VA, USDA, Is No Money Down an Option?

Rick Ripma  0:00  

Can you qualify for a 0%? Financing? Maybe a VA loan, maybe USDA? What are the options out there? We're going to talk about that today on India's real estate gurus.

Announcer  0:11  

Advisors Mortgage Group is proud to present in these real estate gurus hosted by Rick Ripma, the hard working mortgage guy, please contact Rick for all of your mortgage needs at HardWorkingMortgageGuy.com That's HardWorkingMortgageGuy.com. Now, here's the hard working mortgage guy, Rick Ripma.

Rick Ripma  0:44  

Well, it's July 4, tomorrow. Yeah. And should be an exciting day. Yeah.

Ian Arnold  0:50  

I mean, it should be pretty good. Yeah.

Rick Ripma  0:52  

So we're celebrating the country I actually should have looked it up what birthday would this be 200. And

Ian Arnold  0:59  

I have? Well, you really do the math is 1776 minus 2022.

Rick Ripma  1:04  

Well, let's see, that would be 100 200. And we'll just say about 246 years. I should have brought my calculator to two mortgage guys. And we don't have a calculator between us as we do a radio show. That's what phones are for, I guess it is. So we should have been looking up. Welcome to these Real Estate Gurus. I'm Rick Ripma, your hard working mortgage guy.

Ian Arnold  1:28  

and I'm Ian Arnold Advisors Mortgage Group.

Rick Ripma  1:31  

We appreciate you joining us today. Hope, hope you have a great Fourth of July weekend. And we want to talk about VA loans. We thought that would be appropriate on a day, let you know we're coming up to the Fourth of July. But we didn't just want to talk about VA, we want to talk about other options people may have for 0% financing. So we're going to do that. But I always like to go over the numbers, what's going on in the market, and what's happening. And the basics just so you can have an idea, the basics, our rates are pretty much what they were they probably have dropped slightly over the last week. Maybe an eighth, maybe a quarter, but very, very minor. The feds have, you know, there hadn't been much out but the inflation numbers came out. And they were a little better than expected, but not really very much. So that's kind of helped a little bit to help the mortgage-backed security bond market, which is, you know, helping mortgage rates.

Ian Arnold  2:32  

Yeah, I mean, we knew it was going to be pretty close to it. I mean, and having that high number of point nine looking at it, it'd be the next two months, that will be the big judgment days.

Rick Ripma  2:43  

Yeah, it's gonna be interesting to see how it all plays out when we get our numbers for that for those when they were low, when the year over year, numbers were low, we won't go through all that we've done it in the past, but just know it's all year over year numbers. And so what will you look at what's going to happen and you got to expect it based on what's happened in the past, what we're going to be looking at, and it's just it's a matter of watching those numbers, kind of get into an idea of what you think's going to happen? My personal opinion is short-term, we're probably going to see rates stay very similar to where they're at, maybe go up a little bit, may go down a little bit, but it's gonna stay pretty similar. I think they're gonna go up a little bit. But I think long-term I think by the end of this year, early next year, we're gonna see rates starting to come down possibly a little bit. No guarantees, because nobody really knows it's the future. And last time I checked, I don't have a crystal ball. Anything can happen, right? There is no crystal ball we look at, we look at what's happened in the past and hope you know, it kind of check-in try to get an idea. educated guesses, educate. That's all we can do. Right? That's all we could do. We also want to make sure everybody remembers

Ian Arnold  3:52  

Oh, yes, we are. We are putting all of our shows now still on our podcasts. And again, you can find any of our podcasts on any of our shows on the podcast, Indys Real Estate Gurus. Now, sometimes you got to use possibly, yes, sometimes you don't. But they're all on there. We put chapters on there to make it easy for you can easily select what you want to listen to.

Rick Ripma  4:15  

Yeah, not everyone picks up the chapters. I've noticed some of them do some of them, don't I've, I've gotten I've applied to all of them. Everyone I could find I think we're on almost every single possible.

Ian Arnold  4:27  

That is awesome. Now I looked at the numbers because we get an update and quite a few people have started listening to us on our podcast, which is awesome.

Rick Ripma  4:36  

That's That's great. We appreciate it. If you're listening to the podcast, thank you very much. We appreciate it very much. Let's get into VA loans.

Ian Arnold  4:43  

Yeah. So let's start beginning. Rick, what is a VA loan?

