Things You May Not Know About VA Home Loans
Things You May Not Know About VA Home Loans
In the last five years, only about six percent of the more than 21 million veterans and active-duty service members that live in the U.S. today have purchased a home using their VA home loan benefit. We are not sure why this percentage is this low. Most non-military home buyers wish they had access to the program. Is the reason that eligible home buyers do not know enough about the program, or do they think the process of getting a VA home loan is arduous and should be avoided? We hope these facts about the program will bring some clarity, and show you what a wonderful benefit you have for home buying or refinancing.
No Down, No Insurance | Perhaps the biggest advantage of the VA home loan is the fact that you do not need a down payment. Most other mortgage programs require at least 3.5 percent, which is over $12,000 for the average-priced home in America today. With a VA home loan, you are also not required to carry mortgage insurance. These two factors mean for the average home buyer today, you can afford approximately $30,000 more home and have the same monthly payment as someone purchasing with a conventional mortgage. The VA home loan saves you money up front and increases your buying power.
Use More Than Once | You can use your VA home loan benefit as many times as you want. You must pay off your previous VA mortgage completely, and you can re-use your benefit to purchase your next home. This applies whether you pay off your previous VA home loan at closing, have already paid the loan in full, or refinanced a current VA home loan with a non-VA loan.
No Expiration Date | Once you have earned your VA home loan eligibility, it never goes away. Even if you served many years ago, and have never used your benefit. Your eligibility is based on your time served, and the period in which you served. You can check your eligibility by obtaining your DD214 form. A VA-approved lender can use that form to request your VA Certificate of Eligibility for you. You can also request your certificate directly from the VA’s eBenefits website.
Surviving Spouses May Be Eligible | If they have not remarried, surviving spouses of service members who were killed in action can buy a home using the VA home loan benefit. Additionally, the VA funding fee is waived.
VA Loan Interest Rates Are Lower | VA home loan interest rates are typically 0.25% lower than those of conventional loans. Since the VA backs the loans, it makes them a lower risk for lenders. Those savings are passed on to you.
VA Loans Are Available Locally | VA home loans are made available through private companies, not the government. The VA provides insurance to lenders, called the VA guaranty. This assures lenders that they will be paid if the veteran/service member cannot make payments. Because of this guarantee, lenders issue loans at favorable rates and terms. The VA gives you the best of both worlds, you can enjoy the benefit while working with your chosen lender.
Refinance And Tap Into Your Equity | You can use your benefit to refinance your current mortgage, whether or not it is a VA loan. With your VA loan, you can use the Interest Rate Reduction Refinancing Loan (IRRRL) to drop your interest rate and monthly payment without an appraisal, paystubs, W2s, or bank statements. This streamline refinance provides a less expensive and faster way to access lower refinance rates when rates fall. If you do not have a VA loan currently, you can use the VA cash-out loan. This loan is designed to turn your equity into cash. The cash-out loan can be up to 100 percent of your home’s value in many cases.
You can use this loan to pay off a non-VA loan, allowing you to eliminate undesirable loan characteristics like mortgage insurance, variable interest rate, and higher interest rate.
More Leniency In Guidelines | A VA home loan will not disqualify you for bankruptcy, foreclosure, or low credit scores. Since you can shop around for lenders, you can find one who may be more forgiving with your credit score or past financial issues. The VA home loan guidelines do not state a minimum credit score to qualify. Lenders have more flexibility to approve loans. The exception is a foreclosure involving a VA home loan, in which case you may need to pay the amount owed on the foreclosed loan to regain your VA eligibility.
Funding Fee Waivers | The VA usually charges a funding fee to defray the cost of the program and make home buying sustainable. This fee is between 0.50 and 3.3 percent of the loan amount, depending on service history and the loan type. Disabled Veterans receiving compensation for a service-related disability are exempt from this fee. Veterans who are eligible for disability compensation but receive retirement or active-duty pay instead are also exempt from the funding fee.
Consider A Condominium Home | You can purchase a traditional single-family home, a townhome, a home including up to four units, and even manufactured homes. Condominium homes are also included and are commonly overlooked by VA home buyers. Condominium homes often make great starter homes because their price points are generally more affordable. Another feature is that a lot of home maintenance costs are included in your predictable monthly ‘condo fee’. Your REALTOR® can show you the VA’s condo search tool that lists approved condominium communities that are eligible for VA home loans.
Thank you for your service, and although your commitment and service is not easily repaid, we feel that the VA home loan benefit is a small ‘thank you’. We invite you to contact us to be connected with an experienced, veteran-friendly real estate specialist that can get you started today.