VA loans are mortgages administered through the U.S. Department of Veterans Affairs, also known as the VA. These loans are designed to benefit current and former members of the U.S. armed forces and, in some cases, their families. How are these loans beneficial, and why should you consider them (if you qualify) over other loan types? Consider these 10 points, and if you have any questions, don’t hesitate to reach out to us for clarification.
1. Low Rates
VA loan rates are the lowest of all loan programs. The Department of Veterans Affairs protects lenders in the event of a loss. For this reason, VA mortgage rates can be as much as 1% lower than other loan programs.
2. No Down Payment
Eligible VA loan candidates may be able to purchase their home with no down payment. Not all VA loans will qualify for the 0% down payment allowance, but many will. Talk to your Mortgage Specialist to find out if your loan will qualify.
3. No Mortgage Insurance
Typically, if you don’t have a 0% down payment, you need to pay mortgage insurance, which protects the lender in the event you default. The VA does not require mortgage insurance, though it does charge a funding fee in the form of a lump sum payment that is paid at closing. This is generally lent to you, so there is no money out of your pocket for this expense. The funding fee is waived for disabled borrowers.
4. Lower Closing Costs
The VA limits the closing costs lenders can charge to VA loan applicants. This is another way a VA loan can be more affordable than other types of loans. Money saved can be used for furniture, moving costs, home improvements or anything else.
5. Easier Qualifying
Like all mortgage types, VA loans require specific documentation, an acceptable credit history and sufficient income to make your monthly payments. However, compared to other loan programs, VA loan guidelines tend to be more flexible. This is made possible because of the VA loan guaranty. The Department of Veterans Affairs genuinely wants to make it easier for you to buy a home or refinance.
6. Multiple VA Loans
The VA does not limit the number of VA loans one borrower can have. Your eligibility will dictate how much you can borrow with zero down. If you have 25% down, you can get as many VA loans in your lifetime as you want without having the sell your old home!
7. Interest Rate Reduction Refinance Loan (IRRRL) and Cash-Out Refinances
The VA offers a streamlined refinance loan in the event rates drop. No appraisal is required and there are no debt ratios calculated. The only qualifications for the loan are:
· At least 7 payments have been made
· One of the two must be true: the refinance rate is at least .5% better than the current rate, or the loan term changes
· On-time payments on the current mortgage for the past 12 months
The VA also allows borrowers to do a regular refinance to access the equity in their home for any reason up to 90% of the value of their home. Appraisals and regular qualifying are required.
8. Program Choices
Loan programs available:
Use your loan to purchase a
House—existing, newly built or ground-up construction
Manufactured home—existing or newly placed
Home that needs to be fixed up (includes the money to do the rehab)
1-4 family property
9. VA Loans Are Assumable
VA loans are assumable, which means you can transfer your VA loan to a home buyer if they qualify. A non-veteran can assume your mortgage but be advised your eligibility stays tied up if you used any to buy this home. If a veteran assumes your mortgage, they can substitute their eligibility for yours.
Assumable loans can be a huge benefit when you sell your home. If your home loan has today’s low rate and market rates rise in the future, the assumption feature of your VA becomes even more valuable. To capitalize on this, be sure you are working with a Realtor who is versed in working with veterans. Your Mortgage Specialist at Directors Mortgage can help you find the perfect realtor for you.
10. Loan Amounts up to $5,000,000
Many think the VA loan is only for borrowers with no down payment, but this is not the case. The VA loan program will lend up to $5,000,000 to one borrower. A loan this size will require a down payment, but generally is a better choice than its jumbo counterpart.
If you have any questions about VA loans, from eligibility to rates and available programs, contact us today.