The Home Buyer's Korner

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October 28th, 2014

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VA Home Loans Huge Benefit for Vets

va certificate of eligibilityMilitary veterans are eligible for one of the best home loan programs and many aren’t aware of it or exactly how it works. With no down payment, no monthly private mortgage insurance, competitive interest rates and flexible credit guidelines, this loan is certainly worth checking into. 

Loans can cover the total purchase price, and if you have a savvy real estate agent who can negotiate well for you or a lender that offers premium pricing to cover any closing cost your obligated to provide it could mean zero out-of-pocket when you close.  Be prepared to put a small escrow deposit with your offer to show good faith and you might have a few inspection fees or an appraisal you have to pay upfront, but these can be credited back to you if your lender does their paper work right.

Financing terms aren’t bad either.  Veterans can secure fixed interest rate loans for 10, 15, 20, 25 and 30 years and VA also allow for a 5/1 adjustable rate mortgage.

There is an upfront VA funding fee, but it’s included in your mortgage, but if you’re a veteran with at least 10 percent military disability VA waives the fee.

Although not required by VA, veterans that are thinking about owning their own home should have a reasonable FICO score and it’s much easier to qualify if you have at least three credit accounts in good stand for at least 12 months, but each lender is different so check around.

If you had the unfortunate situation of bankruptcy in the past a Chapter 7 needs to be discharged for at least 24 months and Chapter 13 Bankruptcy must have been entered at least 12 months preceding loan application and paid as agreed.

The wait time on foreclosures is 24 months since discharge. Short sales are also allowed with some restrictions.

The seller, lender or other party may pay closing costs with no limitation on behalf of the the veteran, so be sure to take advantage of the benefit if you can. Additionally, sellers can provide concessions up to 4 percent of the value of the home that can be used to pay off accounts or judgments for the veteran and could be a useful tool if it what preventing you from a home purchase.

There is no monthly private mortgage insurance and a great saving each month. As a comparison, an FHA loan that does have mortgage insurance premiums charges an annual fee of 1.35 percent. In addition to paying a monthly house payment veterans are required to pay into an escrow account to cover local property taxes and home owners insurance, but it’s a smart way to avoid having to come up with a large annual payment, when the bill comes due.

I was doing a quick look at interest rates recently and saw some lenders offering VA home loans with a FICO score of 640 or great for as little as 3.75 percent on a 30-year fixed rate mortgage. For a $180,000 purchase price, that’s an $853 monthly principal and interest payment and probably much better than paying rent for something comparable. 

If you’re interested in purchasing a home with VA financing, be sure to find out your option by talking with a network member in our Google+ communities.


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