NO DOWN PAYMENT, AND NO PRIVATE MORTGAGE INSURANCE
These are perhaps the biggest advantages to a VA loan. A Veteran does not need a down payment. None whatsoever! Most mortgage programs, such as FHA and conventional loans, require at least 3.5 percent to five percent down. That’s up to $12,500 on a $250,000 home purchase.
With a VA loan, a Veteran can buy immediately, rather than years of saving for a down payment. With a VA loan, Veterans also avoid steep mortgage insurance fees.
Private mortgage insurance (PMI) typically costs between 0.5% to 1% of the entire loan amount on an annual basis. On a $100,000 loan this means the homeowner could be paying as much as $1000 a year, or $83.33 per month – assuming a 1% PMI fee.
At 5 percent down, private mortgage insurance (PMI) costs $150 per month on a $250,000 home, according to PMI provider MGIC. With a VA loan, a Veteran buyer could afford a home worth $30,000 more with the same monthly payment, simply by eliminating PMI. Using a VA loan saves the Veteran money upfront, and tremendously increases his or her buying power.
The VA Home Loan Can Be Used Again and Again
The VA home loan benefit is not one-and-done. It can be used as many times as they want. Here’s how.
Assume the Veteran purchased a home with a VA loan. But now, they’ve outgrown the home and need something bigger. When they sell the home and pay off the VA loan completely, they can re-use the benefit to buy another home. The entitlement is restored in full.
But that’s not the only way to they can re-use the benefit.
Eligible Veterans and Servicepersons can receive a one-time restoration when they pay off the VA loan, but keep the home. This scenario comes into play if the Veteran purchased the home long ago, and have paid off the loan. It also applies if they have refinanced the VA mortgage with a non-VA loan.
In these cases, the Veteran can keep the home, and enjoy the benefits of VA home buying one more time.
The VA Home Loan Benefit Never Expires
Once a Veteran has earned eligibility for the VA home loan, it never goes away. Those who served 20, 30, even 50 years ago often wonder whether they can still buy a home today if they never used their benefit. If eligibility can be established, the answer is yes.
Eligibility is based on the length of time served, and the period in which you served. For instance, a U.S. Army Veteran with at least 90 days in service during the Vietnam era is likely eligible.
To check eligibility, the Veteran must first obtain his/her DD Form 214. With that document, a VA-approved lender can request a VA Certificate of Eligibility for you, or you can assist the Veteran request it directly from VA’s benefits website. https://www.ebenefits.va.gov/ebenefits/homepage
The Veteran may be eligible to buy a home using a VA home loan, even if they served long ago.
Surviving Spouses May Be Eligible
More than 3,000 surviving spouses, http://www.va.gov/opa/persona/dependent_survivor.asp, purchased a home with their fallen partner’s VA benefit in 2016. Un-remarried husbands and wives of Servicepersons who were killed in action can buy a home with zero down payment and no mortgage insurance. Plus, the VA funding fee is waived.
There’s no way to repay the spouse of a fallen hero, but this benefit surely helps them move forward after tragedy.
VA Loan Rates Are Lower
According to loan Software Company Ellie Mae, VA loan rates are typically about 0.25% lower than those of conventional loans. The VA backs the mortgages, making them a lower risk for lenders. Those savings are passed on to Veterans.
Additionally, VA loans come with some of the lowest foreclosure rates of any loan type, further reducing risk for lenders. No surprise here, but Veterans and Servicepersons take homeownership seriously. These factors add up to lower rates and affordable payments for those who choose a VA loan, and once again more buying power that increases commissions.
VA Loans Are Available From Local Lenders
The VA home loan is unlike most other VA benefits. This benefit is available from private companies, not the government itself. The Department of Veterans Affairs does not take applications, approve the loans, or issue funds. Private banks, credit unions, and mortgage companies do that.
The VA provides insurance to lenders, http://www.benefits.va.gov/homeloans/lenders.asp. It’s officially called the VA Home Loan Guaranty. The VA assures the lender that it will be repaid if the Veteran can no longer make payments. In turn, lenders issue loans at superior terms. In short, a VA loan gives you the best of both worlds. Veterans enjoy they’re benefit, but also have the convenience and speed of working with a chosen lender.
Buy, Refinance, Or Tap Into Home Equity
The VA home loan benefit is not just for buying homes. Sure, it provides unmatched home buying advantages, but Veterans can also use it to refinance an existing mortgage, whether it’s a VA loan or not.
