RealCincy.com Podcast: VA Mortgage
Podcast: VA Mortgages
For this podcast I sat down with Trey Budke, mortgage loan officer with USA Mortgage where we discussed the VA mortgage and all the benefit it offers to active duty and veteran miltary service memebers. Learn about VA mortgage credit requirements, down payment requirements and more.
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About the author: The above Podcast “Podcast: VA Mortgages” was provided by Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. With over 10+ years experience, if you’re thinking of selling or buying, I would love to share my marketing knowledge and expertise.
I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Adams, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.
[00:00:09] Paul Sian: Hello, everybody. This is Paul Sian with United Real Estate Home Connections licensed in the state of Ohio and Kentucky. And with me, today is Trey Budke with USA mortgage. How are you doing today?
[00:00:20] Trey Budke: Good, Paul. Appreciate you having me here today.
[00:00:22] Paul Sian: Glad to have you on. Today we're gonna be talking about the VA mortgages and to start that off why don't you tell us about your background in the military?
[00:00:31] Trey Budke: Uh, yeah. It's been six years in the Marine Corps, 89 to 95 was a radio operator with Com Company headquarters Battalion. Um, toe sing both coasts, Um, had a deployment Honduras during Desert Storm on. Got out 95 finished up school at the University of Cincinnati.
[00:00:54] Paul Sian: Nice. So, what got you into mortgages then?
[00:00:59] Trey Budke: I really got in the mortgages by accident. I was actually working at Fidelity Investments at the time, And the girl I sat next to her boyfriend at the time was a mortgage sales manager and at the third, and I just was seen what he was doing, and it was kind of interesting. And after about a year, um, he invited me to an open house, and, uh, I probably started about two weeks later, and here we are pushing 24 years later, and I'm still doing mortgages.
[00:01:33] Paul Sian: Nice. Did you start specializing in VA mortgages at in a certain time?
[00:01:37] Trey Budke: Nope. All I really didn't. So I always my first half of my career. I always worked at a bank, and I always sort of had, like, a community product available, which would be a low down payment program or a no down payment program on back then, the banks just really weren't doing government lending. Um, eso I didn't do f h a or V a back then, probably for the 1st 10 years of my career. Um, I got into the VA lending probably coming up on five years now. Um, that's from having done literally nova lending to where? It's about 80% of my business
[00:02:16] Paul Sian: right now. Yeah. So I know you're branding is VA Dude. Tell me about that. How did that come about?
[00:02:22] Trey Budke: up? Because of some of the other things I was looking for. We're no longer available, eh? So I just wanted something that people could remember without having to write it down. Um, and the VA dude was available, and that's what I became. And that's kind of how I market. Uh, it's pretty much how I market exclusively. So I'm at the point now. Where I said I do about 80% VA. I still do FHA. I still do USDA. I still do conventional lending. I'm not turning that stuff away, but you know my heart, my passion is helping the vets. And and so that's what I've been specializing in. And that's really the only thing I market at this point.
[00:03:03] Paul Sian: Great. Yeah, so just a library. Little further VA is the Veterans Administration loan it's specifically for for veterans. Tell us a little bit about that. What are the basic qualifications?
[00:03:13] Trey Budke: S. So it's for veterans or active duty or reserve regard, so you don't necessarily have to be a veteran. You could still be in, um, but there's different requirements, depending on whether you're still in the service or whether you're a veteran. Um, so it's a little different between guard and reserve and active duty. Eso in active duty veteran is they're eligible after two years of serving the full contract on DWhite. I say two years, Everything is not etched in stone. There's always exceptions. Yeah. So if someone was discharged with a disability, you know, something got hurt on the job, you know, it really depends. So if someone came to me and said, Hey, I served, you know, 18 months, that's a weird amount of time to serve. So I would think something probably happened so I would get their certificate of eligibility toe to see, You know that that's the final thing that determines whether they're eligible or not. But anyways, eso active duty, the standards two years, uh, guard and Reserve is after serving their first enlistment, which is a six year enlistment, Unless they've been activated. Called Thio active duty. Um, in the case of the reservists, that would be after 90 days, they would be eligible. And in the case of a National Guardsmen, because they actually report to the governor before the feds, they have to be called to active duty under federal orders. So title 30 to give me, uh, title 10 orders. Eso If they're called under becquerel orders, then there are also eligible after 90 days.
[00:04:58] Paul Sian: Okay, Um, I understand, too. There's certain cases where the spouses are eligible. Are you familiar with that?
[00:05:03] Trey Budke: Yes. So the only, uh, the spouse is gonna be able that there's a surviving spouse eligibility? Um, so that would be the only time when a spouse is eligible without the veteran actually being on the loan. So in the case of a surviving spouse, and that would be a surviving spouse of someone who was either, um, killed in action or died as a result of a V A related disability. So just because you're married to a veteran and they pass away, that by itself wouldn't make you eligible, they would have had to have died as a result of their service.
