Evaluating Conventional vs. FHA (VA & USDA)

[Anonymous]

What are my chances of getting another VA home loan considering the following:
1. Got pcs due to job relocation in 8/09
2. Had to do short sale on Michigan home which sold in 3/10
3. Current FICO score of 637 w no credit issues since the short sale...always pay on time
4. Gov employee been here (Tx) almost 2 years now

So, would I qualify for extenuating circumstances due to job relocation? Or am I simply going to have to wait until March next year...2 years after the short sale? Thinking of trying w Navy FCU.

[rom828]

"The monthly mortgage insurance needs to be paid for at least 5 years and also until the loan amount reaches 78% of the home's value at the time the loan was made (not current value)."

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Thanks for this great article, Shane.  As I've said many times before, I wish I'd participated in this forum before I bought my house!

This MI info  is really encouraging, IF I understand it correctly.

I've been under the assumption that  the 78% was based on current value....and with declining home values, this could potentially be difficult....or take quite a while.  I figured I might never get out from under the MI.

So, if the house appraised at  $200K at time of purchase, when loan balance reaches $156K (78% x $200K), and MI has been paid for at least 5 yrs, the MI can be dropped?!?!?

What is procdure for stopping the MI??  I'm still 3 yrs out (at the very least) since I re-fied March '09, but I'd like to plan ahead!

[ShanetheMortgageMan]

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@Anonymous wrote:
What are my chances of getting another VA home loan considering the following:
1. Got pcs due to job relocation in 8/09
2. Had to do short sale on Michigan home which sold in 3/10
3. Current FICO score of 637 w no credit issues since the short sale...always pay on time
4. Gov employee been here (Tx) almost 2 years now

So, would I qualify for extenuating circumstances due to job relocation? Or am I simply going to have to wait until March next year...2 years after the short sale? Thinking of trying w Navy FCU.

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Was the home in Michgan with a VA mortgage?  If so, you will have to check what available entitlement you have, if any, by requesting your certificate of eligibility or by contacting any lender who offers VA loans and they can obtain it instantaneously online.  If it was with a FHA or USDA mortgage, then there may be a CAIVRS claim for the portion that FHA or USDA had to cover.  If it was conventional then there likely isn't anything additional to be concerned about regarding qualifying qualifying for a new government backed mortgage.

So you said you got PCS orders, is that when you were in the military?  And you are not in the military now, but another type of government employee?

VA doesn't have any guidelines pertaining to short sales, so if the payments were on time but it just was short sold at the end then technically you could purchase again right away.  However if you went late on the payments then most lenders will view it the same as a foreclosure and then 2 years is required like you know - VA only cares if you go 120 days late but lenders care if you go late by 30 days or more.

As far as PCS orders as an extenuating circumstance, when it comes to the reason of job relocation, that would be as good as evidence as any.  If there was clear evidence that the PCS orders were the sole cause of the short sale then I think you'd have a real good case of getting approved for a new VA loan at the 1 year mark (assuming the short sale wasn't on a government loan).

[ShanetheMortgageMan]

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@rom828 wrote:

"The monthly mortgage insurance needs to be paid for at least 5 years and also until the loan amount reaches 78% of the home's value at the time the loan was made (not current value)."

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Thanks for this great article, Shane.  As I've said many times before, I wish I'd participated in this forum before I bought my house!

This MI info  is really encouraging, IF I understand it correctly.

I've been under the assumption that  the 78% was based on current value....and with declining home values, this could potentially be difficult....or take quite a while.  I figured I might never get out from under the MI.

So, if the house appraised at  $200K at time of purchase, when loan balance reaches $156K (78% x $200K), and MI has been paid for at least 5 yrs, the MI can be dropped?!?!?

What is procdure for stopping the MI??  I'm still 3 yrs out (at the very least) since I re-fied March '09, but I'd like to plan ahead!

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Welcome.  

If the sales price was also $200k in your example, then your assumption is correct.  

When your FHA loan meets the requirements of MI removal your lender should automatically stop charging you.  However if you feel they have made a mistake then call them up, or call them up ahead of time (heck they may even know now), and go over your and their records.  If you have in deed paid excess mortgage insurance then you would be owed a refund, find out if the lender has passed the mortgage insurance to HUD or if they still have it, if they have paid it to HUD then you'd contact them at the number listed at http://www.hud.gov/offices/hsg/comp/refunds/fhafact.cfm

[rom828]

If the sales price was also $200k in your example, then your assumption is correct. 

Ok, now I'm confused again (not suprising to people who know me!!)......not sure if I understand what you're saying about sales price.  And I am unfortunately not really all that close to this being a reality, but I like  to have my ducks in a row!

When I re-fied March '09,  loan amount was $178K with appraisal amount of $192K.  Based on my understanding of your advices, when my loan is down to just under $150K (78% x $192K), and as long as 5 yrs have passed since loan originated,  the MI should be eliminated?

[ShanetheMortgageMan]

I was assuming you are talking about an FHA loan you used to purchase the home, not refinanced into.  If you were talking about an FHA loan you used to purchase a home with, then if you bought it for $100k it doesn't matter if it's worth $200k - the lower of the two is used.  So if you purchased a home for $100k but it was really worth $200k, HUD still bases everything off of the lower of the two, or the $100k purchase price.  If you are talking about removing MI from an FHA loan that you refinanced into, then it is based off of the appraised value.

[rom828]

"If you are talking about removing MI from an FHA loan that you refinanced into, then it is based off of the appraised value"

Shane, bear with me here, please!  I hate to be so dense!

I bought my house in Oct 2007, NOT an FHA loan.  Appraisal was $191K with loan am't of $173K.

Re-fied March '09  INTO an  FHA loan, $192K appraisal and loan am't of $178K (rolled costs in and probably paid too much closing I now realize, but that's another story)

If I understand the above correctly, then the MI is based on the $192K and not the am't of the loan???   I've been under the impression it would be based onthe original sales price regardless, so if I understand what you're saying, it's really good news?!?!?!?

[ShanetheMortgageMan]

Correct, the MI cancellation point is based on the $192k appraised value when you refinanced.

[rom828]

Yipee!!  That amount is a lot more attainable.

Shane, thanks so much for your advices......and for ALL the help you give us on this forum.  I know it's greatly appreciated.

I'm especially grateful for your patience with those of us that sometimes "just don't get it"!!

[Anonymous]

Update: Certificate of Eligibility shows total entitlement charged is $65K with basic entitlement of $0.  Lender thinks this means I am not eligible for a VA loan however, I discussed this w the VA loan center and was informed I had approx $40K remaining in 2nd tier entitlements.  The base price of the home I want to buy is $185,990 which means I would need a down payment around $7K.  Lender is requiring that I obtain a letter from the VA stating my remaining entitlement for the purchase of the home with all calculations.  Anyone ever received such a letter from the VA?  As for Purchase price I looked at the Guaranty examples on the VA website but am unsure if this price includes or excludes fees/closings, etc—assumption is that it is simply the base price with nothing else included.  Is this a correct assumption?  Any thoughts on this situation would be appreciated.  Thanks