Q: What are some of the features of a VA loan?
A: One of the many advantages of a VA loan is that they are guaranteed for 100 percent financing. This means that no down payment is required. The down payment is the part of the home-buying process that many people struggle with and often dread.
Another great advantage is that a VA loan does not require monthly mortgage insurance. For many consumers, the monthly mortgage insurance can be a hindrance. However, the VA will finance a small funding fee within the loan, which serves as the insurance guarantee.
There is no maximum set loan amount. A VA loan is based on a person’s entitlement and eligibility, which are based upon the amount of time served on duty. Other factors that come into play include the type of time served, such as being overseas during wartime. For the most part, veterans serving their full committed time will qualify for a loan up to $417,000.
Q: What are some of the qualifications for a VA loan?
A: As a veteran (or the widowed spouse of a veteran), most banks would generally like the buyer to have a credit score of at least 620. And as far as debt ratio qualifications, VA loans are similar to other types of home financing. However, the VA also takes into consideration “residual” income. This is the amount that the buyer has left over every month after taxes and housing utilities are paid. The VA has established a preferred amount of residual monthly income based upon family size.
When qualifying for a VA loan, it is extremely important to consult with a mortgage professional who has experience in evaluating and qualifying candidates for this special program. Select someone who is knowledgeable and can guide you in the right direction. The VA has specially trained appraisers who are well versed in the Veterans Administrations guidelines pertaining to the condition of the home.
In some circumstances, a veteran can have two loans. For example, a veteran who already has used his or her eligibility on a home can qualify to buy a new primary residence after relocation. It is all determined by the amount of remaining eligibility. Once again, consult with a mortgage professional to determine your eligibility.
Q: What would my payment be using my VA loan?
A: Let’s assume that you are purchasing a home for $175,000 at 4 percent interest for 30 years. Assume that the property taxes are $167 a month, fire insurance is $50 a month and association fees are $50 a month. Your total monthly payment would only be $1,120. This figure also includes the financial funding fee.
Let’s calculate that same scenario for the purchase of a home with a $225,000 price tag; the monthly payment would be $1,364.
Because there is no monthly mortgage insurance, these loans can be extremely affordable for veterans. The no-down-payment option makes this program one of the few 100 percent guaranteed loan programs available in today’s market. It is one of the perks that we can offer as a huge “thank you” to our veterans and their selfless service to our country. I can’t stress enough how important it is for the brave veterans of our country to research and take advantage of this wonderful, well-deserved opportunity for home ownership.
Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is www.anniechristian.com.