|
A GOOD DEAL FOR VETERANS
More than 29 million veterans and service
personnel are eligible for VA financing. Even
though many veterans have already used their loan
benefits, it may be possible for them to buy homes
again with VA financing using remaining or restored
loan entitlement.
Before arranging for a new mortgage to finance a home purchase,
veterans should consider some of the advantages of VA Home
Loans:
The most important consideration, no down payment is
required in most cases.
Loan maximum up to 100 percent of the VA-established
reasonable value of the property. Due to secondary market
requirements, however, loans generally may not exceed
$203,000.
Flexibility of negotiating interest rates with the lender.
No monthly mortgage insurance premium to pay.
Limitation on buyer's closing costs.
An appraisal which informs the buyer of property value
Thirty year loans with a choice of repayment plans:
Traditional Fixed Payment-- constant principal and
interest; increases or decreases may be expected in
property taxes and homeowner's insurance coverage
Graduated Payment Mortgage (GPM)-- low initial
payments which gradually rise to a level payment
starting in the sixth year and
In some areas, Growing Equity Mortgages (GEMs)--
gradually increasing payments with all of the increase
applied to principal, resulting in an early payoff of the
loan.
For most loans for new houses, construction inspected at
appropriate stages to ensure compliance with the approved
plans, and a 1-year warranty is required from the builder that
the house is built in conformity with the approved plans and
specifications. In those cases where the builder provides an
acceptable 10-year warranty plan, only a final inspection
may be required.
An assumable mortgage, subject to VA approval of the
assumer's credit.
Right to prepay loan without penalty.
VA performs personal loan servicing and offers financial
counseling to help veterans avoid losing their homes during
temporary financial difficulties.
Contact Us
WHAT IS A VA-GUARANTEED LOAN?
These loans are made by a lender, such as a mortgage
company, savings and loan or bank. VA's guaranty
on the loan protects the lender against loss if
the payments are not made and is intended to encourage
lenders to offer veterans loans with more favorable
terms. The amount of guaranty on the loan depends
on the loan amount and whether the veteran previously
used some entitlement. With the current maximum
guaranty, a veteran who hasn't previously used
the benefit may be able to obtain a VA loan up
to $203,000 depending on the borrower's income
level and the appraised value of the property.
The local VA office can provide more details on
guaranty and entitlement amounts.
Contact Us
WHO IS ELIGIBLE?
-
Veterans with active duty service, that was
not dishonorable, during World War II and
later periods are eligible for VA loan benefits.
World War II (September 16, 1940 to July 25, 1947), Korean
Conflict (June 27, 1950 to January 31, 1955), and Vietnam
era (August 5, 1964 to May 7, 1975) veterans must have at
least 90 days' service. Veterans with service only during
peacetime periods and active duty military personnel must
have had more than 180 days' active service.
Veterans of enlisted service which began after September 7,
1980 or officers with service beginning after October 16,
1981 must in most cases have served at least 2 years.
Persian Gulf Conflict. Basically, reservists and National Guard
members who were activated on or after August 2, 1990,
served at least 90 days and were discharged honorably are
eligible. VA regional office personnel may assist with eligibility
questions. Members of the Selected Reserve, including National Guard,
who are not otherwise eligible and who have completed 6
years of service and have been honorably discharged or have
completed 6 years of service and are still serving may be
eligible. The expanded eligibility for Reserves and National
Guard individuals will expire October 28, 1999. Contact the
local VA office to find out what is needed to establish
eligibility. Reservists will pay a slightly higher funding fee than
regular veterans. (See paragraph entitled "Costs of Obtaining
a VA Loan").
Contact Us
WHAT CAN A VA LOAN BE USED FOR?
-
To buy a home, including townhouse or condominium
unit, in a VA-approved project.
To build a home.
To simultaneously purchase and improve a home.
To improve a home by installing energy-related features such
as solar or heating/cooling systems, water heaters,
insulation, weather-stripping/ caulking, storm windows/doors
or other energy efficient improvements approved by the
lender and VA. These features may be added with the
purchase of an existing dwelling or by refinancing a home
owned and occupied by the veteran. A loan can be increased
up to $3,000 based on documented costs or up to $6,000 if
the increase in the mortgage payment is offset by the
expected reduction in utility costs. A refinancing loan may
not exceed 90 percent of the appraised value plus the costs
of the improvements. Check with a lender or VA for details.
To refinance an existing home loan up to 90 percent of the
VA-established reasonable value or to refinance an existing
VA loan to reduce the interest rate.
To buy a manufactured home and/or lot.
Contact Us
WHY A VA LOAN?
The more you know about our home loan program, the more you will realize
how little "red tape" there really is in getting
a VA loan. These loans are often made without
any down payment at all and frequently offer lower
interest rates than ordinarily available with
other kinds of loans. Aside from the veteran's
certificate of eligibility and the VA-assigned
appraisal, the application process is not much
different than any other type of mortgage loan.
And if the lender is approved for automatic processing,
as more and more lenders are now, a buyer's loan
can be processed and closed by the lender without
waiting for VA's approval of the credit application.
Additionally, if the lender is approved under VA's Lender Appraisal
Processing Program (LAPP), the lender may review the appraisal
completed by a VA-assigned appraiser and close the loan on the
basis of that review. The LAPP process can further speed the time
to loan closing.
