The VA Loan Program

Dispelling Myths and Misconceptions

Charlie and I recently went through a training put on by the Veterans Association of Real Estate Professionals to obtain our Military Veteran Housing Certification (MVHC) designation. In this post I hope to dispel some myths and confusion regarding the VA loan benefit program and its origin, intention, and uses.

In 2010 the results from the National Veterans Survey revealed that 33.6% of Veteran respondents did not know about the VA home loan program, and 8.1% of VA eligible loan seekers had a REALTOR who discouraged the use of the VA home loan. I believe these statistics are a good representation of the population, as Charlie and I faced the same confusion and push back ourselves when we were seeking financing for a new home many years ago.

A brief history of the VA loan:

The VA home loan program was a part of the Serviceman’s Readjustment Act of 1944, which aimed to help Veterans buy homes when returning home after WWII. The program was conceived as a good alternative to a simple cash payment, as it would save the government money and better serve the needs of Veterans. As of 2017 there were over 740,000 funded VA loans totaling over 188 billion dollars in benefits!

What is a VA loan?

A common misconception is that the VA is a bank, and that the VA actually loans the money for and services the VA loan. The reality is, the VA simply guarantees the loan. The VA’s guarantee takes the place of the protection offered when a borrower puts a down payment or purchases mortgage insurance for a typical home loan. Most VA loans are handled by private institutions, and the VA simply provides the ability for the Veteran to obtain favorable financing options by guaranteeing the lending institution is protected from any future losses.

The loan is good for residences that will be purchased or constructed to be occupied by the Veteran, their spouse, or dependent children. Under some circumstances, condos and multifamily residences may qualify for purchase with VA loan benefits. You can find a list of eligible condos in your area here: Veterans Information Portal Condo Report. Or, find out more about VA multifamily eligibility here. The benefit may be used many times, and under certain circumstances an eligible Veteran may have more than one VA loan outstanding at any one time, on multiple residences.

How to find out if you qualify

It is vital to allow the VA to make the determination if the Veteran is eligible for a VA loan benefit. This is not a determination that should be made by a lender. Veterans should obtain a Certificate of Eligibility (COE) form 26-1880 directly from the VA. The COE is the official document that certifies if the Veteran is eligible for the VA benefit, and will indicate the entitlement, or amount the VA will guarantee on a loan, for each individual. The COE can be ordered by the lender online and is available within minutes. if the lender is not able to pull up the COE online it does not necessarily mean the Veteran is ineligible for VA loan benefits, it simply means the system does not have enough information to make that determination at that time.

Once eligibility has been determined, the Veteran is subject to lender determined criteria, called overlays, to determine if and for how much they qualify to borrow through that particular lender. The VA does not set these requirements. The overlays may include but are not limited to; credit score requirements, debt to income ratio, and consideration regarding the handling of collection accounts and bankruptcies. As overlays vary from lender to lender, it is advisable to consult with more than one lender when shopping for a loan to guarantee the Veteran selects the best option for their circumstances.

Allowable and non-allowable Fees

Once eligibility and lender qualification have been determined, there are certain closing costs and fees that must be considered and planned for accordingly to meet VA funding requirements. There is a maximum allowable amount of fees that the Veteran/buyer can pay for. If the seller, agents, or lending institution will not incur the remaining costs, the loan will not be funded. There is a list of reasonable fees the Veteran may pay for, which include appraisal and compliance inspections, title related fees and the VA funding fees, among others. The full list of allowable and non-allowable fees can be found in the VA Policy on Fees and Charges Paid by the Veteran-Borrower.

The VA appraisal and minimum property requirements

The minimum property requirements (MPR) for a VA loan ensures that the home is built to applicable local building codes and that it meets HUD and Federal building requirements and regulations. MPRs ensure the home is safe, structurally sound, and sanitary, and meets the acceptable standards of a home in its particular locality. The VA appraisal involves examining the home for potential safety issues, structural weaknesses, and any sanitation concerns, such as the presence of pests.

The appraisal and MPRs, in our experience, are where seller and agent concerns focus when it comes to considering an offer contingent on a VA loan. In reality, if the house being pursued by the Veteran is in safe, structurally sound and sanitary condition, there is little to fear about the VA loan. The loans can close as quickly as a conventional or FHA loan, and are often less expensive for the buyer. Many underwriting accommodations can be made for Veterans buying or refinancing with a VA loan, which makes them easier to qualify for. In some cases VA loans can be used to finance up to 100% of a home’s value, which can greatly expand a seller’s buyer pool.

