The Unique Challenges and Objectives of a Military Home Buyer

The PCS

No one knows the act of moving like a Military family. Moving around the world simply comes with a servicemember’s job. And, relocation is one of the most exciting aspects of a military career, but also the most challenging. While the military offers great resources to help with a move like base guides and on-base relocation experts. There is nothing better than finding a local expert who understands a military family’s unique challenges and objectives. 

 

Thinking Ahead

When a military family has been given Permanent Change of Station (PCS) orders, they’re not actually ‘permanent’ orders at all. In most cases, a PCS order will relocate a servicemember for a number of years but not the remainder of a career. This truth creates a special need, when it comes to purchasing a home, as a future move and sale is likely and must be considered.

 

 

New Construction Challenges

Many military buyers have interest in new construction. These are great options in all instances but one – the future sale. If a buyer is active duty military who may face another PCS (permanent change of station), new construction may not be the wisest choice. The upside to new construction often includes the builder paying all or most of a buyer’s closing costs – when a homeowner seeks to sell in a neighborhood where new construction is being built, they must compete with the pricing and seller concessions offered by a builder. Thereby drastically impacting the veterans ability to compete and sell. 

 

Keeping the Home as an Investment Property

Another item to consider is the option to keep a home as an investment if and when another PCS is on the table. Yes, a VA Loan, when established, is for owner-occupied properties only. But after the home has been utilized as a homestead, a veteran can retain it as an investment property when they move. A Veterans entitlement is attached to the VA Loan and the option to purchase a second home with a VA Loan is based entirely on the servicemember’s remaining entitlement. According to an article published by the VA Home Loan Centers;

“Military members are allotted two forms of entitlement, basic and bonus. The basic entitlement amount is $36,000 while the bonus entitlement is for $144,000; it is permissible to use both entitlements in connection with each other. Essentially, if the previous home purchase did not drain the borrower of the entirety of their entitlement, they may use the remainder for a second home purchase.”

See Article Here

Many savvy veterans have purchased homes in every duty station, building an impressive investment portfolio. As each property is sold, entitlement is renewed. 

 

Choosing the Right Neighborhood

Information runs like water on the internet and buyers, nowadays, are armed with more information than they could possibly need. But still, the need for a local expert remains. A local military real estate expert will look beyond the immediate ‘sale’ and help to position their client in the best possible way for a likely future move. Things to consider are:

  1. What will the future competition be when it is time to sell?
  2. What is the percentage of owners vs. renters in a particular neighborhood?
  3. Is yard maintenance included so we don’t have to worry about a future tenant maintaining the yard?
  4. How will a neighborhood’s CDD and HOA fees impact my ability to rent and break-even or make a profit?
  5. Where is the future growth of the area?

 

The VA Loan

The workings of a VA Loan are somewhat unique as well. It is important that a relocating servicemember have a seasoned and experienced military real estate expert who understands what VA loan requirements are for the Veteran AND the home. With a VA Loan, the Veteran must meet certain guidelines and so should the house. An experienced military real estate expert can identify issues a home may have that could impact the appraisal requirements. This is important because time, energy, and money can be wasted if certain observations are not made prior to contract. 

 

VA Loan Options

There are also several unique features of a VA Loan that not all Agents may know about. There are, of course, the standard features but, what about VA Energy Efficiency Loans and VA Renovation Loans? If a Veteran seeks a military real estate professional, they can expect to learn of features and programs they may not have otherwise found. 

 

Don’t be Fooled

There are some lending institutions who provide ‘recommended’ agents to assist their Veteran clients. Sometimes, these Agents don’t actually have extensive VA loan experience at all, they have simply agreed to pay the institution a referral fee. When a servicemember or veteran is interviewing real estate professionals, they should include the following questions to determine an Agent’s knowledge of VA loan programs and military relocation:

  1. How many of your Clients have utilized a VA loan to purchase a home?
  2. What can you tell me about the VA loan Appraisal process?
  3. Is there anything special I will need to do if I buy a home with a well as its water source?
  4. As a Veteran, do I have any closing costs to pay?
  5. What happens if there is a problem with the appraisal on the home I purchase?
  6. Must a home have all of the appliances included to qualify for a VA loan?
  7. I have VA Disability, how does that impact my home purchase?