Contact Us
FIVE EASY STEPS TO A VA LOAN
- Apply for a Certificate of Eligibility. A veteran
who doesn't have a certificate can obtain one
easily by making application on VA Form 26-1880,
Request for Determination of Eligibility and
Available Loan Guaranty Entitlement, to the
local VA office.
- Decide on a home the buyer wants to purchase and sign
a purchase agreement.
- Order an appraisal from VA. Usually this is done by the
lender. Most VA regional offices offer a "speed-up" telephone
appraisal system. Call the local VA office for details.
- Apply to a mortgage lender for the loan. While the
appraisal is being done, the lender (mortgage company,
savings and loan, bank, etc.) can be gathering credit and
income information. If the lender is authorized by VA to do
automatic processing, upon receipt of the VA or LAPP
appraised value determination, the loan can be approved and
closed without waiting for VA's review of the credit
application. For loans that must first be approved by VA, the
lender will send the application to the local VA office which
will notify the lender of its decision.
Close the loan and the buyer moves in.
Contact Us
REQUIREMENTS FOR LOAN APPROVAL
To obtain a VA loan, the law requires that:
1. The applicant must be an eligible veteran who has available
entitlement.
2. The loan must be for an eligible purpose.
3. The veteran must occupy or intend to occupy the property
as a home within a reasonable period of time after closing
the loan.
4. The veteran must be a satisfactory credit risk.
5. An experienced mortgage lender will be able to discuss
specific income and other qualifying requirements.
Contact Us
COSTS OF OBTAINING A VA LOAN
Funding Fee
A basic funding fee of 2.0 percent of the principal
loan amount must be paid to VA by all but certain
exempt veterans. A down payment of 5 percent or
more will reduce the fee to 1.5 percent and a
10 percent down payment will reduce it to 1.25
percent.
A funding fee of 2.75 percent must be paid by all eligible
Reserve/National Guard individuals. A down payment of 5 percent
or more will reduce the fee to 2.25 percent and a 10 percent down
payment will reduce it to 2.0 percent.
The funding fee for loans to refinance an existing VA home loan
with a new VA home loan to lower the existing interest rate is 0.5
percent.
Veterans who are using entitlement for a second or subsequent
time who do not make a down payment of at least 5 percent are
charged a funding fee of 3 percent.
NOTE: For all VA home loans, the funding fee may be paid in cash
or it may be included in the loan.
Other Closing Costs
Reasonable closing costs may be charged by
the lender. These costs may not be included in
the loan. The following items may be paid by the
veteran purchaser, the seller, or shared. Closing
costs may vary among lenders and also throughout
the nation because of differing local laws and
customs.
VA appraisal
Credit report
Loan origination fee (usually 1 percent of the loan)
Discount points
Title search and title insurance
Recording fees
State and/or local transfer taxes, if applicable
Survey
No commissions, brokerage fees, or "buyer broker" fees may be
charged to the veteran buyer.
Contact Us
HAD A VA LOAN BEFORE?
Remaining Entitlement
Veterans who had a VA loan before may still
have "remaining entitlement" to use for another
VA loan. The current amount of entitlement available
to each eligible veteran is $36,000. This was
much lower in years past and has been increased
over time by changes in the law. For example,
a veteran who obtained a $25,000 loan in 1974
would have used $12,500 guaranty entitlement,
the maximum then available. Even if that loan
is not paid off, the veteran could use the $23,500
difference between the $12,500 entitlement originally
used and the current maximum of $36,000 to buy
another home with VA financing. An additional
$14,750, up to a maximum entitlement of $50,750
is available for loans above $144,000 to purchase
or construct a home.
Most lenders require that a combination of the
guaranty entitlement and any cash down payment
must equal at least 25 percent of the reasonable
value or sales price of the property-- whichever
is less. Thus, in the example, the veteran's $23,500
remaining entitlement would probably meet a lender's
minimum guaranty requirement for a no down payment
loan to buy a property valued at and selling for
$94,000. The veteran could also combine a down
payment with the remaining entitlement for a larger
loan amount.
Restoration of Entitlement
Veterans can have previously-used entitlement
"restored" to purchase another home with a VA
loan if:
The property purchased with the prior VA loan has been sold
and the loan paid in full, or
A qualified veteran-transferee (buyer) agrees to assume the
VA loan and substitute his or her entitlement for the same
amount of entitlement originally used by the veteran seller.
Remaining entitlement and restoration of entitlement can be
requested through the nearest VA office by completing VA
Form 26-1880.
The entitlement may also be restored one time only if the
veteran has repaid the prior VA loan in full but has not
disposed of the property purchased with the prior VA loan.
Contact Us
NEED MORE INFORMATION?
Veterans seeking more detailed information
concerning the VA home loan program may request
VA Pamphlet 26-4 "VA-Guaranteed Home Loans for
Veterans", or VA Pamphlet 26-6 "To the Home-Buying
Veteran" from the nearest VA office. Loan Guaranty
personnel at that office will also be pleased
to answer specific questions and provide any other
assistance they can.
Remember, VA-guaranteed financing is a benefit
which Congress intended eligible veterans should
have. If you are a veteran homebuyer or know of
one, it makes sense to look into the VA loan program
as a good way to finance a home purchase.
Apply for this loan
today!
|
