit so that you can qualify for better rates. Check or any problems that could be hurting your credit  that you can work on in order to raise your scores — and you also get two free credit scores updated monthly, which can help you track your progress

This is an article from Yahoo

Ty Laffoon
Prime Mortgage Loans
Business Development Manager

    Simple ways to pay down your mortgage

Following these tips can help you reduce the length of your mortgage and save you thousands of dollars.

Below is an article that will show you a few ways to shorten or maintain the advantage on your mortgage. Here are a couple ways that I believe they should have included. These two tips may not be for everyone.

A)  Bi-Weekly Payments: Pay your mortgage twice a month not at the beginning . You pay interest on the funds you have borrowed. So if you pay half up front every 2 weeks you will be paying what seems  the same but will be adding a couple payments a year . Plus when you pay half up front you will not be pay interest on that amount for the next 2 weeks. This will Knock Off years from your mortgage. Make sure your financially ready for this

B) Add $100 to each payment . If you add this to every payment on the Bi-Weekly you will Knock Off additional years from the mortgage.

                       

Do you hate having your monthly mortgage payments hanging over your head? Then read on to discover simple ways to pay down your mortgage more quickly.

As silly as it sounds, the acronym "KISS" - for "Keep it simple, stupid" - is a good strategy for homeowners who want to pay off their mortgage faster.

How so? Simple tactics are easier to execute than any strategy that's too complicated. And homeowners hear all kinds of advice when they are looking to save on their mortgages, so it's easy to get confused, says Houtan Hormozian, treasurer of the Los Angeles Metro Chapter of California Association of Mortgage Professionals.

To help take the confusion out of saving on home loans, we've gathered five simple recommendations from industry professionals that could help borrowers "k.i.s.s." their mortgages goodbye. Keep reading to find out which of these solutions could work for you.

Simple Solution #1 - Track Your Home's Fair Market Value

Do you know your home's current fair market value? If you don't, you could miss taking advantage of cost-cutting measures such as refinancing, says Frank Williams, president of the Los Angeles Chapter of the California Association of Mortgage Professionals.

"A lot of people make their payments and forget about it," Williams says. But if your home has dramatically appreciated in market value, you should consider refinancing your mortgage to take advantage of the increased equity in your home. For instance, by refinancing, you could use your equity to pay off credit card debt or fund your children's college education.

And tracking your home's value can be as easy as using a value estimator on a real estate website or on an app for your phone. You can plug in your address to get the fair market value of your home based on comparable homes in your neighborhood and sales records.

For example, Freddie Mac, the government-backed mortgage loan enterprise, has its own estimator called the Home Value Explorer (HVE), which can generate an estimate of property value in all 50 states and more than 3,100 counties with a database of about 81 million property records.

Borrowers interested in keeping up with their home's value also might want to consider a professional appraisal of their home, which might offer a more accurate figure than online home value estimators. According to Federal Reserve Board, appraisal fees range from about $300 to $700.

Simple Solution #2 - Follow the Status of Mortgage Insurance

If you put little down on your home, another simple money-saving measure is to keep up with the status of your mortgage insurance.

Mortgage insurance is "a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan," according to the U.S. Department of Housing and Urban Development (HUD). Typically, this type of insurance is required for borrowers who make down payments that are less than 20 percent of the home's purchase price.

In order to pay down your mortgage, you'll need to get rid of monthly mortgage insurance premiums (MIP) as quickly as possible, says Williams. This move saves people a lot of money, puts them in a better financial position, and secures them for the future, he explains. So how exactly do you squash this expense?

First, you need to know when your home's loan-to-value ratio (LTV) goes below 80 percent, says Williams. Mortgage insurance is kept on conventional loans until the outstanding amount on the loan drops to less than 80 percent of the value of the house.

So you need to keep an eye on your LTV to make sure your mortgage insurance premium is dropped in a timely manner. Another tip: If you make extra payments toward your mortgage, you'll reach the requisite LTV and be able to drop your mortgage insurance sooner.

For FHA loans, however, mortgage insurance remains for the life of the loan, since these government-backed loans only require 3.5 percent down. But once the LTV reaches 80 percent on this type of loan, you can consider refinancing to a conventional loan and drop your mortgage insurance as a result.

So how much could you save by dropping your mortgage insurance? Williams says mortgage insurance premiums generally cost homeowners about 1.5 percent of their homes value, meaning the MIP for a $200,000 home would be $250 on top of mortgage payments.