As always, it is vital you consult with a lending professional for any specific questions regarding your personal financial situation. If you would like help finding a qualified lending professional to facilitate the use of your VA loan benefits, or contact us any time.

Additionally, you can click here to find out about our real estate services, and learn how working with us will support what we are doing to benefit our local Veteran population.

The Good Neighbor Next Door Program for LEO and First Responders

In an effort to strengthen America’s communities, the US Department of Housing and Urban Development offers a substantial incentive for law enforcement officers, K-12 teachers, firefighters and emergency medical technicians through HUD’s Good Neighbor Next Door Program.

In return for a commitment to live in the property for 36 months as a sole residence, professionals in the afore mentioned industries are granted a seven day window of access to view and submit interest in properties that are available for purchase through the program, and are eligible for a 50% discount off of the list price of the home.

If you are interested in purchasing a home through the HUD Good Neighbor Next Door Program, you can find available property listings for your state here.  Properties available for sale change frequently, so it is best to check the website regularly if you are in the market for a home.  If more than one person submits an offer on a certain property, a selection will be made by random lottery.  

So, how does the program work?

HUD requires that you sign a second mortgage and note for the amount they discount off of the property. No interest or payments are required on this second mortgage, as long as the home buyer fulfills the three-year occupancy requirement.  You may be required to pay a pro-rata portion of the discount to HUD should you fail to fulfill the three year occupancy requirement.

Eligible participants will receive a 50 percent discount off of the HUD appraised value of the subject property. For example, if HUD lists a home at $100,000, you can buy it for $50,000, provided you occupy the home as your personal residence for the required occupancy period. If you qualify for any FHA-insured mortgage program, your down-payment is only $100 and you may finance your closing costs.  The program accepts FHA, VA, or conventional mortgages, or cash.

If the property selected requires repairs, the FHA 203(k) mortgage program can help home-buyers buy a home and still have enough money to rehabilitate or repair it. Repairs must cost more than $5,000 to qualify, and the cost of the repairs and the mortgage can be combined into a single monthly payment.  FHA’s 203(b) program may also be a possibility, if needed repairs are under $5,000.  It is always best to meet with a financial professional to discuss your financing options.

The biggest challenge I see in using this program is the caveat that, although there is no first time homebuyer requirement, one may not own any other residential real property at the time they submit an offer to purchase a home, or for one year prior to that date.  For example, if you submit an offer to purchase a home on August 1, 2019, you may not have owned a home during the period prior to that, starting July 31, 2018.

Once you have fulfilled the three year occupancy requirement, you may sell the property and keep the profit.  If you leave the employment that made you eligible for the discount at the time of purchase, there is no penalty, as long as you continue to occupy the property for 36 months.  The program does require the use of a licensed real estate agent to purchase the home. If you have any questions or want more information about the program you can contact me any time.

What Makes a House a Home

home /hōm/ noun – the place where one lives permanently, especially as a member of a family or household.

By the time I was 9 years old, my family had lived in seven different houses in three different states on two coasts. To this day, when people ask me where I grew up, or where I am from, I don’t really know how to answer their question so I just say, “I was born in California but I lived all over the place.”

The meaning of Home is surely different for everyone. A quick google search of “what makes a house a home” reveals this to be true, returning over 2.5 billion responses. Experts in the design world say making a house a home can be accomplished by adding design elements to your rooms; adding candles and meaningful photos, hanging art or placing throw blankets around seating areas. Life and style experts explain that home embodies how we live and see ourselves, and creating a home requires deep reflection and thoughtful choices. But as a seven year old, I never deeply reflected and made thoughtful choices regarding why my house was my home, it just was. Pottery Barn suggests a home is a healthy, relaxing space.

While I don’t believe a home requires fancy bed linens and $280 throw blankets to be healthy and relaxing, I have to admit that I really like the way Pottery Barn defines a home; a healthy, relaxing space.