 

Hedstrom & Stamm Home Solutions – Your Military Real Estate Experts

Hedstrom & Stamm specialize in real estate services for military servicemembers and Veterans. Toni Hedstrom was originally licensed in 2002 in Killeen, Texas – the home of Fort Hood! Throughout her career, Toni has helped thousands of military members and their families purchase and sell homes. And, while Toni continues to learn every day, there aren’t many questions about VA loans and military relocation she can’t answer. Toni’s Husband retired from the US Army in 2008 after 20-years of service so she has experienced the military move both professionally and personally. Selena Stamm, of Hedstrom & Stamm, has earned her PCS Badge as well. Selena’s Husband is currently Active Duty Marine and is currently deployed (at the time of this publication). 

Hedstrom & Stamm offer no hassle consultations for any service member, family member, or veteran. The team will gladly answer any questions about VA loans, VA home purchases and how to manage the future sale when a PCS is ordered. To schedule your consultation, simply fill out this form and a member of the team will be in contact. 

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Appraiser Independence Critical to Veterans’ Home Loans, Appraisal Institute Tells Congress

CHICAGO (April 4, 2017) by PRESS RELEASE– The nation’s largest professional association of real estate appraisers Turesday, April 4th urged Congress to protect the independence of real estate appraisers in the federal program that provides housing loans to military veterans. The Appraisal Institute testified at a Congressional subcommittee hearing on Capitol Hill.

The Appraisal Institute specifically addressed a central ordering feature of the U.S. Department of Veterans Affairs’ Appraiser Fee Panel during its testimony before the Subcommittee on Economic Opportunity of the House Committee on Veterans’ Affairs. The hearing was called to address the topic “Assessing VA Approved Appraisers and How to Improve the Program for the 21st Century.”

“The Appraisal Institute supports the basic framework of the VA Fee Panel in contrast to what is currently found in the Federal Housing Administration or the private sector,” Appraisal Institute Vice President Stephen S. Wagner, MAI, SRA, AI-GRS, told the subcommittee. “By comparison, the structure of the Fee Panel facilitates a greater degree of appraisal independence and represents a much more positive environment for real estate appraisers.”

Veterans Affairs maintains a Fee Panel of approved real estate appraisers who work on behalf of the agency in providing collateral risk assessment in support of the VA Home Loan program. The Fee Panel is directly managed by the VA and consists of a pool of several thousand appraisers who accept VA appraisal assignments on a rotating basis.

Wagner, a former member of the Fee Panel, praised the Veterans Affairs appraisal staff as “some of the most accessible and responsive within the federal government relating to real estate appraisal issues.”

While opposing wholesale changes to overhaul the Fee Panel, the Appraisal Institute offered recommendations to improve the consistency of the VA loan program and to maintain its competitiveness with the private sector:

Maintain an independent Fee Panel of VA appraisers;
Develop a “stand-by” list of approved VA appraisers;
Enhance appraiser recruitment efforts;
Encourage lenders to provide better property information at the time of the appraisal assignment; and
Address appraiser concerns about unpaid appraisal fees.

Are You a Veteran with HGTV Fantasies?

noIt’s Happened…

….to almost every VA Buyer I know – you find a home in the perfect neighborhood. A home, in the perfect school district. Finally, a home you can afford! But then you are told you cannot buy that home because it will not qualify for VA financing. If only, you could buy the home and roll the cost to remodel into the mortgage. This is a fair question; a commonly asked question which is always snuffed out by Lenders. The VA Renovation loan – often called the ‘Unicorn Loan’ because most believe it does not exist. But – It Does Exist!

Distressed Property Solutions for VA Buyers

In today’s market there are new and varied means of financing distressed properties – of which many consumers are unaware. As a knowledgeable REALTOR®, both Toni Hedstrom and Selena Stamm are able to identify various types of distressed properties and understand the specific programs that are available to help with the purchase of distressed real estate while allowing for the renovations that will make the property habitable. Hedstrom & Stamm understand how to make virtually any property, regardless of condition, available for financing – FHA, VA and/or Conventional financing. Their understanding of available programs allows more buyers to purchase homes that might previously been out of reach due to lack of adequate financing that includes the necessary repairs, inspections, contractor bids, appraisals, etc.

