Truth about VA Loans
It’s Veterans Day this week and it’s a good time to reflect on what a VA loan is and why it’s such an important tool for our veterans to utilize! Many veterans never take advantage of this unique opportunity, in fact it's estimated that a mere 6% of veterans have used this type of loan in the last five years! What a missed opportunity! Here’s a few tips for our veterans out there on why using your VA loan can be such a positive aspect of life!
1. No mortgage insurance and no down payment necessary! These two notations are perhaps the biggest advantages to a VA loan. A down payment is not needed. None whatsoever. Most mortgage programs, such as FHA and conventional loans, require at least 3.5 percent to five percent down. That translates into $12,500 on a $250,000 home purchase, and that adds up quick depending on the price of the home you are looking into!
2. Use this benefit again and again! Your VA home loan benefit is not one-and-done, that’s a common misconception. You can use it as many times as you want! Here’s how: Say you purchased a home with a VA loan. But now you’ve had a few children and you’ve outgrown the home, time for something bigger. When you sell the home and pay off the VA loan completely, you can re-use your benefit to buy another home. Your entitlement is restored in full. But hey, that’s not the only way to re-use your benefit!
Eligible veterans 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. In these cases, you can keep the home, and enjoy the benefits of VA home buying one more time.
3. Your benefit never expires! Once a serviceman/woman has earned eligibility for the VA home loan, it never goes away. Some people who served 20, 30, even 40 years ago often wonder whether they can still buy a home today if they never used their benefit. If eligibility can be established, the answer is…YES! Eligibility is based on the length of time served, as well as the period in which you served. For instance, a U.S. Army Veteran with at least 90 days in service during the Vietnam era is likely eligible.
Helpful tip: to check your eligibility, first obtain your DD Form 214. 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. You may be eligible to buy a home using a VA home loan, even if you served long ago.
4. Surviving spouses may be eligible! As of only a few years ago, more than 3,000 surviving spouses purchased a home with their fallen partner’s VA benefit. Un-remarried husbands and wives of Servicepersons who were killed in action can buy a home with a zero downpayment and no mortgage insurance. Additionally, the VA funding fee is waived. There’s no way imaginable to repay the spouse of a fallen hero. It’s a small benefit, but this surely helps them move forward after tragedy.
5. Loan Rates for a VA Loan Are Lower! According to loan software company Ellie Mae, VA loan rates are typically about 0.25% lower than those of conventional loans. The VA backs the mortgages and this helps make them a lower risk for lenders. Those savings are then passed on to Veterans. Also, VA loans come with some of the lowest foreclosure rates of any loan type this further reduces the risk for lenders. It’s no surprise, but Veterans and Servicepersons take homeownership quite seriously. These factors add up to lower rates and affordable payments for those who choose a VA loan.
6. VA loans are available from local lenders! The VA home loan differs from other VA benefits. This particular benefit is actually available from private companies, not the government itself per se. The Department of Veterans Affairs does not take applications, approve the loans, or even issue funds. It’s up to the private banks, mortgage companies, or credit unions to facilitate that. The VA itself provides insurance to lenders. Officially it is called the VA guaranty. The VA ensures the lender that it will be repaid 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 and have the convenience and speed of working with the lender of your choosing.
7. Lenient guidelines for lower credit scores, bankruptcy, foreclosure! With most average loan program things like a lower credit score, bankruptcy or foreclosures will disqualify you from financing. However, these do NOT automatically disqualify you from a VA home loan. Each lender will have their own stance on credit issues, so shop around! VA guidelines do not state a minimum credit score to qualify. This “loophole” gives lenders more leniency to approve loans with lower scores. Additionally, VA considers your credit re-established when you have established two years of clean credit following a foreclosure or bankruptcy. There is an exception, however, if a foreclosure involves a VA home loan. If this is the case, you may need to pay back the amount owed on the foreclosed VA loan in order to regain eligibility. For most home buyers with past credit issues, a VA home loan could be a slam dunk to homeownership.
The agents here at Team Gatlin are all trained and familiar with the protocols for a VA loan, and we work with many qualified lenders with the same expertise. Give us a call today and let us help you get the most house possible for your VA loan! Thank you to all of the men and women of our great nation for your service!!