Rick Ripma  4:49  

a VA loan is a loan that the basics are the person who can qualify as somebody who's been a veteran or is currently in the military. So you have been in or, you know, we are currently in the military. There are some exceptions, but it's exceptions like if the person is deceased, who was the veteran, and it may be while they were in the military, then the spouse may be able to qualify also. But the vast majority of what we see is somebody who is either in the military currently or been in the military mostly been in the military, just because in Indiana, there's not a lot of bases, where there's a lot of veterans that are currently in there in full time, we do get quite a few people who are in the reserves. And each of those has a little bit different rules. But the bottom line is what we're talking about is, that's what you have to do to be able to qualify for a VA loan.

Ian Arnold  5:52  

Yep. I mean, and the reason why we see it more with the reserves or even retired is just that people that point time are looking at homes more. So for instance, my brother in the Air Force, well, in six months, he's at a base here in Iraq, then six months later, he might be in Japan. And so it's a little bit more. So we do see more than retired people. But there are good things, even if you're not retired. And we'll get into it more later, where you can actually transition your house if you sell it to another person and everything like that.

Rick Ripma  6:25  

Yeah. But you know, when you look at that to what you were saying, I have had customers who were in in the military who were not in states, and they bought a home because they were married, their spouse was living here, they still bought at VA and they were able to do that while they run assignment, wherever they happen to be. And that is true, you don't get a lot of it. But you do get some of it. Most of what I've done has been in our area have either been retired or reserves because, in our area, that's there are just more people here. We you know, we used to have a base fort. Fort Benjamin Harrison used to be here. While it was here, we did more. Right. But now we don't have that we don't have a base here. So we don't have the volume of people. We have Camp Atterbury. So we do have some in our area. And I think right, what was the one up, Grissom? I don't think it's even in operation anymore, what military base

Ian Arnold  7:23  

even when they're inop around here that you don't have to, you know, station as many people, right? We're not like a huge base. I mean, I grew up in Florida, and you want to talk about bases, there are tons of bases.

Rick Ripma  7:36  

Yep. So that's that is the first piece of being able to qualify for a VA mortgage is you have to, you have to have some either been a veteran are in the military, or you could be a spouse if they were if the veteran is deceased.

Ian Arnold  7:51  

So how would you check to see if you're eligible,

Rick Ripma  7:55  

you get a certificate of eligibility stability, couldn't remember, the worst part isn't staring me in the face. But a certificate of eligibility and the best way to do that as you go right to the VA, and you can that person can go get that I have had times when we've helped them get that. But it's normal, it's very hard for us to help because we aren't veteran and we don't have the right to do it. Yep,

Ian Arnold  8:22  

you can actually do them online, they do put them online. But again, it's hard for us to do it. Because we got to put in your personal information. We don't know all your personal details, like your rank and all that stuff, or what rank you had when you were in there. So you had to put all that type of stuff in there,

Rick Ripma  8:36  

right? Yep. So you can go in there, you can do that. That's where you get your certificate of eligibility, when you get that it's gonna have some numbers on it. And some of them are kind of confusing. One of those is it gives a number of what you can, what you're able to borrow, but that number, I think it's $36,000 For most people, yeah, that's not really the number that you can borrow. There's a calculation on that. And the basics on a VA loan is the limit for most people is the same as your limit for conventional financing, which is what 647 200 200 You almost have that right? Yeah, I knew it somewhere. I was gonna say 250 changes every year. And I don't know why, you know, the 200 is great, but it was 350 something 350 last year, and it just those things keep changing, but that's the number. And so you can borrow up to that point, you have to qualify. And then, of course, your Certificate of Eligibility has to give you that ability, but that is the maximum VA loan under normal circumstances. And what's the benefit of a VA

Ian Arnold  9:43  

loan? Well, the biggest thing is it helps with your down payment and possibly not even having to put a down payment for military people, which is phenomenal for them.

Rick Ripma  9:55  

Yeah, it's the best piece of a VA loan is you do not have to have a down payment. it and you do not have to have mortgage insurance,

Ian Arnold  10:04  

you are still dependent on the lenders up, you do have closing costs. Now keep that in mind, but you do not have the down payment. So when you hear a lot of times even us say a 3% down or 20% down or something like that, that's what you get rid of.

