Veterans life insurance

Review of All Things Real Estate: Veterans Day and the VA Loan

Bob Hillery

CR properties

As this article is published, Veterans Day will have passed a week ago, but it’s never too late to thank veterans for their service to our great nation. Whether a veteran has served 3 years or more than 30 years, all have given a little and some have given everything; our great nation owes a debt of gratitude for all veterans’ contributions.

That said, it’s a great segue into a discussion of the Veterans Administration loan for active military duty, reserves, and veterans who served honorably and were discharged with an administrative discharge. Even if a person has used their VA loan eligibility in the past, the program is continually changing, so I urge everyone to read this short article to keep up to date; some of the changes may surprise you.

The VA program was created to level the playing field to help military and veterans get into homes, as it can be difficult for those serving to meet the requirements of other mortgage products. The biggest advantage of this program is that qualified borrowers can buy a home without having to put money aside, and that’s a huge financial advantage!

One of the biggest changes is that there are no more loan limits for the program, there are now “guidelines”. Previously, each state and county had separate limits, but now that’s all a mortgage officer can approve considering income, debt, assets; all the normal things considered when qualifying loan applicants.

Fully eligible veterans can borrow as much as a lender is willing to lend them, all with no down payment. The “guidelines” on loan limits can be confusing, and since there is conflicting information on the internet, my strongest recommendation is to contact a local VA loan officer for which I have several excellent ones to recommend.

VA loans are for the purchase of a primary residence only and the VA borrower cannot pay for termite inspection. The VA will send a VA Inspector/Assessor who will identify certain repairs that need to be done before the transaction closes, but these repairs are negotiable between the seller and the buyer.

Other features are favorable interest rates compared to conventional financing; up to ¼ point better, because the federal government guarantees the VA loan as a benefit to veterans and to protect lenders. Due to the federal loan guarantee, there is no private mortgage insurance, which saves the borrower a lot of money over the life of the loan.

The VA loan is generally defined as a zero down payment program, and current market conditions may be conducive to a VA-No-No scenario. This means no down payment and no closing costs if it can be negotiated with the seller to provide a escrow closing cost credit. As homes for sale begin to experience longer market periods as prices and mortgage interest rates remain high, sellers have become more willing to offer buyers incentives to purchase.

A VA loan can be reused after the outstanding loan is paid off, but unless there is a service-related disability, re-use rates can be quite high (sometimes in excess of 3.3% of the amount of the loan). For this reason, my expert VA loan officer will sometimes recommend a conventional loan if the VA buyer has at least some cash to spend on the purchase. The VA loan can also be assumed by non-VA qualified buyers, but beware, the VA qualified borrower who made the original loan remains responsible for the loan. From personal experience, I would not recommend this course of action.

IRRRL: Interest Rate Reduction Refinance Loan is a streamlined refinance of an existing VA loan with very little documentation required which, when rates become more favorable, will become a highly sought after product. Unlike expensive reuse rates for using the VA loan for future purchases, IRRRL only costs about ½ point.

Finally, for the purposes of this article, surviving spouses may be eligible to use the VA loan if the qualified VA borrower has died or is severely disabled due to a service-related cause. See http://www.VA.gov/housing-assistance/home loans for an initial review to determine qualification, then contact a local expert VA loan officer.

The purpose of this article is to identify some of the tops of VA loan benefits. However, it is not meant to be fully inclusive on this subject because, although I have helped several buyers buy their homes with VA loans, I am not a subject matter expert on VA loans. For this level of expertise, I urgently recommend that interested parties contact a local VA mortgage expert. Feel free to contact me for recommendations.