Are you a military service member or veteran looking to buy a home?
The VA Loan is a valuable tool that military members and veterans may use to pursue home ownership.
As a benefit of your service, the Department of Veterans Affairs offers unique resources to help those with military experience purchase a home with a low or zero down payment. VA Loans offer flexible options as either Fixed Rate or Adjustable Rate mortgages.
VA loans provide the veteran the opportunity to finance 100% of the purchase price of the home. This means no down payment is required. It is important to note that buyers will still need to qualify for the loan. This means that lenders will look at their credit and ability to pay the mortgage. If you are in a troubling financial position, a lender may want to see you pay down debt or save up money before they are willing to give you the loan.
You may also be responsible for closing costs, such as recording the title or paying lawyers to draw up all paperwork. This is negotiable with the seller and something to discuss with your realtor before making an offer on a home.
The VA Loan process
A VA loan works the same as most other home purchases, with a buyer making a written offer to purchase a home under specific conditions (price, closing cost assistance, other contingencies), and then going through an approval process with a lender. The key difference with a VA loan is that the Department of Veterans Affairs requires that all homes purchased through this program meet certain habitability requirements. They will send out a home inspector and appraiser to make sure that the home is in good working order and is worth what you are paying.
This step may sometimes cause delays, especially if repairs are needed after the inspector looks around. Issues at the home do not necessarily mean that the buyer cannot use the VA loan, just that repairs will need to be done before the home purchase can be completed. The VA recently started offering a VA loan to be used for homes that need renovation on a limited basis.
How VA Loans Work
- Purchase your home with as little as 0% down payment.
- 30-, 25-, 20- and 15-year terms are all available with fixed rates.
- 5-year adjustable rate mortgage available.
- Jumbo VA loans available.
- VA Streamline Refinance with a reduced funding fee and flexible documentation requirements – available for veterans currently in VA loans.
- No monthly PMI (Private Mortgage Insurance).
- VA loans are governed by the U.S. Department of Veterans Affairs.
- Pay your mortgage off at any time without pre-payment penalties.
To qualify for a VA home loan, you must be:
- A current member of the U.S. armed forces
- A veteran
- A reservist/national guard member
Best Fit For A VA Home Loan:
Most active-duty military and veterans qualify for Veterans Affairs mortgages. Many reservists and National Guard members are eligible as well. Spouses of military members who died while on active duty or because of a service-connected disability may also apply.
Costs associated with a VA Loan
The VA charges an upfront VA funding fee, which can be rolled into the loan or paid by the seller. The funding fee varies from 1.4 percent to 3.6 percent of the loan amount. However, those who receive VA Disability are exempt from the funding fee.
The VA allows sellers to pay closing costs but doesn’t require them to. This means borrowers might need money for closing costs. Borrowers may also need money for an earnest-money deposit.
Pros of a VA Loan
VA borrowers can qualify for 100 percent financing and they are not required to pay Principal Mortgage Insurance (PMI). Veterans do not have to be first-time buyers and may reuse their benefit as needed.
Cons of a VA
According to the VA, there isn’t a cap on the amount you can borrow. However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified veteran with full entitlement may be able to borrow without making a down payment. These loan limits vary by county, since the value of a house depends in part on its location.
Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
**Intercap Lending is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.