Rick Ripma  10:21  

Yes. And that's you get rid of the down payment, you still have your closing costs, you still have your prepaid, like your property taxes, and your homeowner’s insurance and those type of things. But you don't have the down payment, which is a huge, huge deal. There, you can, in a normal market, you can actually get in with no money down, if you can get the seller to, you know, to can give you closing costs and the prepaid items, you know, you can make get in there in this market, that's a little bit more difficult. And I have heard some agents telling me it's a little hard sometimes to get an approval, or the offer accepted on a VA, which I think is terrible. Yeah, I think a veteran ought to be given, you know, they have that they have this great benefit, that they should be able to take advantage of. And if they want to use it to buy your house, you can kind of see a seller's issue is that you get somebody who walks in, they don't they got cash, they don't, you know, there's some benefit there, they don't have to worry about an appraisal coming in short things like that. That is the other thing when you have a when you're in this market, again, this is not a normal problem. But in this market, sometimes the house doesn't appraise for what you buy it for. So it's in the value of the home when you're purchasing is the purchase price or the appraised value, whichever is lower. So if it appraises for 200, and you paid 201, you have to make up that $1,000 that comes straight out your pocket or read or renegotiate or something like that. But I don't want to I don't want that to sound like it's taking anything away from VA. VA is a phenomenal option for anybody who has the ability to use it if they don't have money down. And you know, we're coming up to a break. So after the break, we're going to talk more about VA loans. And we're gonna get into some other options for 0% down.

Rick Ripma  13:31  

Well, welcome back. And thank you for joining us. I'm Rick Ripma, your hard working mortgage guy and I'm Ian Arnold Advisors Mortgage Group. And this is Indy's Real Estate Gurus. And we've been talking about VA mortgages and VA loans. We're going to talk a little bit more about the VA. And then we're also going to talk about the other options that are out there for somebody who doesn't have a down payment. But before we do that,

Ian Arnold  14:00  

we have the question of the week. And the question that week is sponsored by Debt Crusher mortgage, improving your life by reliving and relieving the stress of debt. And again, this debt curse mortgage is done by us. It is our program that we have put together to help people relieve their stress and their debt. All right. So last week's question was Why did the teddy bear say no to dessert? It's because he was stuffed. My kids really liked that one. All right, so what kind of band never plays music? catch us next week and you'll be able to hear the answer to that one.

Rick Ripma  14:38  

Yeah, you know, it's the most of these questions are things I'd never think of and I don't it's like I my mind doesn't think that way. So I don't usually come up with the answer.

Ian Arnold  14:48  

Well, I'm getting to that age where it's now going to become all these dad jokes with me and so I'm getting the age when my kids can start understanding and giving me that weird look. So I get them all down golden in a roundabout way, it happens.

Rick Ripma  15:05  

It kind of sneaks up by this, I was talking to my wife the other day, and she was saying, you know, 20-25 years ago, she thought, you know, I'll always be able to just stand up. And you know, I won't be, you know, bent over and I won't be sore here and saw there. And that's not true,

Ian Arnold  15:21  

you don't realize how much a part of your body you use, until, let's say your muscles get tight or whatnot or you heard it and you can't use it, then you start Oh, man, I use that for that. And that, that now I can't do any of it.

Rick Ripma  15:37  

Well, you just wait. As you get older, you're gonna see what I'm talking about. All right, you just wait.

Ian Arnold  15:43  

Okay, so as we were talking about the VA loans and everything like that, so I do use to see a lot of commercials, you do see me? And let's just say it's not even VA loans. But what type of this? What deceptive practices do you have seen I've seen a few online? And even when I first got into the business, you and I talked about one and I won't get into it. I won't say the name of the company. But I saw them advertised. And they were like a percent. One and a half percent lower on interest rate than what we were given people. I was like, how is that possible? So I came to you and we were sitting there talking, they're like, well, here's what they do. And they were they put it. So where I might have been thinking a 30 year, they put down to like a five year and then they put down Well, you got to put down 50%. And you got to do this. And so but they're advertising, oh, you get this lowest interest rate where we can beat everybody. But they don't tell you it's suffering the little, little writing that nobody read, nobody can read or nobody does read on the screen of your TV. So you broke that down. He's like, Yeah, see, we can get there. But they got to do all this other stuff.

