The Best Advice You Could Ever Get About VA Home Loan
Just because you are a Veteran, it doesn’t mean you should immediately lock yourself into a VA home loan. Why is that? Let’s walk through the most popular advantages and disadvantages of the VA loan process. We will also address why having a broker who cares about education is the key to success for any loan application. A VA home loan will be a great loan for about 50%-60% of all VA loan applicants. The remaining 30%-40% qualify for a different loan that is better suited to your personal credit and finances.
The Key Selling Points of a VA Home Loan Are:
VA Loans are easier to qualify for
Like all mortgage types, VA loans require specific documentation, an acceptable credit history and sufficient income to make your monthly payments. But, as compared to other loan programs, VA loan guidelines tend to be more flexible. This is made possible because of the VA loan guarantee.
The opportunity to have a zero down, zero
Most home loan programs require you to make at least a small down payment to buy a home. The VA home loan is an exception. Rather than paying 5%, 10% or 20% of the home’s purchase price upfront in cash, with a VA loan you can finance up to 100% of the purchase price. The VA loan is a true no-money-down opportunity. If you do have some money to put forward you can eliminate some of the funding fees or better yet get the seller to cover the funding fee. This can save you 1,000s in interest payments over the lifetime of the loan.
You can have multiple VA loans with no down payment
VA Loans have lower closing costs
The VA limits the closing costs lenders can charge to VA loan applicants. This is another way that 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.
No Mortgage Insurance Requirements
Typically, lenders require you to pay for mortgage insurance if you make a down payment that’s less than 20 percent. This insurance, which is known as private mortgage insurance (PMI) and protects the lender in the event that you default on your loan. VA loans require neither a down payment nor mortgage insurance. This can make a VA-backed mortgage very affordable upfront and over time.
VA Loans can have a fixed or an adjustable rate
You can have a 30 year term, or a 15 year term and either can be closed with a fixed or adjustable rate depending on what you want.
Your benefit never expires
Once you have earned eligibility for the VA home loan, it never goes away. Those who served 20, 30, even 50 years ago often wonder whether they can still buy a home today if they never used their benefit. If eligibility can be established, the answer is yes. Eligibility is based on the length of time served, and the period in which you served.
Even with all these excellent benefits that come along with your VA benefit. There are some key things to take into consideration when talking with lenders about your questions about VA loans. Brokers can get a guaranteed payment of 2-3% on a veterans loan due to the fact that Jennie Mae promises to make the bank whole, so you will never lose money as a banker on the VA loan. This helps make it easy for vets to be guaranteed a loan, but it can be an easy way to ensure the broker is making money off your loan. Even though it's illegal and unethical for a lender to shove you into a Veterans loan because of their guaranteed payment on the loan doesn’t mean that bankers and/or brokers aren’t inclined to do so.
Some Additional Downsides of the VA Home Loans Can Be:
Seller’s can shy away from making accepting offers from VA buyers
No, it’s not because citizen’s don’t support their military!! It’s the super strict funding requirements. They often require “lender repairs” so this is not the type of loan you want if you're wanting to get a “fixer upper.”
A seller may also just want to avoid the extra paperwork requirements that come with the VA home loan process.
Funding Fees
While this rolls into your loan, it can oftentimes be costly. So make sure you have evaluated this cost and its value to you!
The funding fees get higher as you reuse your VA loan. For instance, when you buy the first home with no down payment, your funding fees can be around 2.15%, which could increase to 3.3% the second time. You can still stay at the same rate, provided you put down at least 5% of the total amount.
The VA Loan cannot be used for an investment or secondary home
The VA Loan cannot be used for an investment or secondary home. You or your dependents are required to move into the home within 6 months and stay there for one year unless orders or other unforeseen circumstances occur!
Refinancing in a VA Loan will extend the years you are paying
You do not have to refinance as a VA loan simply because you are in a VA loan but if you do choose to refinance many lenders will go for that option. However, if you have paid 7 years on your 30 year term and refinance for lower rates, you may save $100+ on your monthly mortgage payment BUT instead of being left with just 23 years on your loan, you will have 30 years costing you 1000s of dollars in funding fees or insurance. Especially if you roll these fees into your refinancing.
The only true way to determine if a VA Loan is a good investment for you is to reach out and start going over your qualifications. At PCM our goal with all of our clients is development and education. The sooner you get us paperwork turned in the more time we have to educate you on your loan options. Realtors and brokers throughout the nation are always in a rush but here at People's Choice Mortgage we would rather take our time with you. We value ensuring our clients, are in a position of confidence when closing day comes. If you would like to work with a company that promises to educate you on the loan process, giving you the opportunity to save money over the lifetime of your loan, PCM is where you want to be. Our founder David Fasano is a veteran himself and truly cares about providing education and options to all consumers. All of our brokers are educated and trained to feel confident about providing education and tools to our veterans. PCM's unique practice, truly allows the Veteran to decide if a VA home loan truly is the best option for you!
