Loan Guaranty Loan Production

VA's Home Loan Program is for veterans and active duty military personnel (referred to as veterans throughout the rest of the document) and certain members of the reserves and National Guard. VA's program provides an excellent product and benefit for those individuals who have served or are serving to protect our families and our nation, as well as giving them a form of financing that will allow real estate professionals to sell more homes.

For those who are unfamiliar with the program, there are several advantages to using VA's Home Loan Program. The VA allows a veteran who qualifies income and credit-wise to purchase a primary residence without putting money down towards the sales price, as long as the sales price does not exceed the appraised value. Veterans do, however, need money towards closing costs and the earnest money deposit, which the seller generally requires when a sales contract is signed. Closing costs may be paid by the seller, which is an item to consider when the sales price is being negotiated.

Other benefits of using VA's program include:

• No down payment 100% financing up to $741,250.00 in Honolulu county including VA funding fee, all other counties in Hawaii $625,500.00 ( One to Four unit residential property eligible)
• No PMI (private mortgage insurance). VA guaranties 25% of the appraised value of the home allowing the veteran not to have to pay for PMI.
• The Veteran can refinance their current VA loan to reduce their interest rate and include closing costs without qualifying, regardless of property value.
• The seller can pay all or part of the closing costs associated with the process and closing of the mortgage.
• Disabled veterans rated at 10% or higher are exempt from funding fee. 
• No prepayment penalties.
• Cash out refinances up to 90% of appraised value up to $741,250.00 in Honolulu County, all other counties in Hawaii $625,500.00

Here are additional items you may choose if you find them useful:

• Certificates of Eligibility - What is needed, and how to obtain it.
• Lost proof of service? Visit the National Archives and Records Administration or from the American War Library
• Need to find lenders? www.saidynot.com

How much can the veteran afford (and other important factors)?

Please note that VA uses two methods for qualification purposes. The primary method of evaluating a veteran's income is the residual income method. Under this method, the underwriter determines that a veteran has sufficient income to cover day-to-day living expenses after paying housing expenses, taxes, and other debts such as car payments and credit card payments. VA also uses a debt-to-income ratio method like many programs. However, VA uses only one ratio which is the ratio of total debt (both housing and other debt) to income. To calculate the ratio click here.

Important: This is provided for informational purposes only. A VA approved lender is the best resource to see how large a VA loan the veteran truly qualifies for. The lender will look at income (amount and stability), credit and compensating factors involved when rendering a decision. VA also allows lenders to use certain approved automated underwriting systems.

Steps in the Process of a VA Home Loan:

There are five basic steps when obtaining a VA backed home loan. Although there are los of details within each step and some may overlap, here is a basic overview of how the process works.

1. The veteran selects a home they are interested in. The purchase and sales agreement should contain a VA option clause. Sample wording for a VA option 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 of 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."
   The contract must also allow the veteran to "escape" from the contract without penalty if he/she is unable to obtain a VA loan. Some veterans prefer to contact a lender to get "pre-qualified" (see how much they can afford) prior to searching for a home. Veterans may also apply for a certificate of eligibility prior to looking for a home or contacting a lender. Please review our site for information on certificates of eligibility and a listing of lenders.
2. Contact a lender to apply for the loan. At this point, if the veteran has not already obtained his/her certificate of eligibility, they will need to. The lender may be able to obtain it off the internet or the veteran may have to complete a form and send it to the appropriate eligibility center. In either case the lender will be able to assist in the procedures of how to obtain a certificate of eligibility. The lender will complete a loan application and gather supporting documentation, i.e., paystubs and bank statements. An important item for veterans to know is that lenders set their own interest rates, discount points and closing points.
3. The lender will "process" (develop) all credit and income information. Lenders are allowed to use VA approved automated underwriting systems. The lender will also order a VA appraisal. VA's appraisal is not a home inspection or a guaranty of value. It is an estimate of the market value as of the date the inspection is made comparing it to similar homes that have recently sold in that area. Although the appraiser does look for obviously needed repairs, VA does request that appraisers not address cosmetic items. VA does not warrant the condition of existing homes. The appraiser is a licensed individual who does not work for VA but is chosen by VA to assure his/her review is unbiased in any way. The lender can not request which appraiser to use, they are assigned on a rotation basis.
4. Upon receipt of the appraisal and all supporting documentation on credit, income and assets, the lender will "underwrite" the loan. It is the lender who reviews all the data collected and decides if the loan should be granted, developed for additional data or if the veteran does not qualify and must be denied. Although VA does "underwrite" some loans, it is very rare. The decision on whether or not to approve the loan is generally made by the lender.
5. The final step for loans that meet VA regulations and guidelines is the loan "closing" (when the transfer actually takes place). The lender chooses the title company, attorney or if their representative will conduct the closing. The title company, attorney or lender representative who will handle the closing will coordinate the date and time. If there are any questions during the process that the lender can not assist you with, please contact a VA representative.

Check out our informational page regarding your relocation to the HIckam AFB or Schofield Barracks.