Introduction to VA Loans
The VA loan is, quite possibly, my favorite loan product of all time. It’s a wonderful loan product for veterans who served our country in good standing, and one of the best ways, here at mortgage solutions, that we have to say thank you to our Vets for serving our country. It’s very, very, very unusual when we are dealing with a veteran that we don’t find this loan to be the best loan product available to them on the marketplace, for reasons that will be unpacked below
Benefits of a VA Loan
There are at least 4 main benefits to a VA loan, and each can be a real winner in making that loan the best loan possible for a qualifying veteran
1) No down payment is required in most circumstances! The benefit to this is self evident for most people- you can move into a house, and get a loan, without putting any money down in the process. If you can work with your seller to provide seller concessions during the process, or if you work with me to provide a lender credit on your loan, then the typical veteran can move into a house without bringing any money to the closing. In fact, most of our veterans walk away from the closing table not only with keys to their new house, but also a check from the title company, as they typically receive a reimbursement of their earnest money by the time that seller contributions and lender credits are taken into account. Who wouldn’t want to have the option to buy a house without spending any money in the transaction. You can, of course, put down a small, or sizable, down payment with a VA loan if you so desire, but it’s not necessary and it’s a benefit that many Veterans choose to take. If you are a Veteran that qualifies for this program the cost of moving into a new house that you own can often times be lower than the cost of a security deposit on a rental home or apartment. We can help you make home ownership possible, while making the process understandable and easy
2) No monthly mortgage insurance! The typical mortgage payment consists of a payment for principal and interest, taxes, insurance and mortgage insurance. If you put 20% down on a typical conventional mortgage a borrower will not have to pay mortgage insurance, but for almost all other loans (FHA, USDA, Conventional loans with less than 20% down payment) the borrower will have to pay mortgage insurance. What mortgage insurance typically is is a premium that the borrower pays to put down less than a full down payment, because home purchases without a considerable down payment are considered to be greater risks for foreclosure, so mortgage insurance is charged. Not so with a VA loan! This lack of mortgage insurance is typically a cost savings of $100-$300 a month on a typical mortgage payment- depending upon credit scores, loan types, down payment percentages and a host of other factors. Not having to pay this monthly is a pretty sweet deal.
3) Lower interest rates! A VA loan will almost always carry with it a lower interest rate than a conventional mortgage, and can sometimes have a lower interest rate than an FHA or USDA loan as well. We typically find that our veterans do 0.5-1.0% better with their interest rates in a VA loan as opposed to a conventional loan, and often times we can get a Veteran into a loan that is 0.125-0.25% better than an FHA or a USDA loan. The benefits over an FHA or USDA loan might not exist at all times for all borrowers, but, the interest rate differential between a typical VA loan and a typical conventional loan could be the difference of $100 a month on an average size loan in the State of Texas.
4) More lenient underwriting standards! Typically, a VA loan will not require a credit score as high as a typical credit score with a conventional loan, and will allow a greater debt to income ratio as well. We have worked with a lot of Veterans that qualify for a VA loan when they might not otherwise qualify for a conventional loan. You don’t have to have perfect credit, or a super high paying job often times to qualify for a VA loan. You might be completely and totally surprised by what you can qualify for.
VA Loan eligibility and requirements
VA loans are limited to people who have qualified for an entitlement as members of the armed service. Active duty and reserve alike can qualify. To see if you qualify, click on the the following link or look at your DD-214 and get with us today and we can talk about qualifications for your loan.
VA Loan Limits
VA loans amounts are different throughout the country. As we work in the State of Texas in helping people buy houses we will focus on the maximum VA loan amount (for 100% financing) as $453,100 in 2018. This is not the end of the story, however, as you can borrow more money than that with a 25% down payment for every dollar borrowed above that amount. In practical terms what that means is that even if you are going to buy a house more expensive than the maximum loan limit you will likely put down much less money with a VA loan than with a conventional loan. Running the numbers on such a scenario can clarify:
$800,000 purchase price on a Jumbo Loan would require a 20% down payment typically of $200,000.
$800,000 purchase price with a VA means you can borrow the first $453,100 in its entirety, then you can borrower 75% of the remaining $346,900.00 your down payment on this house then becomes $86,725.00 That’s still a huge savings on a required down payment, even for a purchase that exceeds the “loan limit”
VA Potential Drawback
Are there any drawbacks to a VA loan? Potentially the answer to that question could be yes. There is a healthy up front funding fee required on VA loans that can range from 2.2-3.3% of the total loan amount. It is important to note that this up front funding fee is waived when the veteran has a service related disability, but there are scenarios where the borrower has a down payment, great credit, and anticipates being in the loan for a short period of time where the Veteran might be better served with a different loan type. That’s why it’s important to talk to your mortgage professional about what your long term plans are and make sure you are presented options. We’ve actually (very rarely but occasionally) guided one or two qualified Veterans away from a VA loan due to their specific situation, but that’s indeed very rare.
How We can Help
We love our Veterans. We work really hard to make sure that they get the best deal possible for themselves, and most of the time that’s a VA loan. I’d love to help so please email me at firstname.lastname@example.org, call at 832-557-1095 or apply here today