These financing options are crucial in a market where Sellers are unwilling to commit funds for repairs, where there is an overwhelming percentage of “As-Is” listings in inventory, or where Sellers are unable to make repairs prior to closing. Buyers are also more demanding and desirous for upgrades and energy features available but not readily present in the current inventory at affordable prices.

With these ‘Distressed Property Solutions’ a Buyer has the ability to find a not so perfect home in a perfect location or school district and make it their ‘Dream Home’. The process enables Buyers to buy a stripped foreclosure – take advantage of an ‘As-Is’ market – and, instantly improve their quality of life. And yes, even VA Buyers!

What You’ve Been Told and What is Actual Truth

Buyers in the market, especially those using government loans, are often told a home “does not qualify for financing” or is a “cash only sale”. This is almost always a result of the home’s current condition. So, what if a Buyer could purchase the home and roll the cost to renovate into the mortgage?

What if you could utilize a renovation loan for even minor decorative repairs such as removing ‘popcorn’ ceilings? Or, to increase the energy efficiency of a home by replacing its windows and doors? How about reducing insurance costs by replacing the roof?

The truth about renovation loans are: There is only one loan, there is no ‘floating rate’, repairs are completed after closing, there is only ONE closing, there is only ONE appraisal, a consumer needs only ONE contractor bid. The typical timeframe for closing is 45-days and some programs allow several months of mortgage payments to be deferred while renovations take place.

Renovation Lending Solutions

Conventional Loans /Fannie Mae Homestyle Renovation Loan: this is the only renovation loan that allows for items defined as ‘luxury items’ to be included in the loan such as pool, garages, boat slips, etc.

FHA 203k Streamline and VA Renovation Loans: repairs allowed for roofs; gutters and downspouts; HVAC systems; Exterior wall residing; window and door replacements; painting exterior/interior; wood rot repair; plumbing and electrical systems; flooring; minor remodeling (i.e. kitchens and baths). Also, new appliances, weatherization, exterior decks and patios, and improvements for handicap accessibility. These loans have a maximum remodeling cap of 35k but the loan will finance up to 110% of the home’s improved value. There is no minimum for the remodel amount which allows a buyer to do even the slightest repair such as replace the flooring or paint the interior.

FHA 203K Standard: This loan carries a minimum remodeling budget of 5k. A HUD Consultant write-up is required **(a service that should be utilized even when not required)**

A consultation with a renovation specialist will offer a better understanding of these programs. This brief provides an overview, but there are additional features available on these loan types. Furthermore, a specific Renovation Pre-Qualification Letter must be obtained prior to submission of an offer to purchase using a renovation loan.

The Process

Having a renovation loan specialist is crucial to this process. Their understanding of the program and ability to guide the Buyer Agent and Listing Agent through the process are imperative. The purchase offer requires specific verbiage and each renovation loan has specific requirements for the consultation and bid process, all of which are made easy when using a renovation loan specialist. These qualified lenders assist with contractor validation – checking references, insured status, licenses, etc. The renovation loan specialist consults the contractor in regard to timeline on start and completion of the project, the draw process, submission of permits and paperwork, and confirms the contractor’s ability to financially take on the project with proper lines of credit.

Time for Closing

Once the consumer is satisfied with the bid, the appraisal is ordered with the scope of the work provided by the contractor for a “Subject To” valuation by an Appraiser. Once the appraisal order is received, it is reviewed for any additional work required by the appraiser. If necessary, the contractor’s scope of work will be modified to include the additional repairs. The loan will then close and the renovation will begin.

Invitation

Hedstrom & Stamm Home Solutions, LLC invites you to schedule a consultation today. The team will coordinate with a local iMortgage Renovation Loan Specialist to lay out a game plan for your renovation purchase journey. We can help you find a home that may not be perfect and MAKE IT PERFECT with creative financing.

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VA Renovation Loans – Creative Financing

200Veterans: Find a Home that may not be Perfect & Make it Perfect with Creative Financing

I recently attended a workshop with representatives of iMortgage where we discussed financing options for distressed properties. I was familiar with the FHA 203k renovation loan but I was not familiar with the VA renovation loan. Since I work with Veterans who are buying and selling homes everyday, this was of extreme interest to me.

