In continuing my series of articles concerning Texas Affordable Housing; I will break-down the Texas Veterans Land Board Programs. This is an incredible program, and should not be confused with a Veterans Administration (VA) Home Loan. This is a loan program for buying a home, land, or home improvement specifically to benefit the more than 1.7 million civilian Veterans in Texas, and those that want to reside in Texas when leaving active duty.
They also offer other programs for affordable long-term nursing care, and burial benefits. But since I am in the business of helping buyers and sellers with homes, and land I will not be discussing these assistance programs.
Texas has the 3rd largest Veteran population, and over 120,000 reservists and National Guard members. Texas is 1 of only 5 states to offer state specific Veteran’s benefits, and Texas is the only state with a land finance program.
Who can Benefit:
- Active military duty stationed in Texas and have changed his/her state of legal residency to Texas.
- Served no fewer than 90 cumulative days on active duty or active duty training in the Army, Navy, Air Force, Marine Corps,Coast Guard or United States Public Health Service, or recognized reserve component of one of the listed branches of service (unless discharged sooner due to service-connected cause)
- Was NOT dishonorably discharged
- Unmarried surviving spouse of a Texas Veteran listed as MIA, KIA, or who died of service-connected cause may be eligible
- Served after September 16, 1940
- Completed all initial active duty training required as a condition of service in any National Guard or reserve component of one of the listed branches of service
- Served in the Armed Forces of the Republic of Vietnam (ARVN) between February 28, 1961 and May 7, 1975 (ARVN – Housing Assistance Program or Home Improvement Program only).
- Listed Texas as the home of record at the time of entry into the military
- Must have been a legal resident of Texas for at least twelve consecutive months immediately prior to filing an application
- Successfully repaid any previous Texas Veterans Land Board (VLB) loan. A loan is considered repaid when the account has been paid in full by the original veteran purchaser or last approved assignees. Any other active VLB loans in programs other than the one for which application is being made must be in good standing. Veterans are entitled to have only one loan in each VLB program at the same time.
Who Should Use it:
This really depends on the current interest rate of the Federal VA Home Loan vs. The Texas Land Board. More about this under Downfalls. Tex Vet loan programs are not associated with the federal VA; therefore, even if you have used your VA benefits, and that loan was assumed for instance, and not been repaid in full you may still be eligible for these state loan programs.
What You Can Get:
- At or below market Interest Loan Rates
- Residential Home Financing up to $325,000
- Home Improvement Loans up to $25,000
- Land Financing up to $80,000
- Housing loans are available with 15, 20, 25 or 30-year terms.
- Home Improvement loans are available with two to 20-year terms.
- Texas veterans can use all three Texas Veterans loan programs at one time. Multiple eligibility simply means you can receive a land loan and a housing loan and a home improvement loan.
- Interest rates are updated weekly, and can be checked on their website. They are determined by the rate the Texas Veterans Land Board pays on applicable bond proceeds. VLB Base Rate is subject to an adjustment on the first business day of each week.
- The interest rate is determined at the time the lender secures a rate lock.
What you should not expect:
The Veterans Housing Assistance (VHAP) is not a refinancing program. If you have an existing loan on your home, you cannot use the VHAP to lower your interest rate, nor can the VHAP be used as a down payment on a home. It can only be used as a first lien on your primary residence.
Does not lend interim construction money to build a home. The veteran can, however, obtain interim financing from another source to build and, upon completion, finance up to $325,000 of the home through the Housing Assistance Program (VHAP). This is known as a take-out loan. A take-out loan may be made to finance a home that qualifies as new construction under the following conditions:
- The VHAP loan must be used to pay off the construction loan (interim financing). In other words they want to be the 1st lien holder.
- The term of the interim loan cannot exceed 24 months, and the original indebtedness must have taken place within 24 months of the closing date of the VHAP loan.
- The veteran may occupy a newly constructed residence during the term of the interim loan and still qualify for a take-out loan.
- Two-to-four family units are not eligible for take-out loans.
Conditions that must be met:
All VLB loans are subject to credit approval.
The Veteran is required to occupy the home within 60 days following the closing date of the loan. The home must remain the veteran’s primary residence for a period of at least three years. In the event the veteran fails to comply with these requirements, the VLB may require the acceleration of all money due on the VLB loan or the escalation of the interest rate on the program loan to prevailing market rates
All new-construction homes financed through the Texas Veterans Housing Assistance Program (VHAP) must meet the U.S. Environmental Protection Agency’s (EPA) new guidelines for ENERGY STAR® qualified homes. This includes completion of the Thermal Bypass Checklist, by a certified Home Energy Rating System (HERS) Rater, prior to wallboard being installed.
The new guidelines, Thermal Bypass Checklist and applicability dates may be found at: www.energystar.gov
My sequence of the process is a little different than that of The Veterans Housing Assistance. I believe in all instances of any home purchase, the first step is not to locate a house. The initial step should always be to speak with an experienced and knowledgeable real estate agent, and be introduced to their partner lender. Then after it is clear to the home buyer on the what purchase price they should focus on, what their monthly mortgage payment will be with taxes, and insurance; then a house can be located. Because your agent took the initial steps of introducing you to a lender who is already qualified by the Texas Veteran Land Board, the lender can then complete the application which consists of the paperwork necessary to initiate a VHAP loan, including the application for certification as a Texas veteran.
The VLB will lend the amount of the home’s purchase price up to $325,000. All application materials must be requested from and returned to the lending institution.
The Texas Veterans Land Board can directly originate a loan if the maximum loan amount borrowed is $45,000 or less. The term may be for 15, 20, 25 or 30 years.
