VA Home Loans
Service personnel returning home have access to government created VA home loans used to purchase homes. The government approves lenders and guarantees the mortgages. Twenty million veterans found their way to VA home loans that were affordable.
In recent years, lending requirements became tighter due to the collapse of the housing market. VA home loans serve as a lifeline for military homebuyers. Down payment requirements and tough credit standards are less severe than traditional mortgages.
The Difference Between Traditional Mortgages and VA Home Loans
VA home loans require no down payment, compared with conventional loans that require as much as 20 percent to secure a mortgage. Those financing more than 80 percent of the value of a home are required to carry Private Mortgage Insurance that makes monthly payments larger. PMI is not a requirement for VA home loans. With government-backed VA home loans, a more competitive interest rate is typically available.
Fees and Regulations
For most areas of the country, the purchase price of $417,000 or less requires no down payment. Borrowers for high-cost county purchases need to contact the VA for loan limits in the area. Sometimes the limits exceed the $417,000 standard.
The program continuance relies on a VA funding fee. For first-time buyers, the typical fee is 2.15 percent of the home’s purchase price. Subsequent loans have a funding fee of 3.3 percent.
It is possible to add the funding fee to the overall amount of the loan. Closing costs for VA home loans have limits. Sellers sometimes pay all or most of closing expenses. Many purchasers pay nothing at the time of closing.
To qualify for VA home loans, one of these specific conditions exists.
• During wartime, active service for 90 consecutive days
• During peacetime, active duty for 181 days
• Six years of service in Reserve or National Guard
• Service member spouse, if the member died because of service-related disability or in the line of duty
VA Refinancing Loans
The program provides a simple way for qualified homeowners to decrease monthly mortgage payments at lower rates. VA Refinance allows cash back for debt reduction, home improvements, or other goals. There are two available options VA Streamline Refinance and Cash-Out Refinance. Veterans having a current VA Loan take advantage of a Streamline Refinance that has a lower interest rate and reduces monthly payments. The Cash-Out Refinance allows for home equity loans to attain cash. Eligibility for refinancing is similar to VA home loans. The borrowers have an existing VA Loan.
The Loan Process
To begin, complete a contact form. VA specialists reach out to discuss individuals’ situations and help prequalify them for VA home loans. A package of documents contains everything needed to obtain VA home loans. The paperwork often seems daunting, but grouping documents and color coding makes the process easier. When completed, a loan expert issues a preapproval letter that tells a real estate agent financing for the home is available. A little more paperwork needs completion. A required list of documents to complete the pre-approval appears on the letter received. Failure to provide them causes financing to fall apart.
Finding a realtor and searching for a home are the next steps. Seek realtors who understand the needs of veteran and military homebuyers. The broker helps make the offer when one finds a home. The agent uses a copy of the homebuyer’s DD-214 to obtain a Certificate of Eligibility.
An appraisal of the property takes place. Loan closure requires a move-in ready house with problems corrected by the seller. An underwriter ensures everything is in order. The buyer learns of the closing date upon loan approval. After signing and finalizing the paperwork, the buyer takes possession of the home.