"Mortgage insurance is like paying double your property taxes," Williams says. "How long do you want to pay double property taxes? Get it dropped as soon as you can."

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Simple Solution #3 - Schedule an Annual Meeting with Your Mortgage Professional

Did you know a calendar can be a simple, but very useful tool for helping you save money on your home loan? But mortgage due dates aren't the only events you should note on your schedule.

As a homeowner, you should meet annually with your mortgage professionals, says Fred Kreger, a branch manager at American Family Funding and a past state president of the California Association of Mortgage Professionals.

"Meeting with them every year is like getting a physical. It's a mortgage wellness plan," he explains.

Scheduling an annual meeting with your mortgage banker,  broker, or lender could alert you to changes that could influence your ability to save on your home loan, Kreger says. Among those changes could be new mortgage laws, rising property values, dropping interest rates, or different loan products that could better suit your financial needs.

For example, meeting with a mortgage broker could help you determine if you should switch from a fixed-rate to an adjustable-rate mortgage.

According to HUD, an adjustable-rate mortgage is a home loan that does not have a fixed interest rate. Instead, the loan is subject to changes in interest rates, which may increase or decrease monthly payments at intervals determined by the lender.

In some cases, sticking with a fix-rate mortgage year after year could be a missed opportunity if you never consider other options that could offer lower interest rates or monthly payments, says Kreger.

"Some people just pay on a mortgage for 30 years and forget about it," Kreger says, referring to the most popular loan term for a fixed-rate mortgage. "But use an anniversary date or tax season to meet with a mortgage professional. The beginning of March is good time."

Simple Solution #4 - Monitor When Lower Interest Rates Can Save You Money

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Some homeowners are obsessed with refinancing to get the lowest interest rate possible on their mortgage. But they should also figure out when refinancing to a lower interest rate is a financially sound decision.

It's true - a lower interest rate means less paid to the bank, but homeowners need to assess more than that, Hormozian says. In some cases, refinancing to a lower interest rate could actually cost you more money.

For example, lower interest rates can be negated by the refinance charges required to set up the new loan. The Federal Reserve Board's "A Consumer's Guide to Mortgage Refinancings" spells out a laundry list of potential charges and fees associated with obtaining a new loan, which a borrower might have paid the first time the mortgage was purchased.

Refinance charges such as an application fee, points, appraisal fee, inspection fee, closing fee, and title insurance (to name a few) could cost between 3 and 6 percent of a home's purchase price, according to the Federal Reserve Board.    Ty Laffoon

Unless the new interest rate offers substantial savings over the course of the loan, refinancing might not be what it's cracked up to be, according to Kreger.

So how do you know if a refi is worth the cost?

According to Kreger, you should follow the "1 percent rule." Refinancing typically makes good financial sense when the new interest rate is at least one percent lower than the old one, he says.

Consider the following comparison: A 30-year fixed mortgage of $275,000 with an interest rate of 5.5 percent would translate into $287,110 in interest over the life of the loan. But with an interest rate of 4.5 percent, the total interest would amount to $226,618. Ty Laffoon

As you can see, lowering the interest rate on this mortgage by one point means saving more than $67,000.

If you got a 30-year loan five to 10 years ago, refinancing to another 30-year loan wouldn't make sense, because you have already paid down a substantial amount of your principal. Instead, it would be better to think about shortening the loan term, says Kreger.

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Simple Solution #5 - Let Discipline Be Your Guide

Your best chance at paying down your mortgage is to understand the importance of saving.

"Every nickel helps," Kreger says. "You can pay off your loan quicker and lower your interest rate without refinancing by putting extra money toward the principal on your mortgage whenever you can. I'm talking about creating a habit."

One simple way to do this is to make bi-weekly payments on your mortgage to effectively knock years off a 30-year loan, according to Las Vegas-based loan officer Brian Cook.

On a traditional mortgage payment plan, it's 12 payments a year, Cook says. With a bi-weekly plan, it's 13 payments a year, which basically adds one payment a year that goes directly to the principal.

To see for yourself how much you could save with this tactic, check out this example provided by Cook. On a 30-year fixed mortgage of $250,000 with an interest rate of 4.25 percent, you could knock your loan term down to 25 years and save more than $32,000 by making one extra annual payment.

Cook says the simple act of making payments every two weeks helps instill an attitude of saving money in borrowers who might be prone to living from paycheck to paycheck.

"The wealthy stay wealthy by paying less interest," Cook says. "It takes more discipline, but they are budgeting better and building equity in their home faster."