[00:05:43] Paul Sian: And you mentioned eligibility earlier in the determination of eligibility. What's the process for that
[00:05:48] Trey Budke: s o. The easiest thing to do is Thio. Actually, myself and my assistant will reach out to the V A and see if the veterans certificate of eligibility is available electronically right now, I would say probably 80% of them are, which means I type in their name, their social security number and their date of birth, and instantly we have access to their certificate of eligibility. If they're part of the 20% roughly that aren't available electronically, then we need to provide a little more information to the V A. And that's usually their discharge paper. So, in the case of an active duty veteran and be there D D 2 14, in the case of a reservists, it would be their retirement point statement.
[00:06:34] Paul Sian: Okay, what do you think the best advantages would be alone compared to the other other types of loans?
[00:06:39] Trey Budke: So the biggest the biggest obstacle in home ownership, in my opinion, is down payment. Um, that's the thing that stops people. Um, and the V A makes that that obstacle go away. It's a zero down payment loan option.
[00:06:56] Paul Sian: Yeah, that's compared to your even your f h J has a
[00:07:00] Trey Budke: so five. Even so, some of the lower down payment options 3.5% on F h J. There's a conventional option at 3%. Um, the other big advantage that I like about the V a loan is that there is no mortgage insurance on it. So typically, you know, F h s got mortgage insurance. Uh, conventional loans has mortgage insurance. If you're not putting at least 20% down eso you end up, um, you know, Apple staff ALS, you're gonna end up with a lower monthly payment using the V A loan.
[00:07:32] Paul Sian: Okay. Definitely. Uh, advanced. Advantageous For those veterans who were eligible, it's great benefit talking about the VA loan itself. I know there's a funding fee.
[00:07:42] Trey Budke: There is a funding fee. That is how the VA keeps the program going. That's how they self insure, if you will. The funding fee is 2.3% for the first time use, and it's 3.6% for subsequent use. So what I'm saying there is that Yes, you can use the VA alone more than once. Um, the even though it's a zero down payment loan again, there's still the funding fee, but the Via does let you finance that funding fee so most people will put that into the loan amount. And just on a side note, the appraisal does not have to cover that additional 2.3 or 3.6%. Okay, Now, good news is, um there are a lot of veterans that are gonna be eligible to have that funding fee waived. So if you have a B a disability rating of 10% or higher, that entire funding fee is waived. It is, and it's a huge percentage of the veterans that I'm running across.
[00:08:47] Paul Sian: So you mentioned to 2% funding fee for the initial 20.32 point three and then three
[00:08:53] Trey Budke: 3.63
[00:08:54] Paul Sian: 0.6 for the second. How does that apply in terms of refinance if somebody want to refinance
[00:08:58] Trey Budke: so refinances Totally different. Um, and the big refinance that most people are doing with a V a loan is an interest rate reduction loan. Eso It's alone strictly to lower the interest rate. They're not borrowing extra equity out of the property. They're not paying off additional debts. In that case, it's just a half a percent funding fee. Same thing, though. They wave that with the 10% VA disability rating.
[00:09:24] Paul Sian: Okay, bringing up the refi. I mean, you mentioned cash. No cash out in that interest rate reduction. Let's say they didn't want to do that. Let's say they wanted cash out. Can they do that with a VA loan
[00:09:34] Trey Budke: They can. The rules have changed this year. Um, it used to be 100% of the equity in the property. They could They could draw out a to this point. It's its's captain. 90%.
[00:09:45] Paul Sian: Okay, let's go over a little more about the getting more than 11 VA loan, you know, from my understanding of the past is, you know, I've got my V alone in my house, and that's the only one I could get. So can
[00:09:57] Trey Budke: s So there's a lot of misconceptions about it. And I think most of the misconceptions air probably rooted in a truth that existed at one time or another. When the when the VA loan first came out, it it pretty much was a one and done, um, alone. Um, but right now, um, you bet you have basic entitlement, and I don't wanna get to into the math of it, but basic entitlement. And you have bonus entitlement. Um, so and then together, you you have a total amount of entitlement. So as long as you're toe, simplify things as long as you're to loans together, don't go over the total entitlement. Then you would have room to have two loans possibly going at the same time. Now, that would be like if I bought a house and then decided, um, you know, a couple years later, we need a bigger house and we wanna retain that houses an investment property. So that's the example I'm given that you could have two going at the same time. Um assed faras reusing it, though most people are selling their homes that pays off the loan and that restores their entitlement. So they're actually there is no limit to the number of times you can use the VA loan You need it. 345 again over the lifetime. There's really no
[00:11:17] Paul Sian: What about loan limits? Basically, Is there a max loan amount?
