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GRATITUDE TO OUR VETERANS - WHAT YOU NEED TO KNOW ABOUT VA FUNDING

Tuesday, November 23, 2021   /   by Tom Dinnegan

GRATITUDE TO OUR VETERANS - WHAT YOU NEED TO KNOW ABOUT VA FUNDING

As a Loan Officer, one of the first questions I ask a prospective home buyer/borrower is whether they are an active-duty service member or a veteran. Why? Because the Veterans Affairs (“VA”) provides an amazing hard-earned employment benefit to our military service members and veterans…a VA Home Loan! It is a lifetime benefit, and it can be used multiple times.

 

So, what is a VA Home Loan? It was created by the United States GI Bill of 1944 and intended to help veterans and service members purchase a home without a down payment or a high credit score. The VA does not originate the loan, but instead provides a partial guarantee (25% of the loan amount) to lenders who originate the VA Loan in the event the borrower defaults. 

 

To date, over 25 million VA Loans have been guaranteed by the VA since its inception over 7 decades ago. As a result, United States veteran homeownership is 20 percentage points higher than the national average. Those who are eligible for a VA loan include: (1) active-duty service members; (2) veterans with discharges other than dishonorable; (3) National Guard and Reserve service members; (4) surviving eligible spouses, and (5) other uniformed service personnel. 

 

The Benefits of a VA Loan are many:

 

• Lower mortgage interest rates since the loan is partially guaranteed by the VA, which lowers the risk for lenders

 

• $0 down payment versus 3.5% for an FHA loan and 5% for a conventional loan; if the loan amount exceeds the county loan limit where the home is located, the veteran will have to make a down payment equal to 25% of the difference between the purchase price and the VA loan limit

 

• The VA does not limit the loan amount (loan limits are used to determine whether a down payment is required, are the same as conventional loan limits and based on the county where the home is located); however, lenders/investors may have their own maximum loan amounts 

 

• Effective 1/1/2020, veterans with their full entitlement and using it for the first time can put $0 down on any loan amount, even if the loan amount is over $1 million

 

• More flexible and forgiving with respect to the borrower’s credit history (e.g. previous foreclosures, collections, bankruptcy or short sale)

 

• Minimum FICO score of 620 versus 660 for conventional loans (however, you need a 740 FICO score to get the lowest rate on a conventional loan and VA rates are still generally lower)

 

• VA loans are assumable (conventional loans generally are not)

 

• No mortgage insurance, however, a VA Funding Fee is payable at closing (equal to 2.3% of the loan amount for first-time users with no down payment and 3.6% of the loan amount for borrowers who have previously used the VA program with no down payment)

 

• The VA Funding Fee can be financed by rolling it into the loan amount and it decreases as the amount of the down payment increases

 

• Veterans with service-connected disabilities and Purple Heart recipients are exempt from paying the VA Funding Fee – a huge benefit! 

 

• VA Home Loans differ somewhat from conventional loans when it comes to closing costs and there are several additional requirements with a VA Home Loan.

 

Closing Costs

 

• The VA limits how much a lender can charge the veteran (maximum is 1% of the loan amount) for lender-related costs

 

• The seller can pay for all mortgage-related closing costs – must be negotiated between the seller and the buyer

 

• The seller can pay up to 4% of the Purchase Price in seller concessions (to pay buyer’s prepaid interest, taxes, homeowners insurance or pay off buyer’s collection accounts and/or judgments at closing) 

 

• With the exception of the VA Funding Fee, all closing costs must be paid at closing and may not be financed into the loan amount

 

Other VA Loan Requirements:

 

• The veteran must occupy the home within 60 days of closing

 

• Vacation homes and investment properties are not eligible

 

• Prior to funding a VA loan, the lender will need a copy of the Termite Inspection Report and a clearance from the termite company stating that any termite treatment and/or repairs have been completed to the satisfaction of the borrower

 

• The VA has Minimum Property Requirements to protect the interests of the veteran, mortgage lender, mortgage servicer, and the VA. These include, among others: working electricity, no exposed wiring, a functional heating system (depending on geographic location), adequate roofing, and the structure is free from termites and other pests.

 

To see if you qualify for a VA Home Loan as a veteran or military service member, visit www.va.gov/housing-assistance/home-loans/eligibility. For those who are the spouse of a veteran (living or deceased), visit www.va.gov/housing-assistance/home-loans/surviving-spouse. Your lender can obtain your VA Certificate of Eligibility (“COE”) once you have provided them with the necessary information. For more information about VA Home loans visit www.va.gov/housing-assistance/home-loans.

 

If you believe you are eligible for a VA Home Loan and would like to get started simply call, email or text me. The process starts with completing a loan application and getting you pre-approved, which can often be done in couple of days. 

 

I partner with the Salzman Real Estate Team to provide our clients with the optimal mortgage loan to meet their needs. We want the best for our clients and helping them embark on their journey to owning the right home is what we love to do. Being able to aid our Veterans, Servicemembers and their families to provide home financing and find them their new home allows us to pay them back for their service to our country.

 

Tom Dinnegan, MBA Finance

Loan Officer

Priority Financial Network

thomasdinnegan@priorityfinancial.net

(310) 415-2277 mobile

 

Bibliography


Benefits, VA Loans. “What Are the VA Minimum Property Requirements?” What Are the VA Minimum Property Requirements?, 15 Sept. 2020, https://www.benefits.com/va-loans/va-minimum-property-requirements.

Trejo, Mike. “Minimum House / Property Requirements for California VA Loans.” Bridgepoint Funding, 22 July 2021, https://www.bpfund.com/property-requirements-california-va-loan/.

U.S. Department of Veteran Affairs. “VA Home Loan Guaranty Buyer’s Guide - Benefits.va.gov.” VA Home Loan Guaranty Buyer's Guide, Oct. 2021, https://www.benefits.va.gov/HOMELOANS/documents/docs/VA_Buyers_Guide.pdf.

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