VA – Veterans Loan Basics
I have seen a rise in VA loan applications these last couple of weeks. So, I wanted to go over the basics and some different scenarios where I have used the VA loan to the clients Benefit. This is good stuff:
- This is a 100% financing loan. I did a loan once where the borrower did not even give earnest money on the transaction and he got $69 back due to the Aggregate Adjustment?
- Interest rates are similar to FHA, which are much lower than Conventional and there is no Monthly Mortgage Insurance.
- There is however a Up Front Funding fee that the borrower does not have to pay out of pocket, but is normally financed into the loan amount. Basically, the funding fee is 3.3% for 2nd time use and 2.15 for 1st time use. The funding fee is waived for Disabled VET’s
- With a 680 credit score, the borrower can do a 100% Cash Out Refinance
- It can only be used for Owner Occupied homes
- Maximum loan amount is $417,000
- Seller can pay up to 4% in customary closing costs.
- Credit scores as low as 620, 640 is better
- Loan to Value and Cumulative Loan to Value are both 100%
We tend to get pigeon holed in thinking this is only for the Veteran that wants 100% financing. This is not the Case. Here are a couple of scenarios that I used the VA loan to the VETS Benefit:
- The VET was buying a $400,000 home and wanted to put 40% down. Normally, I would have said, conventional loan all the way, but after I reviewed a conventional loan at 3.75% to a VA loan at 3%, the VA loan even with the funding fee was much cheaper monthly for the VET. Because of the Rate spread, their net worth calculation after 15 years was $40,000 better.
- The VET was purchasing a $540,000 home and wanted to put 15% down. Since the max loan amount for a VA loan is $417,000, we did a $417,000 1st VA Mortgage and a Purchase money 2nd for $42,000. Again due to the rate spread between Conventional and VA, We were able to greatly reduce the VETS payment and increase the net worth over the life of the loan.
Many loan officers would not have even thought to ask either one of these buyers if they were VETS. Because the loan process is such a weighty decision, we strive to be experts in our trade and provide our clients with the best loan program, rate and closing costs options.
Managing Partner, Options Mortgage Services