[00:11:23] Trey Budke: Yes, and no eso They're always waas a maximum amount, which would be the county loan limit. And that's set pretty much across the country,
[00:11:34] Paul Sian: like the FHA.
[00:11:35] Trey Budke: Well, no, it it would go with the conventional eso like right now 540,000. Um, however, again, that there were some changes to the V a loan at the beginning of 2020 Andi, one of those was that if a veteran has full entitlement, so they haven't They could have used their loan before, but retirement entitlements been restored, so basically they don't have an outstanding loan right now. Or they didn't have a loan that resulted in a loss to the V A. So like a foreclosure or a short sale. Something like that. So as long as they have full entitlement, there is no loan limit currently. So theoretically, you know, you could buy a million dollar house with zero down, and if you had a 10% disability rating, you would pay no funding. FIA's Well, um, now, when I said yes and know that no part is that or the yes part that there is a limit is if they do not have full entitlement. So maybe they had a loss at one point or they currently have a loan outstanding at that point, then they are capped at the current county loan limit. So for 2020 it's like 540,000. They did just announce the new county loan limits that are going up next year, and I apologize. I don't have it memorized yet.
[00:12:57] Paul Sian: No worries. It's so in the case. Let's say we have got a got a doctor. He's a veteran, you know. It is 20 years in the service, retired, has veteran status. They wanna buy a million dollar houses. A nice post post military house. Do they do they get that 0% down payment option, or do they have to come up
[00:13:14] Trey Budke: with their If he has full eligibility, he could buy that house. Uh, with zero down,
[00:13:21] Paul Sian: that's that's pretty impressive.
[00:13:22] Trey Budke: It is definitely is
[00:13:25] Paul Sian: mhm. Another interesting feature of the loan, which not many people know about or talk about, is the ability to assign the mortgage. I may be familiar with that and how that works get rid of the mortgage, but I can assign it to another to another
[00:13:36] Trey Budke: veteran so it could be assumed. Yes, yeah, so yes. In some instances, the potential buyer could assume the current loan,
[00:13:47] Paul Sian: assuming they're veterans well to.
[00:13:48] Trey Budke: Actually, there's two ways of doing it. So 11 is there a veteran, um, than one is that they're not, um, so yeah, it's not something you see a whole lot off today. I think it was something when rates were a lot higher. But rates are a lot lower. Than it was. It was used as a selling tool. Um, I don't run across it very often.
[00:14:14] Paul Sian: you brought up interest rates. How are the rates compared to the conventional mortgages or FHA mortgages?
[00:14:20] Trey Budke: So I'm seeing va rates and just like conventional, just like FHA, the rate's gonna be based on credit score. So it's a credit score driven, risk based pricing. But if all things being equal, I'm seeing the VA loan being priced a quarter to an eighth better in rate,
[00:14:38] Paul Sian: okay? And then you mentioned credit. How about credit in terms of comparing, you know, the credit requirements for conventional FHA
[00:14:45] Trey Budke: s. So we're in a Post Covid world right now. What we could do today versus what I could do say in January are different things. Um, however, I think we're getting closer back to where we started, so I'm getting a lot of my options back. Credit wise. So the VA does not set a minimum credit score that that is a complete myth. Um, but that doesn't mean a lender won't set a minimum credit score. Yeah, lenders. It's an overlay. Basically, it's a lender. Applied overlay. Um, it's the risk they're willing to take. But so I'll here, and I'll hear veterans talk about it. Oh, you need a 6 40 credit score. To qualify, you need a 6. 60. And that just simply isn't the case. You may need that at the lender. They talked thio, But that doesn't mean that there isn't funds available out there. So right now, I'm I could go down to a 600 credit score on a V A loan, which is the same as an f H A loan right now. Um, conventional. I need to be, like, 6. 40 at least.
[00:15:49] Paul Sian: So we talked about buying your own home. I mean, could you buy an investment property with it? I know there's owner occupied rules.
[00:15:56] Trey Budke: Yeah, there are. So via the va home loan benefit is for an owner occupied property. Okay, um, there's a way to kind of combine the two, though, because it does allow you to buy up to a four unit property. So a 1 to 4 units property as long as one of the units is occupied by the veteran as their owner occupied property. Then the other three clearly could be, you know, used this investment.
[00:16:23] Paul Sian: That's a good way for the house. Hack the owner toe pay for their mortgage at the same
[00:16:27] Trey Budke: time in a way to get into investment properties and pay for your mortgage. Absolutely.
