The VA Loan: Military Benefits for Home Ownership

Posted on Jan 10, 2014 in Blog, Featured | 1 comment

If you have served for a while, you’re probably pretty familiar with the VA loan, or at least heard it mentioned around your unit.

If not, a little background would probably help…

The Veterans Administration, or VA, helps Servicemembers, Veterans, and eligible surviving spouses become homeowners. They do this by providing a home loan guaranty benefit and other housing-related programs to help you buy, build, or repair a home for your own personal occupancy. VA Home Loans are provided by private lenders, such as banks and mortgage companies; the VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms. We highly recommend you consult a lending professional to guide you through the process.

There are several specific programs within the VA:

• Purchase Loans
• Cash-out Refinance
• Interest Rate Reduction Refinance Loan (IRRRL)
• Native American Direct Loan (NADL)
• Adapted Housing Grants

With a Purchase Loan, the VA can help you purchase a home at a competitive interest rate.

The VA’s Cash-Out Refinance Loan is for homeowners who want to take cash out of your home equity to take care of concerns like paying off debt, funding school, or making home improvements.

The Interest Rate Reduction Refinance Loan, sometimes referred to as a Streamlined Refinance, can help you lower your interest rate on your existing VA loan.

The Native American Direct Loan helps eligible Native American Veterans finance the purchase, construction, or improvement of homes on Federal Trust Land.

Adapted Housing Grants help Veterans with a permanent and total service-connected disability purchase or build an adapted home, or to modify an existing home to accommodate their disability.

The guarantee the VA provides allows lenders to provide you with more favorable terms, and there are numerous advantages to using a VA loan:

• No down payment as long as the sales price doesn’t exceed the appraised value
• No private mortgage insurance premium requirement, limits on closing costs (some of which may be paid by the seller)
• The lender cannot charge you a penalty if you pay off the loan early

There are several misconceptions out there about using the VA loan, but please remember that you can use the VA loan more than once, there are no restrictions on whether or not you are a first-time home buyer, and that VA loans can be assumable as long as the new buyer qualifies for the VA loan.

The first step, which you can work through with your VA-approved lender, is applying for and receiving your valid Certificate of Eligibility (COE). You must have suitable credit, sufficient income, and a certificate of eligibility to get a VA-guaranteed home loan. The home must be for your primary residence (cannot use to purchase an investment property) and VA home loans can be used to: Buy a home or a condominium unit in a VA-approved project, build a home, purchase and improve a home, improve a home by installing energy-related or energy efficient improvements, or buy a manufactured home and/or lot.

One final note… there are loan limits depending on where the property is located. The VA does not set a cap on how much you can borrow to finance your home, but there are limits on the amount of liability VA can assume (or guarantee), which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified Veteran with full entitlement may be able to borrow without making a down-payment. These loan limits vary by county, since the value of a house depends in part on its location.

The basic entitlement available to each eligible Veteran is $36,000. Lenders will generally loan up to 4 times a Veteran’s available entitlement without a down payment, provided the Veteran is income and credit qualified and the property appraises for the asking price. Interest rates are subject to change due to market fluctuations, and the VA evaluates these market trends to determine if rate reductions or increases are warranted. The last rate change was on 1/17/2012, and you can check the rate for your county by visiting the VA website.

We hope you have found this information helpful and useful—please give us a call if you have any questions, out team of relocation professionals are standing by!