Friday, August 26, 2016

VA Loan

A VA loan is perhaps the most powerful and flexible lending option on the market today. Rather than issue loans, the VA instead pledges to repay about a quarter of every loan it guarantees in the unlikely event the borrower defaults. That guarantee gives VA-approved lenders greater protection when lending to military borrowers and often leads to highly competitive rates and terms for qualified veterans. 

Benefits of VA Loans

Far and away, the most significant benefit of a VA loan is the borrower's ability to purchase with no money down. Apart from the government's UDSA's Rural Development home loan and Fannie Mae's Home Path, it's all but impossible to find a lending option today that provides borrowers with 100 percent financing. 

VA loans also come with less stringent underwriting standards and requirements than conventional loans. In fact, about 80 percent of VA borrowers could not have qualified for a conventional loan. These loans also come with no private mortgage insurance (PMI), a monthly expense that conventional borrowers are required to pay unless they put down at least 20 percent of the loan amount. 

VA loans offer a few other bells and whistles:

  • Competitive interest rates that are routinely lower than conventional rates
  • No prepayment penalties
  • Higher allowable debt-to-income ratios than for many other loans
  • Streamlined refinancing loans that require no additional underwriting

Monday, August 15, 2016


How to figure debt-to-income ratio

There are two types of debt-to-income ratios that lenders look at when you apply for a mortgage:
  • The front-end ratio, also called the housing ratio, shows what percentage of your income would go toward your housing expenses, including your monthly mortgage payment, real estate taxes, homeowner's insurance and association dues.
  • The back-end ratio shows what portion of your income is needed to cover all of your monthly debt obligations. This includes credit card bills, car loans, child support, student loans and any other debt that shows on your credit report that requires monthly payments, plus your mortgage payments and other housing expenses.

What is Debt Forgiveness?
To make a long story short, debt forgiveness is when some or all of a debtor’s outstanding debt is written off.  This might happen because a lender wants to minimize the loss after a default.  When this unpaid debt is cancelled, this is considered borrower income and is taxable, unless there are any exemptions such as the Mortgage Debt Relief Act of 2007. 
What Do I Need To Know About the Mortgage Debt Relief Act?
First of all, you need to know that your tax credit can be claimed with the IRS Form 982.  You also need to know that you can only qualify if you have restructured your mortgage or gone through a foreclosure.  Talk to your lender about specific tax exemption rules and qualifications.  To qualify for the Mortgage Debt Relief Act, you must have had debt cancelled between the years of 2007 and 2013.
If you do have any cancelled debt that took place in between 2007 and 2013, talk to your lender and/or tax professional for sound advice regarding how to make the best financial decision.  If you think you're at risk for default or foreclosure in 2014, also have a conversation with your lender to see what he or she can do for you to stop that possibility.