Mar. 15, 2008 - Vandenberg Air Force Base Buyers VA 100% Financing Home Buying Tips

Now that home prices have declined significantly on the Central Coast, we are beginning to see the return of VA financing. VA financing limits the purchase price of a home to $417,000, which was the previous FHA limit as well. So, with the decline in home prices, VA financing has become a viable option again, and many potential VA buyers, real estate brokers, and mortgage lenders have begun re-educating themselves on VA financing requirements.

This is especially important to the Central Coast as we are home to Vandenberg Air Force Base, which is home to the 30th Space Wing, which manages missile and space testing for the Department of Defense. So, we have a great deal of active duty and retired military in the local area who are eligible for a certificate for the VA home loan guaranty program. This post offers a few tips for those buyers. Also you can start your home search on my website, where you can search for Central Coast homes, and also for homes immediately adjacent to Vandenberg Air Force Base.

Importantly, the loan limits for VA financing were not raised with the recent legislation which raised FHA limits to $729,500 in high cost areas, so VA buyers are still limited to a maximum of $417,000. I have mixed feelings about the FHA limit being raised especially since the median home price in California has now almost slipped below the previous $417,000 limit, but I'll address that in another post. Currently, the California Association of Realtors indicates that as of January 2008, the median home price in California is approximately $430,000. So, VA financing is again a viable alternative for many, and especially for first time buyers who are spending a lot less than that amount for their first home.

First things first, military personnel who wish to use VA to finance a home purchase must obtain a certificate of eligibility through the Department of Veteran's Affairs. usually, an experienced lender can obtain a certificate almost instantly by using an automated system VA set up just for that purpose. In some cases, you may need to submit a form and wait for a certificate to be mailed to you in order to establish your entitlement to this benefit.

The next step is qualifying your income and credit. Again, this is where your lender comes in. From my discussions with lenders, I've learned the most important aspect of qualification for VA loans beyond income is not the credit score of the applicant, but their most recent credit history. Namely, whether they have made timely payments in the past 12 months. Nothing sinks a VA buyer quicker than recent late payments made on their accounts. If there is more than one late payment in the past 12 months, you may still be able to get the application manually underwritten; however, the more "lates" you have on your credit, the less likely the possibility of squeaking through becomes. So, if you want to buy with VA financing concentrate on keeping current with your payment obligations. I've experienced VA approving buyers with credit scores in 500's, and I've also experienced other buyers being rejected for late payments. So it seems that your overall credit history (or lack of credit history) will affect you less than being late on your car payment for the last 2-3 months.

Also be aware that when you make an offer with VA financing, it may not be as strong as an offer from a buyer using conventional financing. Part of this is dependent upon whether you ask the seller to pay closing costs and/or make other concessions. Closing costs with VA loans tend to be a bit higher than for conventional loans. If you don't have closing costs saved, you can request that the seller pay them, but of course that will impact the strength of your offer. You can also stack them on top of the purchase price in your offer, and that way the seller gets their full price and you don't have to pay the costs out of pocket. This also assumes that the home will appraise at the higher value; sellers who are asking a price close to a reasonable estimate of their appraised value will take this into consideration as well. Lenders I've spoken with estimate about 4% of the purchase price for closing costs on a VA loan. Conventional lenders will typically only allow buyers to request closing cost help from the seller of up to 3% of the purchase price (because they fear fraud if a lot of money is being given back to the buyer), but VA will allow up to 6% of the purchase price to be paid by the seller as closing costs and/or other concessions to the buyer.

The other major hurdle with VA offers is typically the timeline. Most lenders will tell you that it is difficult to close a VA loan in under 45 days. This is primarily due to the VA appraisal process. VA uses their own appraisers and there are fewer appraisers that are qualified to do VA appraisal work. As a result, their workloads are heavy and they cover larger geographic areas than other appraisers. For example, in my experience with non-VA appraisers, I can usually get an appraisal completed within one week. On a VA transaction, it may one week just to get an appointment for the appraisal! Also, the appraisal may indicate that additional work must be completed which can throw a wrench in the works late in a transaction. And, of course, this can be very tricky when you're buying a bank owned property and you have a seller who will make NO REPAIRS. Therefore, at the outset if the buyer has no additional funds, you should make sure to ask for seller concessions that will cover closing costs, active infestation termite work (this will be a guess unless a termite report is on file), and any other repairs VA might require (another guess until appraisal is done and estimates for the work have been completed). But again, asking for more money back from the seller, or stacking the costs on top of the purchase price can also impact how attractive your offer is. So, there are a lot of variables, and experienced listing agents know that and as a result many are wary of buyers using VA financing.

All of the above is based on my experience as well as informal and anecdotal interchanges with loan officers. You should do your own research on these issues, as none of it is meant to be a guaranty of what it will take for you to qualify for a loan or successfully complete a transaction. It is offered merely to give potential VA buyers an indication of the possible pitfalls involved with using the VA home loan guaranty program.