Distressed Property Solutions

The more common distressed property solutions are the FHA 203k Streamline / the FHA 203k Standard and the Fannie Mae Home Style Mortgage. These loans are often used in situations where sellers are unwilling to make repairs and insist on selling ‘As-Is’; and where Buyers are willing to do repairs but cannot do them prior to closing BUT, the repair(s) is a condition of closing (stuck between a rock and a hard place); or, when a buyer finds the perfect location with a not so perfect house. With 42k being the average cost for a home remodel, it is very often out of reach for a buyer to pay for a remodel outside of the mortgage – these loans allow the remodel to be rolled into the mortgage. But what about VA Buyers and VA Loans?

Veterans Option

VA Renovation Loans have sometimes been called ‘Unicorn Loans’ because most people don’t believe they exist. The truth is THEY DO EXIST and offer some very compelling options for VA Buyers in today’s competitive market. Some of the renovations that can be covered by a VA Renovation Loan are: Roofs; Gutters and downspouts; HVAC Systems; Exterior wall re-siding; Window and door replacements; Painting both interior and exterior; Wood rot; Plumbing and electrical systems; Tile; Carpet and flooring; Minor remodeling (such as kitchens and baths). Repairs can also include appliances such as free-standing ranges; refrigerators; washers/dryers; dishwashers; microwave ovens. Weatherization of the home can also be addressed including items such as storm windows; doors; insulation; exterior decks; patios; porches; and improvements for handicap accessibility. The VA Renovation Loan does not qualify for structural changes or adding square footage to the home. 

The VA Renovation loan follows these guidelines:

  • Loan Amount – up to county limit
  • NO minimum for repairs
  • Maximum for repairs is 35k
  • NO structural items
  • Must be primary residence
  • Credit Score minimum of 585
  • Property must be classified a Single Family Home

Here is an example of how a VA Renovation Loan compares to a Traditional VA Loan:

 

                                                                Traditional VA Loan                                                   VA Renovation Loan

Purchase Price                                     $   100,000.00                                                             $   100,000.00

Rehab Amount                                     $     30,000.00                                                              $     30,000.00

Financed Amount                                $   100,000.00                                                             $    130,000.00

Cash Required                                      $     30,000.00                                                             $                0.00

How to Get Started

It’s simple really – FIRST, you need an Agent and a Lender who are familiar with the program and how it works. Then,

  1. Speak with a qualified lender to acquire a Renovation Pre-Qualification Letter
  2. Start Shopping: find the perfect property and identify the renovation project
  3. Have your qualified Agent prepare a purchase offer which includes the VA Renovation guidelines
  4. Obtain inspections; Get a HUD Consultant write-up; Obtain estimates
  5. Have your qualified Agent run comparable for price
  6. Finalize the contractor bid for remodel/repairs
  7. Order the Appraisal

How do You Get to Closing?

The appraisal will take into consideration the finalized bid for remodel/repairs and will reflect the value of the home with stated remodel/repairs. Once the appraisal is received and finalized the closing is prepared. Work, on the home, does not commence until after the sale. The average time frame for closing is 45-days with 14 days consisting of getting and finalizing the bid for remodel/repair. The program allows for up to 3-months to complete the work after closing.

Imagine

You find a home in the RIGHT neighborhood, RIGHT school district, BUT not the RIGHT house. This program can help you make it RIGHT! Stop being told that a house you love cannot be yours because it doesn’t qualify for government financing. NOW – you have the control and the ability to compete for these homes!

VA Streamline Refinance

In an effort to help veterans secure the lowest fixed interest rate available, the VA started a Streamline Refinance program called Interest Rate Reduction Refinance Loan program (IRRL). This loan option is a way for current VA homeowners to lower their interest rate with very little or no out-of-pocket costs. These refinance loans are done with very little effort and can help veterans start saving immediately.

IRRL allows you to refinance your mortgage to a lower interest rate. This is only available to veterans who used their VA eligability when initially purchasing their house, The IRRL program lets you refinance your mortgage with very little or no out-of-pocket expenses, as well as take advantage of these great benefits:

  • No Appraisal Required
  • No Credit Check required (unless the payment will increase 20% or more)
  • No upfront application fee collected
  • No income documents required (unless the payment will increase 20% or more)
  • Skip up to two monthly payments

Visit the official Government site which explains, in great detail, this VA program and how it can work for you.

IRRL Facts for Veterans

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