    

Ty Laffoon

FICO Drops Paid Collections off report

If you’ve ever had a debt collector call you, Thursday’s announcement from credit scoring company FICO may be good news for you.

FICO just released the newest edition of its general credit scoring model, FICO Score 9. The big changes come in the area of debt collection: The score will not include paid collection accounts, and it differentiates medical collection accounts from non-medical debt.

These are significant changes for a few reasons: First, medical debt is often beyond the consumer’s control, because unlike an unpaid rent check or utility bill, the consumer may have no way of anticipating healthcare needs or medical bills and, as a result, may not accurately reflect a consumer’s typical payment practices.

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In addition, by removing paid collection accounts from the formula, consumers are, in a way, rewarded for meeting their debt obligations. In other scoring formulas, including FICO’s older score versions, collection accounts have a negative impact on a consumer’s score, paid or unpaid.
As is the goal with all credit scoring models, the purpose behind the changes to the FICO score is to better assess the risk consumers present to potential lenders. However, it’s up to lenders which scores they use, and it’s difficult to estimate how quickly the industry will adopt the new model.

The changes in considering collections accounts are similar to a formula currently in use: VantageScore 3.0. That model has grown in popularity, but FICO maintains about a 90% share in the credit scoring market.

Ty Laffoon  

“FICO’s announcement today appears to be a competitive response to the traction that VantageScore 3.0 has garnered amongst the largest lenders in the country, and changes to the new FICO model apparently try to remedy many lender and consumer challenges already addressed by VantageScore,” said Barrett Burns, CEO of VantageScore, in a statement to Credit.com.

Whatever the reason, formula changes could be very good for consumers. As score providers aim to design the most predictive models, ideally scores will become increasingly accurate reflections of a consumer’s credit risk, theoretically making it easier for consumers to change their scores through their financial behaviors.

New-score adoption is typically not a rapid process. Lenders tend to test a new model to make sure it serves their purposes better than the model in place, at which point they update their risk-assessment processes to include a new score.
“The advances in FICO Score 9 provide significant incentives for lenders to upgrade from earlier versions of the FICO Score,” said Jim Wehmann, executive vice president for Scores at FICO, in a news release announcing the update. “U.S. lenders can more consistently and precisely assess new applicants and existing accounts with a more robust credit score built on the most current credit data available, while minimizing operational hurdles associated with adoption and compliance. We stand ready to help lenders make that upgrade as smoothly and quickly as possible.

As a consumer, you never really know what credit scoring model a potential creditor will use when reviewing your application, so it makes the most sense to focus on the fundamentals of good credit and increase your chances of receiving a good credit score, regardless of model. An easy way to do this is to review the same credit score over time (checking the same score gives you an apples-to-apples comparison), and as your score changes, you can understand how your behavior impacts your creditworthiness.

Bank of America will pay just under $17 billion

WASHINGTON — The Justice Department and Bank of America have reached a record settlement in principle in which the bank will pay just under $17 billion to resolve allegations related to fraudulent marketing of mortgage-backed securities that helped cause the nation's economic crisis, an official with knowledge of the negotiations said Wednesday.
The tentative deal, reached last Wednesday night during a telephone conversation between Attorney General Eric Holder and Brian Moynihan, the bank's chief executive, surpasses a similar $13 billion settlement with JPMorgan last November, said the official who is not authorized to comment publicly.

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Last week's telephone call, the official said, came as Justice officials in New Jersey were preparing to file a complaint against Merrill Lynch, a part of Bank of America. The official said the bank then requested the call and later raised its offer to reach a tentative settlement.
Although there is an agreement in principle on the value of the deal, the official said other issues have yet to be resolved, and it could be days before there is any public announcement.
A second government official briefed on the negotiations said the settlement is expected to include "hundreds of millions" of dollars in consumer relief to help struggling homeowners in several states cope with their mortgages. The official was also not authorized to speak publicly because the negotiations are confidential.

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A critic of past settlements between banks and the Justice Department questioned whether this one will go far enough.
"The DOJ can be counted on to brag that the settlement dollar amount with Bank of America sets yet another record and claim, again, that this shows DOJ is tough on Wall Street," said Dennis Kelleher, president and CEO of Better Markets, a financial watchdog group. "But, unlike other recent settlements, will DOJ provide the public with the key information on investor losses, Bank of America profits, the names of involved executives, specific laws broken and the actual systemic illegal schemes and activities? In short, is DOJ willing to actually inform the American people about such important and grave matters?"



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