This is not a 100% GUARANTEED Loan Program. A 5% Down-payment is required for the Home Buying program. This is not always such a bad thing. It is great to have some equity from the beginning.
Loans originated by a Participating Lender are not required by Veteran Land Board, but are allowed and may charge:
- Up to 1% Origination Fee
- Up to 1% Participation Fee
Both of these fees are completely negotiable between the buyer, the seller, and the lender.
With a VA loan the lender is only allowed to charge an origination fee, but they also charge a Funding Fee. The participation fee is just what it implies; 1% of the loan amount is allowed to be charged by the lender for doing the extra applications, processing and paperwork for using this program.
However, in the next few days I will be implementing a 1.5% Buyers Rebate promotion especially for Veteran’s regardless of the loan program they choose to use. Details will be released soon, or call me now to hear what I have in mind.
Another possible negative, that I have seen recently in the mortgage rates is that the TexVet loan may not be the best interest rate, by possibly as much as .25%. It goes without saying, with today’s mortgage debacle that FHA, and VA are very attractive. Unless you have a FICO score of 680 or above your chances of getting the terms, interest rate, and actually making it to the closing that closely compare to FHA / VA are getting slim. Again, this is as of TODAY.
This is not really a concern however, because you have been pre-approved, by a partner-lender that will be certified to close FHA / VA / Conventional and numerous affordable housing programs they simply just put you into the loan that is best for YOU at the time you are ready to enter into a contract to purchase. It’s no sweat to you, the Texas Veterans Land Board, or anyone other than the lender, who should be happy to oblige to put you in the best loan for YOU.
My partner-lenders think like me, they want you to be extremely happy with the real estate services provided, so that you will refer your friends and family to us, and when it is time to move-up or size-down you come back to us. Now, enough shameless self-promotion!
This is an example of closing costs to close a Veterans Housing Assistance Program (VHAP) loan that would be disclosed on the Good Faith Estimate. Remember, with ANY loan you should be able to have this in your hand before you ever have to go out and start looking at homes. No surprises’!
- 1% Origination Fee*
- 1% Participation Fee*
- Realtors Commission (Typically paid by seller)
- Hazard, Fire & Casualty Insurance
- Taxes for all relevant taxing authorities
- Flood Insurance (if applicable)
- Title Insurance Premium
- Attorney, Legal and/or Document Drafting/Review Fees
- Closing Fee
- Pest Inspection
- Tax Certificate Fee
- Tax Service Fee
- Prepaid Interest
- Appraisal Fee
- Flood Certification Fee
- Overnight Delivery Service
The Veterans Housing Assistance (VHAP) and Home Improvement (VHIP) Programs offer an interest rate reduction to qualifying veterans with disabilities. The veteran must have a compensable service-connected disability of 30% or greater as verified by an Award Letter from the Department of Veterans Affairs (VA). The veteran must also meet all other eligibility requirements for the VHAP and VHIP. This can mean 1% off the base rate, at the time of this update would mean a interest rate of 4.64%
It is noteworthy, that the state of Texas also offers an additional property tax exemption for disabled Veterans.
Looking down the road:
VHAP loans can be assumed under the following conditions:
- The veteran must have occupied the home as his/her primary residence for a period of three years from the closing date, unless this requirement is waived by the VLB.
- An Assumption and Release Agreement must be entered into by the person assuming the loan.
- All applicable program insurance policies must be maintained.
- The terms of all rules of the VLB must be met, and approval of the VLB must have been obtained.
- All paperwork and approvals must be obtained through the company where the monthly payments are made.
How the Home Improvement Program Works
The Texas Veterans Land Board (VLB) will lend eligible Texas veterans up to $25,000 for up to 20 years on a fixed-rate note to make substantial repairs to their existing primary residence. No down payment is required.
For loans of $10,000 or less, the maximum term of the loan will be 10 years.
All loans are FHA-insured. The VLB must be in a first or second lien position. The veteran cannot advance any funds to the contractor or purchase materials prior to receipt of loan proceeds from the VLB. The VLB now offers a one-time closing with up-front funding (4 business days after closing) of the full amount of the loan. The VLB recommends that the veteran and the contractor enter into an agreement allowing the veteran to distribute funds from the loan as work progresses. The parties may draft their own agreement, including hiring an escrow agent. The agreement should provide for disbursal’s as the improvements are completed, including a final ten percent (10%) disbursal 31 days after completion. The ten percent (10%) retainage is to comply with statutory requirements to avoid liens by subcontractors.
All property improvements should be completed within six months from the date of disbursal of loan proceeds.
If the veteran is required to vacate the home while the improvements are being made, the veteran must re-occupy it within 60 days after completion of the construction.
Again, the Home Improvement Program cannot be used for refinancing.
VLB Land Program
- One Acre Minimum
- Up to $80,000
- 30 Year Fixed Rate
- 5% Minimum Downpayment
- Note/Deed of Trust
- Application Fee of $325 (Appraisal and Contract Fee)
The benefits over other Land Loans:
- 45 – 55 Days to Close
- Only 5% down-payment
- No Productive Value Required
- Online Application
- Recent and Current interest rate of 7.25%
So this will conclude my summation of the Texas Veterans Land Board Programs for buying a home, land, and home improvement loans. In my opinion, there is no better place than Texas, specifically North Dallas and Denton County to be a Veteran and a home owner. With affordable housing, property tax exemptions for disabled Veterans, programs like these and so much more. I hope the tens of thousands of soldiers that will be returning soon will choose Denton County to call home, and choose me to be their Realtor.
All Rights Reserved© Jay Myers (972) 510-7800 Licensed Real Estate Agent in Texas with Fathom Realty LLC