Adventures in VA Loan Home Buying: Is VA the Best Loan for Me?
September 23rd, 2009 by Rich Jacobson
The first step in the VA Loan Home Buying process is to firm up your financing and get pre-approved for your loan. This really sets the stage for all that follows and effectively drives your home searching adventures.
Ask you real estate agent for recommendations on some qualified, experienced local lenders/loan officers. A knowledgeable mortgage professional will be able to analyze and assess your financial status, and help determine the best loan product for your particular situation/budget.
One of my preferred lending partners is Cheri Kesti, Branch Manager and Mortgage Consultant with Windermere Mortgage Services here in Silverdale. I don’t recommend Cheri to my Buyer clients because she’s affiliated with Windermere. I endorse her because she consistently gets the job done, on time, and without a lot of added drama!
I’ve asked Cheri to provide some basic comparative information and the primary benefits of associated with using VA financing:
Cheri states “VA home loans are an excellent choice when compared to conventional, FHA, or USDA home loan options, which can often carry higher interest rates, or greater closing costs for the veteran or active-duty home buyer.”
Here are some basic highlights of the VA home loan:
- Lowest interest rate for zero down payment
- Lowest Buyer Paid-out closing costs
- No monthly mortgage insurance
- VA funding fee is waived if there is a service-related disability
- Applicable VA funding fee may be financed into the loan
- VA maximum loan amount is $700K with minimum down payment or $417K with zero down payment
- VA home loans are assumable
- Principal balance prepayment – without penalty
- The seller is allowed to pay up to 6% of the purchase price toward any or all of the following:
- Buyer closing costs and permanent interest rate buydown
- The VA funding fee (or any portion of it)
- The buyer’s revolving or installment debt, prepaid interest, taxes, and insurance (not to exceed an additional 4% of the purchase price)
As stated above, the VA loan allows veterans 100% financing without paying private mortgage insurance. A VA funding fee of up to 3.3% of the loan amount is paid to the VA and is allowed to be financed into the loan. In a purchase, veterans may borrow up to 100% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI, more of the mortgage payment goes directly towards the Buyer qualifying for the loan amount, allowing for larger loans with the same payment. In a refinance, qualified veterans and active-duty personnel may borrow up to 90% of reasonable value, where allowed by state laws.
VA loans allow veterans to qualify for loans amounts larger than traditional Fannie Mae or conforming loans. VA will insure a mortgage where the monthly payment of the loan is up to 41% of the gross monthly income vs. 28% for a conforming loan assuming the veteran has no monthly bills.
Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.
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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com, ActiveRain, and Crabbing in the Hood, or e-mail: kitsapagent@gmail.com
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The VA Loan began in 1944 through the original Servicemen’s Readjustment Act (also known as the GI Bill of Rights). The GI Bill was signed into law by President Franklin D. Roosevelt and provided Active-Duty Service Members and Veterans with a federally guaranteed home loan with no down payment. This program made the dream of home ownership a greater reality for millions of service people and veterans. The GI Bill has contributed more than any other program in history to the welfare of our uniformed personnel, veterans, and their families.
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