7 Must-Know Facts About VA Home Loans
The sacrifices veterans have made while defending the freedoms that we cherish as Americans is something that can never be fully repaid. The least that can be done to honor and appreciate the sacrifice they made for the country is to provide tangible benefits to make life easier for them. This is important because throughout their service, they have faced hardships that most people cannot even fathom and most of them bear scars physically, emotionally, financially, and otherwise. The government, therefore, created the VA mortgage program, a tangible way to help veterans on the financial front. While most veterans are aware of what benefits the program entails, there are several important aspects that deserve particular attention.
1. VA Loans have favorable Down Payment Requirements
For most VA home loan applicants the biggest allure of a VA loan is the opportunity to purchase a home with no down payment. This, however, is only available as long as 1) the home value is equal to, or above, the total loan amount, and 2) the total loan amount is less than maximum allowable limit. In DFW, and most of surrounding areas, that maximum limit is $417,000. A borrower can, indeed, obtain a VA home loan above the maximum limit, but it will require a down payment on the difference between the maximum loan amount allowed and the purchase price.
[Example: $450,000 purchase price = 25% down payment on $33,000 (difference between purchase price and maximum limit) = $8,250 down payment.]
2. VA Loans have No Mortgage Insurance Premium
Since the mortgage loan is secured by the Department of Veteran Affairs, the VA home loan program simply just does not have a mortgage insurance premium requirement. This could save you hundreds ($100’s) of dollars a month compared to other loan programs. There is, however, a one-time upfront funding fee.
3. VA Loans have an Upfront Funding Fee
This is a one-time funding fee charging by the VA, not the lender. The fee fluctuates from time to time and can even vary based on if it is your first time to purchase a home using a VA mortgage loan versus a second time user. Most VA home loan applicants choose to roll the upfront funding fee into the loan amount, which is allowable as long as the loan amount does not exceed the property value. Remember, the maximum loan limit rules could come into play as well. Finally, a VA home loan applicant can avoid the upfront funding fee altogether if they have a service connected disability, or is the spouse of a Veteran who died in service or due to a service connected disability.
4. VA Loans can be Accessed More than Once
VA loans aren’t a one-time benefit. To have full entitlement restored, borrowers must sell their current home and pay off the existing mortgage. VA home loan borrowers also have the option to rent the old home and buy a new one, provided they can show that they will be able to afford the paying both mortgages.
5. VA Loans Apply to Specific Types of Homes
For business, a “fixer-upper”, or working farm there is no access to VA loans. Though the current market provides a variety of options, VA loans are restricted to a few home types. The following are granted VA loans – primary residence, condominiums, townhouses, and multi-unit properties, among others. For more information, contact one of our VA home loan experts in Texas.
6. VA Loans are Available Despite Foreclosure or Bankruptcy
Poor global economic conditions have negatively impacted a lot of people’s credit scores in the recent past. Incidents such as bankruptcy and foreclosure have also become increasingly common. If you have experienced any of these, it should not deter you from applying for a VA home loan. Typically, veterans need to wait for two years post-bankruptcy or foreclosure, to apply for a VA loan, but there are exceptions to that as well.
7. VA Appraisal is Not a VA Inspection
VA lenders cannot guarantee the condition of the property. They can’t confirm whether the property is new, previously occupied, free from defects, or any other such relevant information that a buyer may require before deciding to buy. It is, therefore, in the interest of the veterans to seek professional advice from a home inspection expert, before committing themselves to a purchase agreement.
The points discussed above reference a few gray areas for which most veterans need all the help and information they can get. However, there are a lot of other things that you must know before applying for a VA home loan. This is one of the reasons we always suggest that veterans seek professional help when applying for VA home loans. If you need help or more information, get in touch with a VA loans expert based out of our Texas offices.