When I try to remember some of the houses that have served as my home, I can’t remember the placement of the walls, the furniture, or the location of my bedrooms. But the memories I can recall are fundamental parts of my childhood; family gatherings around the dining table for the holidays, the smell of dinner as my dad cooked in the kitchen, doing crafts with my mom in our craft room, the pools where my brother and I swam for hours every day every summer, our four legged friends, and the love and comfort of feeling at home. Everywhere we laid our heads at night, no matter where we happened to be living at the time, it was in a healthy and relaxing space, made so by the people who occupied it.

Being a parent myself now, I realize how dependent my children are on my husband and me to be happy, healthy, and secure. For our family, home is a place to retreat to and recover from what the day handed out; be it a tough day at work for my husband or a stubbed toe for our three year old. Our home is a place of stability and safety.

My mom and stepdad’s house and literally everything they owned burned to the ground last year.  It was devastating and horribly unsettling for them; suddenly, they were homeless.

The things they were most upset to have lost were not their most expensive and rare belongings. The things they miss the most are the books my mom read to us as kids and planned to read to my kids, the knife my stepdad used to carve the holiday roasts, and the garden that my mom spent years of hard work cultivating.  The things they miss the most were the reminders of the memories we made in their house over the last 18 years.  

As my mom’s home was burning down, they were in their car driving here, to our house. Our house was their temporary home until they were able to start anew. I am well aware of the fortune I have been dealt when it comes to always having had a safe, comfortable, and dignified place to call home. Needing to provide the same under such circumstances for the people who once provided it for me, my parents, was something none of us would have ever imagined facing. There are many people who face homelessness, but often they have nowhere and no one to turn to.

Regardless of circumstances being what they may, addiction, mental or physical health challenges, strained relationships etc., I believe no individual should face homelessness on their own. While there are many folks who choose to resist housing assistance for various reasons, there are also some who don’t know what to do or where to go for help getting off the street.

In Reno, we as a community have a ton of resources for our homeless population. The Reno Police Department Community Action Office targets long term problems, such as homelessness, with outreach services that build relationships in the community. Additionally, the Reno Housing Authority provides housing vouchers for rent assistance for homeless individuals who meet basic compliance criteria, and Catholic Charities of Northern Nevada provides food, clothing, and other assistance for those in need.

One of my favorite programs in the Reno area, which I previously wrote about, is the HUD-VASH program. HUD-VASH is a joint effort between the Veterans Administration and the US Department of Housing and Urban Development that provides housing for homeless Veterans. Providing housing for HUD-VASH recipients is the reason I started Homeward Bound NV, and the reason every dollar I earn from my real estate business will be reinvested into the purchase and maintenance of safe, comfortable and dignified homes for homeless Veterans. To find out more about Homeward Bound NV and how you can help our business to support homeless Veterans in Reno, contact me here any time.

Somebody Has To Fight For What Is Right

I ran into constant roadblocks when I began my journey looking for properties to provide housing for homeless Veterans.  The issues I faced were the catalyst to me getting my real estate license, instead of contracting with a third party to represent me. I realized the full value of having my real estate license this week and exercised my ability to go effectively fight for what I believe in. 

At some point in the not too distant past I came to realize that none of the people I was working with believed in my mission, providing housing for Veterans, as much as I do. I realized that no one was going to fight for this as hard as I would; with the exception of my husband.  We sat by and watched as property after property we wanted went to other buyers.  We had deals fall through left and right due to technicalities that could have been avoided.  I was ill advised on the proper routes to take to successfully accomplish my mission.  In my experience, my agents operated in their best interest, instead of representing mine. 

We have been fighting for years, trying to negotiate business through a third party with sellers who do not follow the rules, only to realize after the fact that no one was really fighting for us at all.  We are finally in contract for a property for our Veterans that we refuse to lose, and the transaction has been going poorly at best.

I know with certainty that this was the week that this property would have been lost if I wasn’t representing myself.  But the great news is that I am.

My dad taught me a lot as a child, but there are a few lessons that stand out.  The first thing he taught my brother and me was that you never start a fight, but if someone else does you finish it.  As a kid I took that to mean; don’t punch your brother or he’ll knock you out.  I now realize, his advice applies to grown-ups too.  When you travel through central Reno and see one disgusting, disastrous property after the next, there’s a reason; were letting it happen.  I refuse to stand idle as one more property that could be put to good use exchanges hands into the ownership of another uninterested landlord; taking money out of our community and leaving trashy properties in their wake.  

