Ten Reasons to Always Use VA Loans

Nearly 25 million Veterans and Servicemembers live in the U.S. today, but only about 10 percent of them bought a home using a VA home loan in the past five years. With your help that percentage could be much higher. www.benefits.va.gov/homeloans/

Eligible Veterans often bypass the program as a viable option for a number of reasons.

First, many do not know the significant benefits of the program. Second, they may think getting a VA loan is an arduous process to be avoided. Last, some lenders and real estate agents don’t take the time to teach Veterans about the program, or don’t know much about it themselves. The VA home loan is a program non-military home buyer’s wish they had access to.



Boot Camp for Success Tip:  Take a few minutes to learn these 10 facts about the program, and you’ll all but forget about any other home buying or refinance option.




1. There is no down payment, and no mortgage insurance

These are perhaps the biggest advantages to a VA loan. VA Home Loan buyers don’t need a down payment. None whatsoever. Most mortgage programs, such as FHA and conventional loans, require at least 3.5 percent to five percent down. That’s up to $12,500 on a $250,000 home purchase.

With a VA loan, the buyer can purchase immediately, rather than years of saving for a down payment. With a VA loan,  steep mortgage insurance fees are also avoided. At 5 percent down, private mortgage insurance (PMI) costs $150 per month on a $250,000 home, according to PMI provider MGIC.

With a VA loan, this buyer could afford a home worth $30,000 more with the same monthly payment, simply be eliminating PMI. Using a VA loan saves you money upfront, and tremendously increases the buyers purchasing power. (And, your commissions! Click here to see the difference.)

2. The VA Home Loan benefit  can be used again and again

The VA home loan benefit is not one-and-done. Eligible home buyers can use it as many times as you want. Here’s how.

Assume a home was purchased with a VA loan. But after sometime, the buyer has outgrown the home and need something bigger. When the home is sold or is paid off completely, the benefit can be re-used to buy another home. The entitlement is restored in full.  But that’s not the only way to re-use the benefit.

Eligible Veterans and Servicepersons can receive a one-time restoration when they pay off the VA loan, but keep the home. This scenario comes into play if you purchased the home long ago, and have paid off the loan. It also applies if the VA mortgage was refinanced with a non-VA loan.

In these cases, you can keep the home, and enjoy the benefits of VA home buying one more time.

3. The benefit never expires

Once eligibility for the VA home loan has been earned, it never goes away. Those who served 20, 30, even 50 years ago often wonder whether they can still buy a home today if they never used their benefit. If eligibility can be established, the answer is yes.

Eligibility is based on the length of time served, and the period in which you served. For instance, a U.S. Army Veteran with at least 90 days in service during the Vietnam era is likely eligible.

To check eligibility, first the buyer must obtain his/her DD Form 214. With that document, a VA-approved lender can request VA Certificate of Eligibility for you, or you and the Veteran can request it directly from VA’s eBenefits website, www.ebenefits.va.gov/ebenefits/homepage.  Veterans may be eligible to buy a home using a VA home loan, even if you served long ago.

4. Surviving spouses may be eligible

More than 3,000 surviving spouses www.va.gov/opa/persona/dependent_survivor.asp purchased a home with their fallen partner’s VA benefit in 2015. Un-remarried husbands and wives of Servicepersons who were killed in action can buy a home with zero down payment and no mortgage insurance. Plus, the VA funding fee is waived.

There’s no way to repay the spouse of a fallen hero, but this benefit surely helps them move forward after tragedy.

5. VA Loan Rates Are Lower

According to loan Software Company Ellie Mae, VA loan rates are typically about 0.25% lower than those of conventional loans. The VA backs the mortgages, making them a lower risk for lenders. Those savings are passed on to Veterans.

Additionally, VA loans come with some of the lowest foreclosure rates of any loan type, further reducing risk for lenders. No surprise here, but Veterans and Servicepersons take homeownership seriously. These factors add up to lower rates and affordable payments for those who choose a VA loan.

6. VA loans are available from local lenders

The VA home loan is unlike most other VA benefits. This benefit is available from private companies, not the government itself. The Department of Veterans Affairs does not take applications, approve the loans, or issue funds. Private banks, credit unions, and mortgage companies do that.

