As we celebrate Veterans Day in November, I would be remiss to not mention one of the most misunderstood and overlooked veteran’s benefit, the VA home loan.
While not at all flag-waving worthy, these statistics can, and should change. It starts with the real estate/mortgage industry taking responsibility for educating veterans and their spouses about the VA home loan program and its benefits.
The U.S. Department of Veterans Affairs offers a home loan guaranty, promising the veteran’s lender that the veteran will repay the loan.
Now this guaranty doesn’t cover the entire loan amount. Should the veteran default on the loan, the VA guaranty covers from 40 to 50 percent, depending on the size of the loan.
VA home loans can be used to:
Today there are only two easy ways to finance a home with no down payment: through the United States Department of Agriculture Rural Development Program and through the Veterans Administration.
Thinking of a FHA-backed or conventional loan? If you put down less than 20 percent, you’ll be subjected to the required monthly payment for MIP (mortgage insurance premium) for the former and PMI (private mortgage insurance) for the latter.
This insurance, which benefits the lender should the borrower default on the loan, can add quite a chunk to your monthly mortgage payment.
The amount you’ll be required to pay depends on how much you borrow and the loan-to-value ratio. You’ll find an FHA MIP rate chart at LendingTree.com.
The VA loan, on the other hand, has no monthly mortgage insurance premiums, there are limitations on how much you’ll spend on closing costs, and the loan has no prepayment penalty.
If you choose a newly constructed home, the builder is required to purchase a 1-year home warranty for you.
As with anything that comes from the government, eligibility can become complicated (wait until you see the appraisal requirements!). You are eligible for a VA-backed loan if:
The latter is easy to obtain. In fact, a VA-savvy lender should be able to get your COE through the online ACE system. Learn how to choose the right lender for your VA loan at Military.com.
If for some reason your records can’t be accessed, you’ll need to apply to the VA for your certificate. We can help you with that.
Remember, you’ll be applying for this mortgage through traditional lender and each has its own guidelines so you’ll need to meet the lender’s requirements as well.
Yes, your credit score and overall financial picture will be examined, but the lending process for veterans isn’t quite as stringent as it is for civilians.
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