Sept. 26, 2012

Overview of VA Home Loans

So I went to a VA Seminar, hosted by Military Home Programs, to re-up my knowledge on VA home loans. Andrew Paul and Ken Bates did a wonderful job detailing the benefits of VA home loans and explaining the new forms and addendum associated with VA financing.

VA financing is an extremely useful tool for military members, past and present. It can save them a lot of money. I will touch upon the main points that Andrew and Ken brought up during the seminar to give an overview of the VA loan program.

More than 29 million veterans and service personnel are eligible for VA financing.

A VA loan is a loan guaranteed by the United States Department of Veteran Affairs. This guaranty protects the lender against loss if payments are not made, allowing lenders to give more favorable terms to the veterans.

However, the maximum VA loan guarantee varies by county. In San Diego County, the maximum VA loan amount is $518,750 with Zero Down Payment.

Eligibility for VA loans basically applies to anyone that has completed military service. This eligibility does not expire, meaning that widows can utilize the eligibility of their spouses, and that the VA loan is re-usable. To be eligible, Active Duty members need a minimum of 90 continuous days or 181 during peacetime and Active Reserve or National Guard need 6 years in selected reserves.

Active Duty members need a minimum of 90 continuous days or 181 during peacetime and Active Reserve or National Guard need 6 years in selected reserves.

Here is a list of benefits of VA loans:

  • Negotiable interest rates.
  • Zero Down (You can buy a home WITHOUT a down payment).
  • No Mortgage Insurance (It is backed by the US Government).
  • No Pre-Payment Penalties (You can pay off loan early with NO penalty).
  • You Can Re-use this Benefit (Not a one time deal).
  • Limits the Amount You can be Charged for Closing Costs.

Here is a list of VA home loan requirements:

  • Property must be owner occupied (No investments/2nd homes).
  • The Mortgage can be taken over or assumed by the buyer when a home is sold.
  • Credit scores need to be “good enough” (Can be as low as 620).
  • Active Duty (90 continuous days or 181 at peacetime).
  • Reserves / National Guard (6 years in selected service).
  • Payment of VA Funding Fee (basically a small % of your total loan).

If you are disabled due to a service-related injury (and are receiving military disability pay currently), your funding fee is waived and you pay nothing anytime you use a VA loan.

Below are two examples from Andrew and Ken at Military Home Programs:

Alesha W. (Single Mom, Closed on 4/21/08 for $237,000):

Loan Issues VA Conventional
633 FICO Score Yes No
Zero Reserves Yes No
Zero Down Payment Yes No
30 year fixed rate: 6.0% N/A
Monthly Payment: $1,805 N/A
Housing Allowance: $1,857/month

It was better for her to own her own home and live off base!


Greg & Mary P. (Closed on 2/03/09 for $1,375,500 purchase price):

Loan Issues VA Conventional
799 FICO Score Yes Yes
$500K Reserves Yes Yes
$957,500 Loan Yes No
30 year fixed rate: 5.625% 7%
Monthly Payment: $7,269 $8,130

They saved nearly $1,000/month over a regular Jumbo loan!

So as you can see, if you are eligible for a VA loan, you would be wise to take advantage of it. These are just a few among many examples where VA financing saved buyers a lot of money.

Hopefully this gave you a better insight to what VA financing is and what you need to utilize it. If you have any questions or concerns feel free to Contact Park Life Real Estate and we will get back to you as soon as we can.

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