A VA Loan

Dated: 04/29/2018

Views: 30

The Servicemen's Readjustment Act, also known as the GI Bill of Rights was signed into law by President Franklin D. Roosevelt in 1944, and it provided veterans with a federally guaranteed home with no down payment. 

What does guaranteed mean in this context? It means that the lender will be protected in case you cannot, or the future owner fails to repay the loan. What the guaranty does is protect the lender since there is no down payment to them. 

You can always put money down, and this will reduce the funding fee. It is a percentage of the loan amount which is based on the type of loan and your military category (first time user or subsequent loan user) and whether you are making a down payment. Some veterans that get disability compensation for service-related medical issues could be exempt from the funding fee, or are entitled to get compensation if you aren't drawing retirement pay. This funding fee is used to offset the few loans that go into default, and is used to reduce the cost to taxpayers, in order to ensure the VA Home Loan program continues for future generations. You can always pay the fee upfront or include it into your monthly mortgage. 

Who can apply? Active duty members and members with a discharge other than dishonorable after a minimum service of 3 months during wartime or a minimum of 181 continuous days during peacetime. After September 7, 1980, there is a 2 year requirement. After October 16, 1981, there is a 2 year requirement if the veteran was an officer. There is a 6 year requirement for National guards and reservists, and also, there is eligibility of surviving spouses. Please verify with your lender.

Who is eligible? Veterans that meet service requirements (you must receive a Certificate of Eligibility) and veterans that meet credit/income requirements. 

What is the benefit? The main benefit is no money down. The VA will guarantee a maximum of 25% of a home loan, this 25% cannot be more than $113,275, meaning that the maximum loan amount will be $453,100. The funding fee, may also be borrowed, and no monthly mortgage insurance premium, are benefits as well. A veteran is entitled to this benefit for life, but you will have to repay your first loan in full in order to restore full entitlements. Check with your lender for your specific situation. 

Where do I apply for a loan? Any private lender, such as a bank or mortgage company will do this, but the home must be used as primary residence. 

What about closing costs? The veteran will have to pay closing costs, or receive enough lender credits from their lender to cover all of these costs. These average around 1-3% of the loan amount on bigger purchase prices, and 3-5% on smaller purchase prices. 

How long will this particular loan take to close? Most loans close in 40 to 50 days, with this number being the standard for the mortgage industry regardless of the type of financing chosen. 

Getting a VA loan is not hard if you qualify, just know what is required, and be prepare when the time comes. 

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Debora A. Letelier

"My commitment to you will always be to act upon what's right. We will work together to accomplish your visions and watch them materialize into your dream Island Home". My Spanish/bilingual backgro....

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