An article about a VA Home Loan seems on point as we recognize the Memorial Day weekend, and honor the “some that gave all” and those that still endure that sacrifice. Veterans Affairs (VA) helps Servicemembers, Veterans, and eligible surviving spouses. This article endeavors to provide information to those eligible to utilize the benefits of VA Home Loans.
About VA Home Loans
How does a VA Home Loan compare to other loans, besides the fact that this benefit is reserved for Servicemembers, Veterans, and eligible surviving spouses? It all has to do with the guaranty. Similar to how the Federal Housing Administration (FHA) insure Home Loans which allow lenders to provide more favorable terms, VA guarantees the loan. The big difference however, is guaranty verses insure.
What makes the two so different? The difference is subtle unless you take the time to really think about it. Insurance has a policy attached, that stipulates certain conditions that need met prior to any payout. These payouts tend to have limitations as well. A guaranty on the other hand, injects a third party into the legal agreement. So in the case of Home Loans, VA guarantees the VA Home Loan by promising to pay the lender in the event the homeowner defaults. This guaranty in turn enables the lender to provide more favorable terms.
This VA Home Loan guaranty benefit assists Servicemembers, Veterans and eligible surviving spouses buy, build, repair, retain, or adapt a home for personal occupancy.
About VA Home Loan Benefits
The two most commonly known benefits of VA Home Loans include no private mortgage insurance (PMI) and no required down-payment. Both benefits have stipulations and limitations, although they almost never affect borrowers except in rare circumstances. One such circumstance includes the purchase of a home over $417,000 (or $721,050 in Honolulu Hawaii among other high value select areas).
Other benefits include:
- Allowing up to 4% seller concessions (payment of discount points is not subject to this limitation)
- No one can charge termite report fees, commissions, brokerage fees, or “buyer broker” fees to a VA Home Loan borrower
- One time VA funding fee that can be included in the loan (more below)
- Can be assumed by qualified persons
- Minimum property requirements to ensure the property is safe, sanitary, and sound
- No anti-flip rules (meaning one can purchase a home renovated buy a “Flip Investor”)
- No maximum debt ratio; (although debt ratio over 41% is carefully reviewed)
- No maximum loan amount; however, VA does limit its guaranty
- No minimum credit score requirement; instead VA requires a lender to review the entire loan profile to make a lending decision
About VA Home Loan Fees
The main cost is called a funding fee. This fee is based on the type and value of the VA Home Loan, as well as other factors. These factors include military category, how many times you have used this VA benefit, and how much money you decide to use as a down-payment. This fee can cost as much as 3.3%, or as little as 0.5%. Surviving spouses of a Veteran who died in service or from a service-connected disability do not pay this fee.
Other fees include interest rate, discount points and closing costs. Discount points include money you can spend up front to lower your interest rate, which in turn lowers your monthly payment. Closing costs include the VA Appraisal, credit report, state and local taxes, and recording fees.
Utilizing A VA Home Loan
Lenders require a Certificate of Eligibility (COE) to prove entitlement. Most Veterans can obtain the COE online, however lenders also that the ability to request the COE on behalf of the borrower. Not all lenders provide VA Home Loan options, so make sure to call and “interview” a number of lenders and choose the one right for you.
VA Home Loans have an extensive list of benefits for the borrower. Unfortunately though, some properties will not qualify, or some sellers will not allow their use. Make sure to speak with your REALTOR® and save yourself some stress when you begin the house hunting. That fixer-upper you found on Craigslist that is such an amazing deal may not qualify. The owner of that beautifully remodeled Colonial Home that is “For Sale By Owner” on your favorite house hunting site may not accept VA Home Loan offers. Your REALTOR® will know, and save you the time, effort, and heartache of falling in love with a property the owner cannot or will not sell to you.
We hope you found this article on VA Home Loans helpful. If we missed any points, or if you have any questions, please feel free to let us know! And again, on this Memorial Day, we remember those that gave their lives in the service of our nation, and the appreciate those family members that endure that sacrifice every day.
/salute
