5 Things you Didn't Know a VA Loan Could Do for You
Date: May 14, 2021
Because of the bravery and sacrifices of veterans and active military, the rest of the country’s civilians can live the American dream in safety. As one tangible way to say “Thank you for your service,” current and former members have access to Veterans Affairs home loans. These unique mortgage options allows veterans and those still serving to own a piece of the American dream by potentially qualifying for homes they might have thought were out of reach. Veterans, active-duty, service personal, and select reservist or National Guard members are among those who can qualify for VA loans. Wondering what some the benefits of a VA loan might be? Here are five to consider.
1 No down payment. This is one of the most valuable and touted benefits—and for good reason. Saving enough for down payment can be the biggest obstacle to buying a home. But VA loan eliminates that roadblock. In most parts of the country buyers can purchase up to $424,100 before factoring in the cost of a down payment. In pricier areas, borrowers can go beyond that threshold. But beware: the “no money down” aspect of a VA loan should not be confused with “no money out of pocket,” A VA loan still requires closing cost and the earnest money deposit (a negotiated amount of money that the buyer puts in escrow to essentially “hold” the house.)
- More lenient loan requirements
The required credit score fir a VA loan can be lower for a conventional loan—a range of 650 to 700 for most conventional loans.
In addition, the required debt-to-income ratio for VA Loans is often more flexible than conventional mortgages.
- No mortgage insurance
Most conventional buyers have to pay private mortgage insurance if they put less than 20% down. FHA loans come with their own forms of mortgage insurance. But a VA loan waives that insurance requirement. Even though there’s no mortgage insurance there is a “funding fee” – an upfront cost applied to every purchase loan or refinance. The proceeds help VA cover losses on the few loans that go into default. But borrowers can roll it into their monthly payment, or pay it all at once. Plus it’s tax deducible. And veterans with a service-connected disability don’t have to pay a funding fee at all.
- Limited closing costs
Legally, veterans are allowed to pay certain closing costs, which include the following: appraisal, credit report, origination fee, recording fee, survey, and title insurance.
And the VA allows lenders to charge no more than 1% to cover the costs of underwriting the loan.
So for example, if the purchase price is $280,000, the veteran might offer $300,000 and ask for 3% back to cover the closing costs.
- Extra assistance with appraisals
When purchasing a home that a verteran is considering purchasing is having trouble reaching the purchase price during the appraisal process, buyers and lenders can ask the VA Appraiser to consider adjusting the valuation before making a final determination. Appraisers notify lenders in the event the appraised value is likely to come in low., giving buyers and real estate agents 48 hours to supply additional information that the appraiser might not be aware of to help justify the home’s value.