[00:16:32] Paul Sian: Yeah, definitely. Were the options available? Thanks for that information. Let's talk about your process. I'm Let's say I'm a first time Homebuyer where we know veteran, I'm coming to you. I want to buy a house. What? What? What can I expect from that? First sit down
[00:16:45] Trey Budke: I mean, the first thing we're gonna do is talk about your personal situation because everybody is different. I'm going, Teoh gonna pull credit. I'm gonna look at your income versus your debts. Kind of see what you can afford. I'm going to have my assistant pull the certificate of eligibility, which will tell me how much eligibility you have on. It will also actually tell me if you have a V a disability rating or not. So I'll know if the funding fees applicable to you or not. Um, at that point, it's documenting what we talked about, you know, pay stubs, w twos, tax returns, that type of thing. Basic things on den. I'm gonna run it through our automated underwriting system. Basically, at that point, if I can prove what I entered is correct. We're waiting on appraisal and title, so it's really it's pretty straightforward. Um uh, from ah standard. But of course, again, everybody's situation is different. Um, so the in the V A. There's a lot of quirks and things that you could get done with the V A loan if you know what you're doing. Um, so to me, it's it's not alone that you dabble in. You either need to really learn it. Um, you know are not mess with them and all. It is my personal opinion. Just I won't Do you know, two or three K lives? Um, uh, rehab, especially because it's especially exactly. That's exactly right.
[00:18:17] Paul Sian: So talking about rehab loans via doesn't offer anything like that,
[00:18:21] Trey Budke: but they actually do. They dio however, right now it zahn it's on hold during the covert pandemic. Uh, but prior to that, there actually is a V a rehab loan, and there's also a V A construction. Well, okay, it Now again not all lenders offer them. Um, but the V a absolutely supports them, just like properties. So I'll hear a lot of talk in a lot of veteran groups and see a lot of guys, you know, talking about their experiences. And I will see veterans, you know, almost weekly say that you can't get a manufactured home with the VA alone, and that's just absolutely not true. Not every lender will do it. Um, but be a absolutely will support it.
[00:19:11] Paul Sian: That's something you do.
[00:19:12] Trey Budke: It is actually, yeah, I probably have a fee. A manufactured home going a t least. I have one going at all at all times. Yeah,
[00:19:22] Paul Sian: it's good. Good information. Helpful. No. Going back to your process to If somebody needs help with their, you know, their new they maybe they got some things on their credit, you know? Is that something you could counsel them
[00:19:31] Trey Budke: guys it is. And I would tell you that the VA is way more forgiving than any other loan. Uh, via underwriting is about telling a story and seeing if it makes sense, Thea ultimate goal is to get the veteran in a home and to protect the veterans interests. So via underwriting is not about, you know, how can we turn alone down it? Z my experience has been It is truly about How do we help the veteran s o That being said, Um, credit standards are little, in my opinion. Lighter eyes, An example f a j looks at usually the most recent 24 months. Um, especially when you're doing what's a manual underwrite, which is when you don't get that automated approval. Um, that doesn't mean you can't do the loan. It just means you gotta fit things in a box. Basically. So f a J is gonna look at the last 24 months really closely where the VA is gonna look at the last 12 months really closely. So you may have had some issues in the past, but if I could show for 12 months that you have paid everything on time, haven't taken out any new derogatory debt collections, leans anything of that nature. Andi, you've got at least a 600 credit score at this point. Um, you're very likely to get alone. Yeah. So, again, every situations completely unique. So it's it's hard to just say, Oh, If you have a 600 credit score, you're gonna qualify. You may, or you may not. It really depends on what's driving that credit score.
[00:21:07] Paul Sian: Yeah, at same time to Is that something? Somebody comes in. I've got a 600 credit score Can. I'm not ready to buy now, but six months. Can you help me out? Can you
[00:21:14] Trey Budke: guys, I do that a lot, Actually. S O I mean, I've had closing this year that I probably started talking to the customer, you know, a year and a half ago. Eso That's pretty frequently that happens on guy. Know enough about the credit Thio when it's real obvious things to say If you do this and this, this will do this to your score, and it may be something as simple is you don't have a lot of credit and maybe it's getting, you know, adding a secured credit card and paying that on time for three months. That may be enough to get your score where you need it to be. So it could be something really simple like that once they start getting real complicated. Lots of collections tax leans, attack that point. Honestly, I'm gonna probably refer them out for some professional credit help.
[00:22:05] Paul Sian: Yeah, that's that's always helpful to in certain cases. Yeah. All right, Great. That's all the questions I have for today. Do you have any final thoughts,
[00:22:12] Trey Budke: Paul? I appreciate you give me the opportunity to talk about the VA loan. It z what it do. It's what I love. And I think it's It's a great opportunity for vets on Bond. If anybody needs help, I'm happy to help him. And by the way, you said where you were licensed at the beginning. I'm licensed in Ohio, Kentucky, Indiana and Pennsylvania
[00:22:36] Paul Sian: and your first outside states. I'm sure you've got people in your network that you confront Thio. Absolutely, absolutely. That's great. Thanks for being entree.
[00:22:45] Trey Budke: Appreciate Paul.