There are more than 21 million Veterans and Servicemembers that live in the U.S. today, but did you know that only about 6 percent of them bought a home using a VA home loan in the past five years? That percentage could be much higher if more of them are better informed of what their options are. If only more veterans knew, the VA home loan is a program non-military homebuyers wish they had access to!
To date, most eligible veterans still bypass the VA home loan program as a viable option. There are a number of reasons however that this option should never be overlooked. First, they may not know all the advantages. Second, they think getting a VA loan is an arduous and exhausting process that they would rather avoid. Finally, a lot of lenders do not take the time to inform Veterans about the program or don’t know much about it themselves.
Here are 8 key facts about the program. Learn more about it and you’ll all but forget about any other home buying or refinance option.
1. No down payment, no mortgage insurance
These two are perhaps the biggest advantages of a VA loan. You don’t need down payment. None whatsoever. To compare, most mortgage programs, such as FHA and conventional loans, require at least 3.5 percent to five percent down. Now that’s up to $12,500 on a $250,000 home purchase. But with a VA loan, you can buy immediately, rather than waiting years while saving for a down payment.
Also, with a VA loan, you get to avoid steep mortgage insurance fees. At 5 percent down, private mortgage insurance (PMI) usually costs $150 per month on a $250,000 home. With a VA loan, however, you can afford a home worth $30,000 more with the same monthly payment, simply by eliminating PMI. Using a VA loan saves you money upfront, and tremendously increases your buying power.
2. Use your benefit again and again
Did you know that your VA home loan benefit is not one-and-done? Yes. You can use it as many times as you want. Let's say you purchased a home with a VA loan, but have since outgrown the home and needed something bigger. When you sell and pay off the VA loan completely, you can re-use your benefit to buy another home. Your entitlement is restored in full.
But wait, there's more! There's another way to re-use your 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 you purchased the home long ago, and have paid off the loan. It also applies if you have refinanced the VA mortgage with a non-VA loan.
3. Your benefit never expires
Most of our military who served 20, 30, even 50 years ago often wonder if they can still buy a home today when they never used their benefit before or at all. If eligibility can be established, the answer is yes. Once you have earned eligibility for the VA home loan, it never goes away. So know this, you may be eligible to buy a home using a VA home loan, even if you served long ago.
Please note: Eligibility is based on the length of time served, and the period in which you served. (e.g. a U.S. Army Veteran with at least 90 days in service during the Vietnam era is likely eligible.)
To check eligibility:
1. Obtain your DD Form 214.
2. With that document, a VA-approved lender can request your VA Certificate of Eligibility for you, or you can request it directly from VA’s eBenefits website.
4. Surviving spouses may be eligible
There’s no way to repay the spouse of a fallen hero, but this benefit surely helps them move forward after tragedy. 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.
5. Buy, refinance or tap into home equity
Know this: the VA home loan benefit is NOT JUST FOR BUYING homes. Sure, it provides unmatched home buying advantages, but you can also use it to refinance your existing mortgage, whether it’s a VA loan or not.
- Homeowners with a VA loan can use the Interest Rate Reduction Refinancing Loan, 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.
- 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. It can be used to turn your home’s equity into cash. You simply take out a bigger loan than what you currently owe. The difference is issued to you at closing.
The VA cash-out loan amount can be up to 100 percent of your home’s value in many cases. So you can use the proceeds for any purpose – home improvements, college tuition, or even a new car. Also, you don’t have to take out cash to use this loan option. You can use it to pay off a non-VA loan as well. Eligible homeowners who pay mortgage insurance or are dealing with other undesirable loan characteristics should look into refinancing with a VA loan. This can eliminate PMI, get you into a stable fixed-rate loan, pay off a second mortgage, or simply reduce your rate to make homeownership more affordable.
6. Lenient guidelines for lower credit scores, bankruptcy, foreclosure
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. You see, unlike many loan programs, a lower credit score, bankruptcy or foreclosure does not disqualify you from a VA home loan.
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 your credit re-established when you have established two years of clean credit following a foreclosure or bankruptcy.
7. Buy a condo 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, and even manufactured homes. But condominiums are commonly overlooked by VA home buyers. Consider the array of home types when shopping for a home. 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. Case in point, there are more than 2,400 approved condo communities in Washington State, about 1,000 in Texas, and a staggering 9,000 in California.
Image Source: HGTV
8. VA loans are available from local lenders
Unlike most other VA benefits, the VA home loan 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. Instead, the VA provides insurance to lenders. It’s officially called the VA guarantee. This means that the VA assures the lender that it will be repaid even 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. You enjoy your benefit but have the convenience and speed of working with your chosen lender
As your local Caliber Home Loans representative, Robert is dedicated to providing superior...