22 Sep VA Mortgage Disclosures
Disclosures to be made for VA Mortgage
Mortgage loan for veterans is an important tool nowadays, to provide safety and long term financing to the veterans in America. Whether you are a veteran first time home buyer, in the process of buying another house due to a transfer, or a surviving spouse. Processing a VA loan could be a long process and requires a lot of documentation on the way to avail it. VA loans are usually available to those veterans who may not have money for a down payment or qualify for private financing in their area.
Let us try to understand in this article what all disclosures need to be understood while applying for a VA loan.
The most important point that one needs to consider is the GFE or ‘Good Faith Estimate’ from one of our top lenders. This is a statement provided by the lender to the borrower. This statement contains all the costs that one has to bear with reference to the mortgage. One should not get into a contract with a lender unless he gets this statement from the lender. If one has multiple GFE from various lenders, the borrower also has the option to compare multiple offers and select the best one. A GFE usually contains the below points. In fact, the borrower has to make sure that these points are included:
- The GFE contains the Interest rates for the loan. This has to be understood by the borrower.
- You will have an option to ‘buy points‘ which will lower your long term interest rate. Be sure to discuss this option with your lender because it can save you 10’s of thousands of dollars over the life of a loan.
- There are lots of fees that a lender charges to the borrower, like appraisal fees, etc. This statement shows all the fees that the lender charges to the borrower.
- Before the payment date of the first interest amount, the interest has to be paid in advance.
- There are few insurance amounts also mentioned in GFE like mortgage insurance etc. One has to understand, why these charges show up there.
At the time of closing the loan, the borrower gets a settlement statement. It is called HUD-1 disclosure. This settlement statement shows all the fees and charges paid for the loan. The borrower has to compare this statement with the GFE statement and ensure that it matches.
It is also as per the law that the amounts mentioned in the settlement statement (sometimes also referred to as the HUD-1) should match with the amount in GFE. Whenever there is a change in any clause, the lender has to reissue the GFE. The settlement statement is matched with the most recent GFE issued. Always keep in mind that a lender does not ensure a fee or rate unless the borrower confirms and locks the mortgage. There may be other instances as well when a new GFE is issued. For example, the credit score of the borrower changes, the employment status of the borrower changes, and the appraisal of the property is not as much as expected, etc.
There are quite a few other forms as well which needs to be filled up for VA mortgage:
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- The purchase agreement contains a VA Amendatory clause. This clause is signed by both parties and as per this, the borrower is not obliged to buy the property if it does not appraise to the value as agreed upon.
- It also contains Federal Collection Policy Notice which informs that if the borrower defaults on the loan, he can be taken to court and other possible actions.
- There is an Assumption Approval clause as per which the loan is not valid unless the Department of Veteran Affairs approves it.
- There is an acceleration clause, as per which, if you sell your house to another third party who cannot take care of the mortgage, the payment of the remaining amount becomes due immediately.
- The funding and Processing fee clause confirms the amount of funding fee and processing fee to be added to your loan.