Rick Ripma  16:58  

Right. And, you know, part of the problem is there's one out there advertising right now that's not on the VA, it's on a, you know, standard financier, you'd think it was standard financing. And they and they quote, a 15-year rate that's fairly low. And it's a 20%, down and all of this. So you think, Oh, this is a great deal. You look at it, when you look at it, you realize they're quoting an FHA loan. So even if you put 20% down, you still have mortgage insurance. And the mortgage insurance at that point adds point eight to the loan, which you just add that so let's say the rate was five and a half. If it adds point eight to the rate, your effective rate, not your APR yet your APR will be higher than this would be 6.3. It's very, very deceptive. It's, it's not right, in my book. No, it's legal. But it's not. Just because something's legal doesn't mean it's the right thing to do. That is correct. You know, and I think that's the that's one thing to look at. On the VA, though, I actually was looking up some things on VA and I came across the Consumer Financial Protection Bureau. And what they were saying they were talking about a lot of veterans get these mailings, and we do they do. And you and they appear as this says a sound too good to be true. And they appear official. And that's part of the issue, you got to make sure look at them to make you know because they're probably not official. It's very much like when you if you go online, and you put in VA loans, you'll see one of them comes up, I'm just guessing, but it will say va.com be like the first ad that comes up and you look at you go Oh va.com No. va.gov is where you want to go is where you want to go. va.com is just some lender trying to get your business, right. And they're trying to get it before you get to anybody else. So I don't know what they're trying to do. I just think like for most people, I think they're trying to find out directly from VA, not from some mortgage company. And I think that's where they need to go. So we look up that information. I just believe you give people the correct information, and let them make the right decision. But this is saying they're saying that you know, many of these solicitations promise extremely low-interest rates like you and I were talking about 1000s of dollars in cash back skip mortgage payments, no out-of-pocket costs, and no waiting period. This is directly from the Consumer Financial Protection Bureau. It says don't be fooled before responding to unsolicited offers. Here's what you need to know. The offers a skip one or two mortgage payments lender sometimes advertised this as a benefit of a VA rate mortgage refinance. In fact, VA prohibits a lender from advertising the skipping of payments as a means of obtaining cash in an interest rate reduction refinance loan that's what they we, we call that in Neural, okay, but it's an interest rate reduction refinance loan or IR R. R L, I made them to

Ian Arnold  20:08  

say that five times.

Rick Ripma  20:09  

So certain lenders nevertheless use the selling point when they are unable to offer cash-out or a significantly lower interest rate. So that's just one area. Another offers to receive an escrow refund, you know, lenders may promise that you will receive a certain amount of cash as a refund from your escrow account, however, the amount you may receive is dependent on how much he left in your account on the other loan. Don't be fooled by that, first of all, if there is there, it's going to come from everybody. And secondly, you're putting it in the new loan. So you may finance it in the new loan, and you may get some money back, but you have to understand what's going on there. Right? It's not free money. No, nothing's ever free, not free money, low-interest rates without specific terms, they'll advertise that you have to know what those terms are. And then they'll use aggressive sales tactics. If your VA, if you get one of those, I would just get online, look us up HardWorkingMortgageGuy.com That's HardWorkingMortgageGuy.com. Look us up. You know, call us and send us the information. We'll tell you what it's you know, we'll help you.

Ian Arnold  21:20  

Hey, it's better to have a five-minute conversation with us to see where what is true, and what isn't, than for you to put your information out there. And then next thing you know, somebody steals your I still see your identity. So just keep that in mind. Five minutes, we'll talk in us we can help out

Rick Ripma  21:38  

quite a bit. Right. Yep. And you know, these things are being they're out there. The Consumer Financial Protection Bureau is the ones talking about this. We're just telling you what they saying. And they're also they're trying to put a stop to it. Because it's bad information. It's not it's wrong.

Ian Arnold  21:56  

All right. So on a little lighter note. What about a USDA loan?

Rick Ripma  22:02  

Well, USDA loans are a little different. They're different qualifying pieces for a USDA loan. So let's talk about the qualifying number one, the home, the home has to be in a qualified USDA area, what we call rural housing.

Ian Arnold  22:19  

So when you say rural housing, so now I'm not going to put you into specifics, but in Indiana, how does that look to Deena?

Rick Ripma  22:28  

Well, most areas have some rural housing, and Marion County does not have any rural housing. All right. If you looked at fishers, Zionsville, Carmel, you know, some of those areas, I haven't. Greenwood probably, there's not going to be any rural housing, but we can look it up. But the best thing to do is go hey if I want to do that, let's look up the area, we can look it up by address, or we can kind of you tell me an area, you know, some of the small towns they may have the whole town may be open or there may be pockets where they don't allow USDA. The basic key though, is it has to be in a rural area. Now I've seen neighborhoods that are in rural areas that work. But I've never seen it. In fact, I've looked it up there is nothing in Marion County, nothing there is no rural area.