Secondly, he taught me; if you can’t step around someone, you step over them.  This one used to seem a little harsh to me, but it now makes sense.  As soon as we turned up the heat on the sellers of this property to comply with simple contractual obligations, they started side stepping, making excuses, and shirking responsibility; taking on an “if we ignore them maybe they’ll go away” attitude.  This is where the transaction would have collapsed, but that’s not how we do business.   Having a direct line of contact with the sellers agent became a vital part of this transaction being executed successfully and if I weren’t representing myself I may not have had that option.

This situation takes a real estate professional into scary territory, opening them up to a lot of liability and risk.  I can understand why other professionals without a vested interest in my mission shied away from the fight, but I can say with certainty that I will not.  I have come to realize there are many people who don’t know what they don’t know when it comes to real estate transactions, and as such they are often misguided, given poor advice, and taken advantage of.  I am happy to be able to share my passion for real estate and the impact it has on people’s and the community’s lives with my clients. 

Entry Level Home Investing Reaches 20 Year High

According to a report by CoreLogic, over 11% of homebuyers are investors.  While it could be speculated that conglomerate investment firms such as Blackstone and American Homes 4 Rent account for a large portion of these sales, data indicates that is not the case.  CoreLogic’s research indicates that most investors in real estate properties have purchased between one and ten properties in a ten year period.  Their data indicates that 61.6% of investment properties are owned by “mom and pop” investors vs just 15.8% being owned by institutions, with professional investors making up the other 22.7%.  Many houses purchased by investors are bought to diversity their investment portfolio, to function as a landlord, or by someone who will fix the home up and flip it to an owner occupier.  

It is important to note that CoreLogic only considers buyers who use a corporate, non-individual identifier on the deed at time of purchase. What that means is buyers who use their names when purchasing investment properties as opposed to that of an LLC, corporation, or other business entity, are not included in this report.

Home purchasing activity of investors has been on the rise in the US, and in 2018 it reached its highest level in two decades.  CoreLogic’s research indicates that most investor activity is being seen in the entry level home tier, also targeting areas with higher than average rents.  What this does to potential owner occupant homebuyers is create a shortage of available houses, and drive rental prices even higher. 20.3% of investor purchases were in the entry level housing market in 2018, compared to 6.3% of upper end homes.

So what does this mean for renters and potential homebuyers in the Reno housing market?  It means that there is more competition now to get into an entry level home that there has been in 20 years. What I have personally witnessed in Reno is great number of out of state investors who have purchased properties in the downtown Reno area, and either use them as rentals, or simply let them fall into disrepair, waiting for their value to increase for resale.  

Many of these properties end up boarded up and condemned.  These investors take the money they earn in our community elsewhere, leaving blight in our city with very little short or long term benefit to our city.  

If you are a first time homebuyer, or a homebuyer looking to get into an entry level home, there are things you can do to help your chances of getting into an affordable home.  Working with a licensed real estate agent to closely watch the market will give you an advantage over home seekers simply using the internet to find homes. Agents have access to more up to date and accurate listing information.  Additionally, working with a qualified and competent lending institution can give you an advantage over other buyers.  Sellers in a competitive market can be more picky about the sales contracts they choose to accept, and having a reputable lender backing your offer with a financial pre-qualification letter makes your offer much more likely to be accepted.  As always, if you need help, get in touch with me here any time. I am here to help. 

The Importance of Hiring a Professional

“It’s much easier to stay out of trouble now than to get out of trouble later.” Warren Buffett

In today’s DIY climate, there are countless opportunities for consumers to take business and personal matters on themselves without the help of professionals.  With in home tax software for personal and business taxes, who needs an accountant?  But, maybe you didn’t realize you qualify for a tax credit that will save you thousands, because you haven’t read the entire latest tax code and your accountant has. If you don’t consult with a tax professional to learn about it, you may never know about it.

Need to sell your home? Why not just throw a sign in the front yard and put an add up on Craigslist; houses are basically selling themselves in this market right? The reality is that in addition to listing your home for sale and facilitating the appropriate state mandated legal process to complete your real property sale properly, a REALTOR® can help you with so much more. They can guide you toward down payment assistance for your new home, professional photography, staging, curb appeal, marketing, moving resources, escrow assistance, and so much more. They can save you money by advising you on where you should spend your money before listing your house, and where you should not. If that doesn’t convince you, the National Association of REALTORS® reports that agent sold homes sell for an average of 18% more than for sale by owner homes.