If you are transferring to the area, retiring from service, or have too many dogs to live on Base, I would love to help you find a home using your VA eligibility certificate. These transactions can be challenging, but I'm up to the challenge. Please feel free to give me a call today, I make it a point to be available to my clients by cell (805) 878-9879, so please give me a call today so we can begin the process of finding the perfect home for you.

Sincerely,

Tni LeBlanc, JD, M.A. , e-PRO
Broker/Owner
Mint Properties
(805) 878-9879
tni@MintProp.com

www.MintProp.com
www.BuySantaMariaForeclosures.com
www.SantaMariaRealEstateBlog.com
www.CentralCoastRealEstateSearch.com
www.VAFBRealEstateSearch.com

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Mar. 9, 2008 - The Short Sale Housing Market in Santa Maria California

A little while back I promised to write an entry on buying short sales. I have many clients who have the notion that they want to buy their next or first home this way, and these days my first conversation with potential buyers always includes a discussion of these types of sales. Last time I took a peek, there were approximate 800 single family home listings in the Santa Maria area, and about 40% of them were short sales or at least potential short sales. So, the current market for homes in Santa Maria and Orcutt is inundated with these listings.

First things first. What is a short sale? A short sale listing is one in which the owner owes more on their loan than their house is currently worth. And, due to any number of factors, they are trying to sell their home. Many of the current short sales are caused by a home owner's interest rate adjustment making payments unaffordable. Other homeowners could make their payments but they must sell because they have to move (due to job transfer, etc.) and they cannot currently sell their home for what they owe. Even others are simply walking away because they do not wish to make payments on homes that are not worth what they paid for them. When it is apparent at the outset that a home will not sell for what the homeowner owes it is listed as a "short sale."

Typically, when I'm showing potential buyers homes in Santa Maria and Orcutt they fall in love with a short sale. Many of the short sale listings in Santa Maria show very nicely, especially when you compare them to similarly priced foreclosed and bank owned properties. In a short sale situation, you have a motivated seller in the home and they present the home very well, as compared to a bank foreclosure where appliances may be missing, carpet is stained or torn out, projects unfinished, or even apparent deliberate damage inflicted by a homeowner who was unhappy about losing their home. So a short sale can be a great bargain because they may require less repair for the same price as a foreclosure. But as with most things, the details make the difference.

How is buying a short sale different from buying another home? A short sale contract, if accepted by the seller, will be conditioned upon the seller receiving approval from the bank. That is the tricky part. Obtaining bank approval can take 3-4 months. And, at the end of that 3-4 months the answer can be "no," and the bank can just proceed to foreclose on the property (where a Notice of Default has already been filed), or they can request more money from the potential buyer (even though the seller has agreed to a lower price), or the bank can throw a wrench in the works by demanding more money from the seller's other resources or assets in order to make up the difference between the loan balance and the offer.

Once an offer is accepted by the seller, and presented to the bank for approval, the bank will conduct its own appraisal and solicit broker price opinions from other local brokers to make sure that the offer is in line with the market. But even if they agree that the offer is fair, the bank will still try to get the seller to assume a note (debt) for the difference between the offer and what that seller owes on the property. Ultimately, the seller and the bank may not be able to agree to terms, and bank approval will not be obtained. And while all of this is being negotiated, the buyer must simply just wait, often hearing nothing in response for weeks at a time.

It is very difficult to wait through this process because of the obvious uncertainty involved. I usually advise Santa Maria buyers to write on short sales when this is the ONLY house they want and they want NO OTHER. Because it takes that type desire to make it through the process. Santa Maria short sales may also make sense if you are buying a home for investment, and you are not waiting through this process to move into the home. Most buyers simply can't deal with the uncertainty, they want to know when they can schedule movers, when they can lock their interest rate, and most of all, they want to know if they have a deal or not. Waiting 4 months and getting a "no" for an answer is exhausting to most, and during that time most buyers usually find another home that they would like to pursue.

There is some advantage to trying to pursue short sales as the Santa Maria real estate market currently has a shortage of inventory, in my opinion. Believe it or not, I have plenty of buyers who can't find anything they want to buy! This is because they've ruled out short sales and overpriced listings, and bank owned properties that are priced correctly are receiving multiple bids. Sometimes, by focusing on a short sale they are able to get a home in good condition that they like without having to compete with so many other buyers.

The current market for short sales in Santa Maria and the surrounding areas is complex. I would be happy to discuss the best approach to finding the right home for you here on the Central Coast. Please feel free to give me a call at (805) 878-9879, I make a point to be directly available to my clients. Also, feel free to search for properties on my website.

Sincerely,

Tni LeBlanc, JD, M.A., e-PRO
Broker/Owner
Mint Properties
(805) 878-9879
tni@MintProp.com
www.MintProp.com

www.CentralCoastRealEstateSearch.com
www.BuySantaMariaForeclosures.com
www.SantaMariaRealEstateBlog.com