Ian Arnold  23:22  

Well, what the USDA loan was designed to do was to help people move further out. It was basically to set up where everybody's living downtown in the city, it was trying to branch people out and make the one it makes the city bigger as if once you move in the rule, it keeps growing and stuff. But it allows people to basically try to think of the exact way to say this, but you can have more out there. I mean, make people move further, a little bit further away.

Rick Ripma  23:59  

Yeah, not make a lot, you know, it gives them some options and makes it it's important to the USDA, because they want people living in rural areas, United States Department of Agriculture, they want but you think why are they loaning people money on houses, right? And the reality is they actually aren't loaning money on houses. What they do is that it's an FHA loan, and they're just a, what I'll call an overlay. It's a USDA overlay. They don't call it that, but that's what it is. And that gives these rules and it allows you to get in with zero money down. And it is, but the two items are the house has to be in the right area. And there are income limitations. You have to qualify. So you can't earn too little money and you also can't earn too much money. Right? Yep. That's what you have to watch. So it's, there are two items there that you have to watch, but it is a great option. The rates are usually very competitive. They're very good, especially if for no money out of your pocket, and it is other than VA, it's the only one I know of that you truly can get in without any money out of your pocket. If you set it up correctly, you may have to still pay your closing cost near prepaid. If you don't have the seller pay them. But it is one that will allow you know; those allow the seller to pay those so you could get into a USDA loan without any money out of your pocket. At closing, you stopped to pay for an appraisal, things like that. But you can actually get in with almost nothing out of pocket, which is very difficult in today's world. Oh, definitely.

Ian Arnold  25:35  

Especially with the prices of a lot of stuff going up. And I mean, I guess you can't say too much on gas gas has dropped last couple of weeks, but it's still quite a bit higher than it was a year ago. But

Rick Ripma  25:47  

the average is $5. In Indiana, which is other than a week ago the highest. And I'll tell you, I paid I have to use premium. But I paid $5.47 last weekend. Yeah,

Ian Arnold  26:03  

I think I filled up it was like 495. And I looked today, and it was like 479. So I saw it dropped a little bit. But again, it's still nothing like it has been.

Rick Ripma  26:17 

Right. Yeah. I mean, it's gonna take a while for it to get if it goes down, it's gonna take a while for it to go down. It should be able to buy, who knows.

Ian Arnold  26:27  

But so what are the USDA loans, and who all benefits from them, let's

Rick Ripma  26:35  

or it's really a, a low to mid-income. Loan. Okay. And it's hard to tell your income because it depends on how many people are in the house. You know, there's a household, how much you know, we have to count everybody's income in the household. There are just so many things around the program, it's hard to tell you, it's a reasonable amount, though, I think the last time I looked at 80 to $90,000, on a one to two people, I may be a little high. And it does depend on the area that the lower-income in the area, the lower the average income in an area, the lower this number is going to be. So it is one of those things we have to look at. And be cautious because you can't earn too much money. That's the big piece there. You cannot earn too much money.

Ian Arnold  27:25  

All right. So I know we're getting close to time. So you know what we're doing next week? I got it. What is it we are doing? Are our fixer-uppers worth buying? And does it work for you? Because we're having a lot of people start doing that fixer-uppers and stuff. So we want to go through it, is it even worth

Rick Ripma  27:47  

doing? Right? Because there's a lot to that program. And there are a lot of issues and a lot of things you have to watch. And you really have to know what you're getting into because it isn't mortgages are not necessarily that difficult. There are for certain people self-employed, things like that. That type of program to get into a fixer-upper is difficult program. Difficult meaning that it takes a lot of effort because of all the things that have to be done to make it set up. So it's a really good thing to talk about. It'd be great. If you have any interest in that or know anybody who does, you know, listen next week, you can listen to the podcast on all the different podcasts. And these real estate gurus may need an apostrophe or may not an in these. I haven't noticed that for the most part. Or listen to us here on the air. And on Saturdays from 330 to four. Again, I'm Rick Ripma, your hard work and mortgage guy and I mean Arno visors Mortgage Group. And you just look online at HardWorkingMortgageGuy.com That's HardWorkingMortgageGuy.com Thank you so much for joining us and have a great July 4.

Announcer  28:50 

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