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VA Loans


The VA Loan Guaranty Program was created by the U.S. Congress in 1944 to assist returning veteran service members achieve the dream of home ownership. Since that time the VA has helped millions of veterans with their home purchases. The way a VA loan works is that the VA doesn’t physically make the loan but instead guarantees the loan and to repay up to 25% of the loan amount if the borrower defaults. That gives VA approved lenders greater protection when making loans to military borrowers which makes for what is probably the best loan on the mortgage market today. There are many benefits to getting a VA loan but the most popular is the ability to purchase a primary residence without having to make a down payment. With the tight mortgage market these days and underwriting criteria which create even more difficulties, there are few loans which compare with the VA loan. Now does that mean the veteran doesn’t need any money to get into their house? Not necessarily because there are still potential closing costs which are VA allowable costs but structured properly those can in many cases be handled to make a true VA no-no loan. A VA no-no is terminology for a VA loan which virtually requires nothing or very little out of pocket by the eligible member. Call me for more details. Another huge benefit is the fact there are no monthly private mortgage insurance(PMI) payments. Many times that PMI payment can amount to an increase of almost 15% on the payment. That is very significant and can amount to a huge savings over the course of any loan. A couple of other things which benefit the qualifying borrower are no pre-payment penalties on the loan, higher allowable debt-to-income ratios than for many other loans, 6% allowable Seller concessions and the ability to do streamline refinances once you have a VA loan in place. VA loan eligibility is for military members who have served at least 181 days on active-duty or three months during war time, people who have had at least a half-dozen years in the National Guard or Reserves and the spouses of those veterans killed in the line of duty. If you fall into one of those categories and you want to find out your eligibility you can contact the VA and request your Certificate of Eligibility. We can also request your entitlement online if you wish so please call for further information. One important thing to remember is that even though you have the Certificate of Eligibility, that does not necessarily guarantee you will get the loan, you must still qualify. With a VA loan there will be a VA funding fee. That can be 2.15% of the sale price with no down and first time use of the VA program to as high as 3.3% for a no down previous VA loan borrower. The fee is different for various down payment amounts. Also if a veteran has been deemed to be “disabled”, the VA funding fee is waived completely. By the way, the VA funding fee is normally rolled into the loan so the borrower does not have to pay it upfront. All in all this product is probably one of the best on the market today. If you have access to it and when compared to many products available there might be some other loans which might be better for those borrowers who have better liquidity and cash reserves but they can’t match the buying power of the VA loan.