VA Loans

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VA loans are mortgage loans for consumers who served or are presently serving in the U.S. military for purchase of a primary residence. The U.S. Department of Veterans Affairs (VA) guarantees these loans made by private lenders (banks, savings & loans, or mortgage companies) to veterans who qualify. A VA loan allows veterans 100% financing without paying private mortgage insurance or a 20% second mortgage. Alternatively, there is a VA funding fee of 0 - 3.3% of the loan amount, paid to the VA, although this can be rolled into the loan. Since there is no monthly PMI, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment. In a refinance, veterans may borrow up to 90% of reasonable value, where allowed by state laws. VA loans also allow veterans to qualify for amounts larger than traditional Fannie Mae / conforming loans. The VA will insure a mortgage where the monthly payment of the loan is up to 41% of your gross monthly income, vs. 28%, assuming the veteran has no monthly bills. How can veterans get VA loans? Veterans can apply for a VA loan with any lender that participates in the VA home loan program. You will need a Certificate of Eligibility from the VA to prove to the lender you are eligible for a VA loan, although lenders that routinely write VA loans can often get this for you. Eligibility rules for VA loans are on the U.S. Department of Veterans Affairs Web site. Lenders typically require 45 days or more to close a VA loan. To compete with conventional and cash offers, find a lender who routinely closes VA loans in 30 days. What are the benefits of a VA loan? There are many, as taken directly from the Veterans Administration site: No down payment required (unless required by the lender, or the purchase price is more than the reasonable value of the property). Ability to finance the VA funding fee when the loan amount is up to $417,000 (plus, there are reduced funding fees with a down payment of at least 5%, and there are exemptions for veterans receiving VA compensation). Closing costs are comparable with other financing types (and may be lower). No mortgage insurance premiums. For homes inspected by the VA during construction, a warranty from builder and assistance from the VA to obtain cooperation of the builder. The Funding Fee Type of Veteran Down Payment First Time Use   Subsequent Use for loans from 1/1/04 to 9/30/2011  Regular Military None 2.15%    3.3%* 5% or more (up to 10%) 1.50%    1.50% 10% or more 1.25%    1.25% Reserves/ National Guard None 2.4%    3.3%* 5% or more (up to 10%) 1.75%    1.75% 10% or more 1.5%    1.5% * Check with your lender to be sure of your funding fee Other Costs of the Loan Other costs will be involved. Of course, the lender charges interest. And some other fees and charges have to be paid at closing. Here are some general rules: " The lender, not VA, sets the interest rate, the "discount points," and closing costs. These rates may vary from lender to lender. " The seller can pay for some closing costs. (Under our rules a seller's "concessions" can't exceed 4% of the loan. But only some types of costs fall under this 4% rule. Examples are: payment of pre-paid closing costs, VA funding fee, payoff of credit balances or judgments for the veteran, and funds for temporary "buydowns." Payment of discount points is not subject to the 4% limit.)  • You’re not allowed to pay for the termite report, unless the loan is a refinance. That fee is usually paid by the seller. Department of Veterans Affairs Home Loan Program U.S. Department of Veteran Affairs