Have you served our country in any branch of the armed forces?
Whether you’re a veteran or still in active service, why not join 22 million happy beneficiaries of the VA mortgage loan to get the home you’ve always wanted?
With lending requirements becoming ever more robust following the disastrous housing crash, VA loans are a lifeline if you need to buy a house or refinance your mortgage.
What exactly are VA mortgage loans, then?
What Is a Veteran Affairs Mortgage Loan?
VA loans offer $0 down payment mortgages to qualified applicants including active military members, veterans, and some spouses.
Often called a Veterans Affairs Mortgage Loan or simply a Veteran Affairs Loan, the VA loan is arguably more important now than when it was created back in 1944.
With credit standards continuing to tighten and down payment requirements rising, VA loans will help you get the house you deserve so check to see if you qualify.
How VA Mortgage Loans Work
Issued by private lenders, the Veteran Affairs Mortgage Loan is backed by the US Department of VA (Veterans Affairs) as a benefit reducing down-payment requirements.
The 5-step process is designed to be straightforward and streamlined.
- Pre-qualification: Contact your mortgage broker to get an idea of whether or not you’ll qualify. You’ll need a Certificate of Eligibility generally requiring a statement of service.
- Offer: Once you’ve secured the ideal home, offer and negotiate to the point of contract
- Veteran Affairs Appraisal and Underwriting: With a contract established, the property will be appraised by the VA and your financial details evaluated. If everything checks out, you’ll be given a clear to close.
- Closing: Finalize all the paperwork and grab the keys to your new home courtesy of a VA loan
We’ll look now at why you should consider a VA loan if you qualify…
Benefits of VA Mortgage Loan
- $0 Down Payment: It’s hard to find a mortgage that doesn’t require a stiff down payment with some conventional loans demanding 5% to 20% down. With a Veteran Affairs Mortgage Loan, you can get the ball rolling without any deposit in place.
- Keen Interest Rates: The VA guarantee inspires confidence in lenders and this government backing leads to extremely competitive interest rates on VA loans. Save money over time not just up-front
- No Need For PMI: You won’t be forced to buy Private Mortgage Insurance with VA loans. Normally any financing over 80% attracts mandatory PMI so you can avoid this extra expense
- Less Stringent Lending Criteria: The government backing of a Veteran Affairs loan means the bank assume less of a risk. As a result, you’ll find more lenient lending guidelines in place. If active service has led to a blemished credit history or diminished savings, a VA loan may get you back in the driving seat so you can get the home you want now.
- VA Loan Benefit is Reusable: As long as you pay off your VA loan, you’ll be able to use your entitlement repeatedly even if you’ve lost a home to foreclosure.
- No Prepayment Penalty: Sometimes, life treats you well and you might want to make some extra payments on your mortgage. Chipping away at the loan with overpayments can shave off thousands of dollars in interest over the years. With VA loans, you won’t be penalized for prepayment.
- Get Help If You’re Struggling With Repayments: If circumstances change and you start struggling to repay your Veteran Affairs Mortgage Loan, the VA can step in to liaise with the lender. A team of counselors is in place to ensure you can negotiate lower payments and explore alternatives to foreclosure if things get to that stage. There’s no need to suffer in silence with a VA loan and no need to fear losing the roof over your head.
Fees and Regulations
The Veterans Affair Mortgage loan is a federal benefit but the government stops short of making direct loans to veterans.
Private lenders act as financiers while the government stands guarantor.
Given that this arrangement means the lender faces no risk in the face of total default, keen interest rates and competitive deals can be found under the VA loan program.
The VA funding fee is 2.15% of the purchase price for first-time buyers. Subsequent VA loans come with a 3.3% fee. Exceptions are for Veterans with service-related disabilities who may find that the funding fee is waived for them. With a downpayment, the funding fee may be lower, so ask your broker about this.
In most areas of the US, qualified veterans can borrow up to $484,350 before needing to come up with any kind of down payment. Recent regulation with the VA Loan Limits in 2019 means if you live in a high-cost county, you might still be eligible to borrow far in excess of that limit without any call for a down payment.
Things You Should Know About a Veteran Affairs Loan
- You Can’t Use a VA Loan For a Second Home: The Veterans Affairs Mortgage Loan is for primary residences only. While you can forget about buying a vacation home, there is some leeway here… You can purchase a multi-unit property as long as you live in one of those units
- There Are Limits On The Type of Home You Can Buy: VA loans are normally provided for homes in good repair that you can move into without renovation. You won’t be able to buy a property with the intention of fixing it up using a Veteran Affairs Loan, unless you get a special VA Renovation Loan; ask your broker about this possibility.
- Veteran Affairs Loan Comes With a Mandatory Fee: Although VA loans don’t call for insurance, there is a modest fee attached which helps to keep this valuable program rolling. If you’re unable to meet the fee, it can be rolled over into the mortgage and waived completely if you have a service-related disability
- Restrictions on Co-Borrowers: If you plan to take out a VA loan with a co-borrower, unless they are your spouse or a veteran sharing VA loan entitlement, you’ll find it tough. Not all VA lenders offer joint loans so make sure you dial this in if you’re not the sole borrower
For more information about Veteran Affairs Loans, here is a link for information for obtaining a certificate of eligibility.