Confused about the housing market this Summer (Mount Vernon: foreclose, renters)

[hilsmom]

Then, would you consider the VA Loan program the same as FHA? They still allow for 100% financing. And they don't have PMI.

We used the VA Loan for our current house - we put down 10% and are not paying PMI. It was absolutely the best way for us to go about purchasing this home and we have great credit and decent HHI.

[Jayess1]

Originally Posted by hilsmom

Then, would you consider the VA Loan program the same as FHA? They still allow for 100% financing. And they don't have PMI.

VA = requires eligibility.
Current (Summer '12) FHA programs (again IIRC under 203) this summer = anyone who can meet the (historically low) standards.

Doesn't seem the same to me.

[hilsmom]

eligibility for VA is to have been a veteran, right? I'm just trying to understand how that is somehow a higher standard than the FHA standards. In no way disparaging veterans, as I obviously am married to one I just don't think it in any way makes you better qualified for a mortgage than someone who qualifies for FHA.

[NC211]

VA loan is definetely a government loan program, as is the FHA route, but administered completely seperate from the FHA program. VA is a benefit afforded to the finest of this country, our military men and women. If you have a VA certificate, I'd use it in a heartbeat! In term of apples / apples across all lending platforms, the VA route is by far the most affordable to the borrower, for reasons you mention. It's been at least 10 years since I did a residential mortgage, but I recall that you can contact your local VA office to be put on the path to find out what you're eligible for under that program. It's an actual certificate that you will receive that a loan officer will make a copy of for presentation back to the VA housing program to fund the loan. The VA program, albeit use to (and presume still does) requires a few more documentation steps to close on, is an excellent program! It's a program that helped build many communities in this country after WWII. Many of those older, single level brick "ranch" type houses that you see throughout the country, especially around major military outposts like the Carolinas, were veteran homes funded under the VA program.

[Jayess1]

Originally Posted by hilsmom

eligibility for VA is to have been a veteran, right? I'm just trying to understand how that is somehow a higher standard than the FHA standards. In no way disparaging veterans, as I obviously am married to one I just don't think it in any way makes you better qualified for a mortgage than someone who qualifies for FHA.

"higher" standard? No, it's a different standard. Are they similar in function? Yes.

Veteran = someone who has worked to achieve a specific goal & met the standards for that goal, with a program limited to a subset of the population.

FHA = open to much greater % of the population, and has fewer restrictions on such issues as chargebacks & loss recovery.

[hilsmom]

right, I get that they are separate programs. We considered both as we knew 20% down was going to be tough since we were looking at homes that were going to need upgrades and renovations which needed to be paid for out of pocket, too. We decided to use the VA Loan since it had the most flexibility in general (for money down and whether we could readjust should our previous property have sold after we bought) and no PMI.

I just am trying to figure out how they really differ financially to have one called kool-aid and the other not. It really is an honest question, mostly because the argument seemed to be about lack of "sufficient" down payment.

[Jayess1]

Originally Posted by hilsmom

I just am trying to figure out how they really differ financially to have one called kool-aid and the other not. It really is an honest question, mostly because the argument seemed to be about lack of "sufficient" down payment.

One's limited to a subset of the population and has issued a grand total (when last I saw) of around 18 million loans since WWII, with a default rate lower (again, when last I saw - fall 2011) than even high prime (approx 800 FICO) and does carry low FICO limits. Oh, and as the other posted is a benefit to servicemembers.

The other issues somwhere excess of 10 million per year to a far, far riskier pool.

If that's not a major difference, well...

[hilsmom]

Look, I get the difference you are pointing out (as we wouldn't have qualified had my husband not served in the military), but if the argument is about down payments and government backing, the two programs are extremely similar.

I just did a quick internet search, and it seems that:
VA - doesn't require downpayment, but does require the upfront funding fee (the purpose of which seems similar to that of PMI), and then is guaranteed by the VA.
FHA - requires 3.5% down, plus PMI, then is guaranteed by the FHA.

Just because one has a higher default rate than the other doesn't mean they don't function in similar fashion. I think that is more a function of where these loans are being used, not really the loans themselves.

[NC211]

hilsmon - my comment about the FHA program being the kool-aide of the moment, is pointed towards the qualification requirements that haven't changed much for the program over the past three years, while what use to be the kool-aide of the private sector, has both changed dramatically, and in some cases, doesn't exist anymore (like financing 125% of your home). No Doc loans, gone, stated income loans, gone. Subprime / Alt-A type loans, pretty much gone. But FHA, with it's still 2.5% down payment, still higher debt/income ratio requirements, remains the same, making it the easiest to qualify for. That's all I was saying.

For the record, in 2006 when I bought that house in NC - I went the Alt-A method instead of the traditional conforming loan route. A lot less paper work, less down payment, less loan origination fee, and a much better rate! Those days, are gone. Today, I used FHA myself last fall, because I wanted the "transferable" clause of an FHA mortgage. Different topic of discussion here, but in summary, it is my belief that 3.75% for 30 years will create value for my home when rates return to the 7% window, if I am able to sell that debt package with the home itself. I pay for it now in terms of the PMI, but I believe will be worth it. "Inflation" is pretty much a guarantee now. The only question left is - how bad and how quickly will it happen. Considering the 10 year US Treasury bill is yielding 1.4% today, 30-Day LIBOR hasn't seen 0.30% in years, and the French government is actually issuing government-backed bonds with negative interest rates now.... how "bad" might not be an answer anyone wants to openly give...

[VRE332]

OK Back on Track..... Thanks everyone for their insight. This is more than I had expected.