The Department of Veterans Affairs was first established back in 1930. The VA established multiple programs for returning soldiers for many reasons but one of the more important was to help these soldiers more easily assimilate back into civilian life. One of the more popular programs introduced was the VA Home Loan Benefit. For those who qualify, it is hands-down the best option to finance an owner-occupied home for those wanting to come to the closing table with as little cash to close as possible. What are these benefits?
Probably the best benefit is the fact that there is no down payment needed. It’s a true zero-down home loan program which dramatically reduces the amount of cash brought to the settlement table. Conventional loans offer low down payment programs but not a zero-down program. Further, conventional loans with less than 20% down typically require mortgage insurance, which is an additional fee borrowers must pay. Most such policies are paid monthly, reducing the overall amount of home the borrower can qualify for.
VA loans also have a form of mortgage insurance. This policy comes in the form of an upfront fee that is rolled into the loan amount. This fee is referred to as the Funding Fee. If a VA loan goes into default, which is rare for VA loans, the lender is compensated at 25% of the loss. Plus, there is no monthly mortgage insurance premium which allows borrowers to qualify for a higher amount. The funding fee can vary based upon the number of times a VA loan has been used and ranges from 2.3% of the loan amount and up to 3.6% for subsequent use.
Another unique benefit relates to closing costs. Borrowers are only allowed to pay certain types of fees. These fees include an appraisal, credit, title, origination and recording fees. All other fees must be paid for by others involved in the transaction. The sellers for example are allowed to pay for some or all of the borrower’s closing costs. Lenders can also offer a credit to be applied toward closing costs at the settlement table.
Another plus comes when those with an existing VA home loan want to refinance. VA loans can be refinanced with a ‘streamlined’ method. A streamline means there is a significant reduction in the amount of documentation needed to close the transaction. No minimum credit score, no appraisal and no income or employment verification is needed.
VA loans are available for veterans of the armed forces but are also available to others. Active duty personnel may also be eligible with at least 181 days of service. National Guard and Armed Forces Reserve members can also qualify for the program with at least six years of service in addition to unremarried surviving spouses of those who have died while serving or as a result of a service-related disability.
Interest rates for VA loans are also extremely competitive compared to other low down payment programs. Further, the VA recently removed the maximum loan amount requirement. Historically, the loan amount followed current conventional loan limits but today, the VA does not have a limit. Individual lenders can institute their own maximum loan limits should they choose but the VA no longer mandates it.
If you’re eligible this is an ideal loan program. If you’re not sure you’re eligible, contact me directly and we’ll work over the program guidelines together including current VA home loan rates, closing costs and qualifying.