When you hire a professional, that individual takes on the liability of your transaction and has the education and resources available to prevent potentially devastating mistakes. Many homeowners are not aware that there are federally required disclosures that must be filed when you sell a home. Failing to submit any one disclosure can come with fines up to $10,000. We all try to save money where we can, but when there is as much at stake as there is when you’re filing taxes, buying, or selling a home, it is important to truly understand what is at stake before you disregard the advise of professionals. A well trained and educated REALTOR® can help you avoid devastating and costly mistakes from becoming a part of your transaction.

It is also vitally important to consider the source of information you are relying on to make a decision.  As such, a REALTOR® is not a financial or tax-adviser and should not be considered a reliable resource to advise you on how to file your taxes.  Hiring the right professional for the job is the most important thing you can do to protect your financial future.

If you are considering buying or selling a home in northern NV consider supporting our business, Homeward Bound NV. All earnings we receive from our work representing you will be reinvested into housing for Veterans in the Reno metropolitan area. To find out more about our services contact us today by following this link:

Contact Homeward Bound NV

The Most Lucrative Business Deal Isn’t Always the Right Deal

I recently read a post by Jamie Anderson, Why Surrounding Yourself with Positive People Isn’t Always the Best Choice, and the piece spoke right to my soul.  Anderson argues against the idea that we are only as good as the people we surround ourselves with. Studies often suggest that we are wise to select our friend group based on what they can provide for us; social status, professional status, positive attitudes and the like.  Anderson counters this idea, asserting that there is nothing wrong with being the positive force when others are weak, inspiring others and building them up instead of expecting them to always do so for you.  I think her ideals are commendable.

As I was reading, I couldn’t help but see a likeness in Anderson’s ideas about friendship and my own ideas about my business.  I find myself having to constantly defend some of my business motives and decisions, to people who have no vested interest in my business. It’s hard to explain to money minded people that maybe always doing the thing that makes the most money, solely because it is the thing that makes me the most money, isn’t necessarily the right thing to do. 

I feel very fortunate to have found a brokerage to partner with which shares my values. Doing the right thing, not the easy thing, and serving remarkably is the foundation of everything that we do.

The right thing for me, is doing what is going to have the most positive impact on the largest number of people and Berkshire Hathaway HomeServices supports that.  Maybe that “‘thing” is personally financing a property for someone who has tried to save up a down payment their whole life to no avail, due to circumstances out of their control.  Maybe it looks like paying for a client’s home inspection, so they don’t have to put the charge on their credit card, or buying a distressed property and putting enough money into it to change the course of an entire neighborhood.  It may not be the most immediately lucrative financial decision, but whether or not it’s the right decision is for me to decide.

So much of the downtown area in Reno is owned by faraway landlords.  Of the properties I look into that are vacant, in disrepair, or condemned in the downtown Reno area, I would put a number of around 75% being owned by people all over California. Many of these out of state owned buildings have the highest calls for police services in the city.  These are disinterested investors, sitting on these properties waiting for them to increase in value enough to turn a decent profit, then they sell.  Often times another investor is the buyer, who then sits on the property for years, again waiting for it to appreciate in value only to be resold as is. Sometimes they use the properties as “weeklies” and rent the rooms out to fixed income individuals.

The craziest thing about these run down motels in Reno is this; they’re bringing in $300 per week per room. In the case of a 40 room motel, like the Desert Sunset on 4th street, that amounts to over $600,000 per year to the owner; for people to live in a filthy motel room without a kitchen, linens, or cleaning service.

The problem in Reno is not just out of state investors.  I tried to buy the Desert Sunset Motel in 2017.  The place was a disaster; mold, squatters, hypodermic needles everywhere, boarded up and condemned. I wanted to buy the Desert Sunset and fix it up so badly. At the time, I intended to clean up the property, modify it for ADA compliance, and provide housing through HUD for senior citizens who were being displaced by the expansion of the Sand’s Casino.

But it was bought, for double fair market value, by a local politician’s son.  The buildings are still boarded up to this day.

My hope is that more people who care will start buying these properties and rebuilding the character of the areas surrounding downtown Reno.  If they do, it may not be the most immediately lucrative business decision they ever make, but that doesn’t mean it isn’t the right thing to do.  It is easy to see that these investors don’t care about our city. But if they don’t, and we don’t, then who will?