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5 things you didn’t know a VA loan could do for you



Because of the bravery and sacrifices of active veterans and military personnel, the rest of the nation’s civilians can safely live the American dream. As a tangible way of saying “thank you for your service,” current and former members of the military have access to Veterans Affairs home loans. These unique mortgage options allow veterans and those still in service to own a piece of the American dream by potentially qualifying for homes they might have thought were out of reach. Veterans, active duty personnel, and select reservists or members of the National Guard are among those who may qualify for VA loans. (Find the specific eligibility requirements here). Wondering what some of the benefits of a VA loan might be? Here are five to consider.

  1. No down payment.

This is one of the most valuable and touted benefits, and for good reason. Saving enough for a down payment can be the biggest hurdle to buying a home. But a VA loan removes that hurdle.

“Most of the buyers I work with have no additional resources available, so the fact that they can buy a home with zero down payment makes the transaction feasible,” says Benny Dinsmore, Realtor® at Coldwell Banker in Frisco, TX.

In most parts of the country, qualified buyers can buy up to $ 424,100 before taking the cost of the down payment into account. In more expensive areas, borrowers can go beyond that threshold.

But be warned: The “no down payment” aspect of a VA loan should not be confused with “no money out of your pocket,” a common misconception, notes Michael Garcia, broker and owner of TQS Realty in Palm Beach, FL.

A VA loan still requires closing costs and a security deposit (a negotiated amount of money that the buyer puts into escrow to essentially “hold” the home).

“However, that money will often come back at closing, when the title company will issue a check to the veteran on the spot for the full amount that was pledged,” says Garcia.

  1. More lenient loan requirements.

The credit score required for a VA loan can be lower than that of a conventional loan – around 620 for a VA loan compared to a range of 650-700 for most conventional loans.

Also, the debt-to-income ratio required for VA loans is often more flexible than for conventional mortgages.

“It allows someone with less than perfect credit and some debt to still qualify for a loan,” says Dinsmore.

  1. Without mortgage insurance.

Most conventional buyers have to pay for private mortgage insurance if they pay less than 20%. FHA loans come with their own forms of mortgage insurance. But a VA loan exempts that insurance requirement.

And trust us, this one is important.

“This can be a huge savings on monthly payments, as the PMI is typically around $ 200 a month,” says Realtor® Twila Lukavich of Russell Real Estate Services in Cleveland.

Although there is no mortgage insurance, there is a “financing fee,” an initial cost that is applied to each purchase loan or refinance. The proceeds help the VA cover losses from the few loans that are in default. But borrowers can build it into their monthly payment or pay it all at once. Plus, it’s tax deductible. And veterans with a service-connected disability don’t have to pay the funding fee at all.

  1. Limited closing costs.

Legally, veterans can pay certain closing costs, which include the following:

Evaluation

Credit report

Origination fee

Recording fee

Survey

Title insurance

But there are some fees that veterans can’t afford. And the VA allows lenders to charge no more than 1% to cover the costs of originating and underwriting the loan.

So, for example, if the purchase price is $ 280,000, the veteran could offer $ 300,000 and ask for a 3% return to cover closing costs.

“This way, the veteran is essentially funding his closing costs on the loan, which means less out-of-pocket costs up front,” Dinsmore explains.

  1. Additional assistance with appraisals.

When a home that a veteran is considering buying is having trouble meeting the purchase price during the appraisal process, buyers and lenders can ask the VA appraiser to consider adjusting the appraisal before making a final determination.

Appraisers notify lenders if the appraised value is low, giving buyers and real estate agents 48 hours to provide additional information that the appraiser might not know to help justify the home’s value.

“I usually put together a detailed list of improvements and improvements that the seller has made to the house in the last three years that the appraiser was not aware of and therefore did not include in the home value,” says Lukavich .

This process “gives agents the opportunity to help the appraiser make sure they have the full picture of the home and gives the local agent an opportunity to help the appraiser be educated on specific local values,” he adds.

It’s just another benefit of VA loans aimed at helping the men and women in our service buy the home of their dreams.

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