Homeowners with a VA loan can use the Interest Rate Reduction Refinancing Loan, http://www.benefits.va.gov/homeloans/irrrl.asp, or IRRRL, to easily drop their rate and payment without an appraisal, or even paystubs, W2s or bank statements. The VA streamline refinance, as it is commonly known, gives VA loan holders a faster, cheaper way to access lower refinance rates when rates fall.
Even homeowners without a VA loan can use a VA refinance. The VA cash-out loan is available to eligible Veterans who don’t have a VA loan currently. As its name suggests, a VA cash-out refinance can be used to turn a Veteran’s home’s equity into cash. The Veteran can simply take out a bigger loan than what is currently owed. The difference is issued to the Veteran at closing.
The VA cash-out loan amount can be up to 100 percent of the home’s value in many cases, and can use the proceeds for any purpose – home improvements, college tuition, or even a new car. Many homeowners today are dropping their rate and taking cash out simultaneously, accomplishing two goals at once.
But Veterans don’t have to take out cash to use this VA loan option. They can also use it to pay off a non-VA loan. Eligible homeowners who pay mortgage insurance or are dealing with other undesirable loan characteristics should look into refinancing with a VA loan. It can eliminate PMI, get them into a stable fixed-rate loan, pay off a second mortgage, or simply reduce their existing rate to make homeownership more affordable.
Lenient Guidelines For Lower Credit Scores, Bankruptcy & Foreclosure
Unlike many loan programs, a lower credit score, bankruptcy or foreclosure does not disqualify a Veteran from a VA home loan. In fact, according to the VA 1 of 10 of those using the VA Loan could not qualify for a conventional loan – thus expanding the market of potential homebuyers. Generally, VA lenders are looking for a
least a 620 credit score to move forward.
Shop around at various lenders, because each will have its own stance on past credit issues. However, VA guidelines do not state a minimum credit score to qualify. This gives lenders leniency to approve loans with lower scores. In addition, VA considers a credit re-established when you have established two years of clean credit following a foreclosure or bankruptcy.
Many homeowners across the U.S., military and civilian, experience bankruptcies and foreclosures due to a loss of income, medical emergency or unforeseen event. Fortunately, these financial setbacks don’t permanently bar VA-eligible home buyers from ever owning again.
The exception, though, is a foreclosure involving a VA home loan. In this case, the Veteran may need to pay back the amount owed on the foreclosed VA loan to regain eligibility. But for most home buyers with past credit issues, a VA home loan could be their ticket to homeownership.
Funding Fee Waivers
VA typically charges a funding fee, http://www.benefits.va.gov/HOMELOANS/purchaseco_loan_fee.asp, to defray the cost of the program and make home buying sustainable for future Veterans. The fee is between 0.50 percent and 3.3 percent of the loan amount, depending on service history and the loan type.
However, not everyone pays the VA funding fee. Disabled Veterans who are receiving compensation for a service-connected disability are exempt. Likewise, Veterans who are eligible for disability compensation, but are receiving retirement or active duty pay instead, are also exempt from the fee.
Buy A Condo Or Farm With A VA Loan
You can buy many types of properties with a VA loan, including a single-family (free-standing) home, a home of up to four units – as long as the Veteran occupies one unit, and even manufactured homes. But condominiums and farms are commonly overlooked by VA home buyers.
Condominiums are ideal starter homes. Their price point is often lower than that of single-family homes. And, condos are often the only affordable option in many cities.
The VA maintains a list of approved condominium communities. Veterans can search by city, state, or even condominium name on VA’s condo search tool, https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch. It’s not a short list. For example, there are more than 2,400 approved condo communities in Washington State, about 1,000 in Texas, and a staggering 9,000 in California.
The Department of Veterans Affairs’ (VA) Home Loan benefit may be used to purchase a farm on which there is a farm residence to be owned and occupied by a Veteran as his or her primary residence. Although the VA Home Loan benefit cannot be used for business loans, including for farming, Veterans can use the benefit to purchase a farm on which there is a residence. And, loans for farm dwellings are appraised the same way as for homes in urban areas.
These preceding 10 facts are just a few, and there are actually many more reasons, http://themortgagereports.com/13222/10-biggestbenefits-of-a-va-home-loan, why Veteran clients should consider a VA loan.
There is absolutely no reason why eligible Veterans should not be utilizing the VA Guaranty Home Loan benefit for each and every home, farm, condo, or refinancing.
In short – The freedom afforded to this country by members of all branches of the military, past and present, is not easily repaid. But this VA Loan program is a small “thank you” for their service and dedication.