Using Your Benefits
Benefits of the VA Home Loan Program
Learn how to maximize your hard-earned VA benefits to make it easier for you to purchase a home and jumpstart your life.
No Down Payment
No down payment is the greatest advantage of using the VA Home Loan program for qualifying service members and veterans. After 2008, most zero down loans faded away making this feature a signature benefit. For conventional and FHA loans, buyers are typically looking at a minimum down payment requirement of 5 percent and 3.5 percent, respectively. On a $200,000 mortgage, that’s a $10,000 down payment for conventional and a $7,000 down payment for FHA.
It can take someone years to save the funds for a down payment and closing costs. The VA loan is a fantastic benefit that allows service members and veterans the perfect jumpstart in life.
No Private Mortgage Insurance
FHA and conventional loans require PMI or MIP…mortgage insurance. If a buyer can’t afford to put down a whopping 20% of a loan as a down payment, then the banks will require private mortgage insurance on the loan.
There are an upfront mortgage insurance premium and a monthly expense based on the sales price of the home vs equity. The monthly portion can last the life of the loan and is an added expense above PITI (principal, interest, taxes, and insurance).
There is NO mortgage insurance with VA loans.
VA loans do come with a mandatory funding fee that goes directly to the Department of Veterans Affairs. Borrowers with a service-connected disability are exempt from paying this fee, which helps keep the program going for future generations. Subsequent use of the VA loan does bring an increase in funding fees. Call for details.
Looser Credit Requirements
Our service to our country has earned us some great benefits. The VA loan is one of them and with its reduced credit score requirements, it’s one of the best.
While FHA and conventional borrowers have high credit score thresholds, the VA loan lenders are generally looking for a score of at least 620. In some cases, as the lending limits continue to thaw, we’ve even seen loans accepted with scores below 600. There are many factors that are included in these programs, call today for details.
Less Restricting Debt-to-Income (DTI) Ratio Requirements
Common lenders want to see borrowers with monthly, debt to income ratios (DTI), ranging from 41%-49%. Lenders evaluate major monthly debts such as car payments, credit cards, student loans, mortgage payments, and others vs verifiable monthly income.
VA lenders will often allow qualified buyers to obtain a loan with elevated DTI ratios. The VA loan will allow other considerations including high credit scores, cash savings, and higher income levels to increase DTI limits over 55%.
Loan Usage
Myth: “I can only use the VA loan one time.” This loan is absolutely not a, one shot one kill, benefit. You can use the loan over and over again. In fact, you can actually carry three VA loans at once.
"Only For My Dream Home"
Myth: “The VA loan is for my dream home, and I must live in the home for a year.”
The VA requires that the veteran is an “owner-occupant” for at least one year. However, orders to deploy, PCS, ETS, and other “life-changing events” may also fulfill the requirement. Receiving orders to another assignment allows you to still move freely and even use your benefit at the next assignment, if qualified, without breaking this rule. So for active-duty buyers, it makes sense to purchase wisely in order to maximize your earned benefits.
The process repeats until the veteran owns several homes that he or she can either sell for profits or use to continue generating rental income. In time, the homes pay for themselves many times over.
The VA Inspector
Myth – “I have to let the VA Inspector assess my home”
There is no such thing as a VA Inspector. A VA appraiser is often confused with an inspector. However the VA appraiser simply assesses that what the veteran is paying for a property is appropriate. We always suggest a professional home inspection for every property purchase a veteran makes.