The VA provides insurance to lenders, www.benefits.va.gov/homeloans/lenders.asp. It’s officially called the VA guaranty. The VA assures the lender that it will be repaid if the Veteran can no longer make payments. In turn, lenders issue loans at superior terms. In short, a VA loan gives you the best of both worlds. You enjoy your benefit, but have the convenience and speed of working with your chosen lender.

7. Buy, refinance or tap into home equity

The VA home loan benefit is not just for buying homes. Sure, it provides unmatched home buying advantages, but it can also use it to refinance an existing mortgage, whether it’s a VA loan or not.

Homeowners with a VA loan can use the Interest Rate Reduction Refinancing Loan, www.benefits.va.gov/homeloans/irrrl.asp, or IRRRL, to easily drop their rate and payment without an appraisal, or even paystubs, W2s or bank statements. The VA streamline refinance, as it is commonly known, gives VA loan holders a faster, cheaper way to access lower refinance rates when rates fall.

Even homeowners without a VA loan can use a VA refinance. The VA cash-out loan is available to eligible Veterans who don’t have a VA loan currently. As its name suggests, a VA cash-out refinance can be used to turn a home’s equity into cash. And, it can be used to take out a bigger loan than what is currently owe. The difference is issued at closing.

The VA cash-out loan amount can be up to 100 percent of the home’s value in many cases. Use the proceeds for any purpose – home improvements, college tuition, or even a new car. Many homeowners today are dropping their rate and taking cash out simultaneously, accomplishing two goals at once.

But taking out cash to use is not the only VA loan option. You can also use it to pay off a non-VA loan. Eligible homeowners who pay mortgage insurance or are dealing with other undesirable loan characteristics should look into refinancing with a VA loan. It can eliminate PMI, get a stable fixed-rate loan, pay off a second mortgage, or simply reduce the rate to make homeownership more affordable.

8. Lenient guidelines for lower credit scores, bankruptcy, foreclosure

Unlike many loan programs, a lower credit score, bankruptcy or foreclosure does not necessarily disqualify from a VA home loan.

Shop around at various lenders, because each will have its own stance on past credit issues. However, VA guidelines do not state a minimum credit score to qualify. This gives lenders leniency to approve loans with lower scores. In addition, VA considers your credit re-established when you have established two years of clean credit following a foreclosure or bankruptcy.

Many homeowners across the U.S., military and civilian, experience bankruptcies and foreclosures due to a loss of income, medical emergency or unforeseen event. Fortunately, these financial setbacks don’t permanently bar VA-eligible home buyers from ever owning again.

The exception, though, is a foreclosure involving a VA home loan. In this case, they may need to pay back the amount owed on the foreclosed VA loan to regain eligibility. But for most home buyers with past credit issues, a VA home loan could be their ticket to homeownership.

9. Funding fee waivers

VA typically charges a funding fee, www.benefits.va.gov/HOMELOANS/purchaseco_loan_fee.asp, to defray the cost of the program and make home buying sustainable for future Veterans. The fee is between 0.50 percent and 3.3 percent of the loan amount, depending on service history and the loan type.

However, not everyone pays the VA funding fee. Disabled Veterans who are receiving compensation for a service-connected disability are exempt. Likewise, Veterans who are eligible for disability compensation, but are receiving retirement or active duty pay instead, are also exempt from the fee.

10. Buy a condo with a VA loan

Many types of properties can be purchased with a VA loan, including a single-family (free-standing) home, a home of up to four units, a farm residence, and even manufactured homes. But condominiums are commonly overlooked by VA home buyers. Condominiums are ideal starter homes. Their price point is often lower than that of single-family homes. And, condos are often the only affordable option in many cities.

The VA maintains a list of approved condominium communities. Veterans can search by city, state, or even condominium name on VA’s condo search tool, www.vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch. It’s not a short list. For example, there are more than 2,400 approved condo communities in Washington State, about 1,000 in Texas, and a staggering 9,000 in California.

As a Veteran or Servicemember, consider the array of home types when shopping for a home.

11. Last, but not least – Because Our Heroes Have Earned It!

The preceding 10 facts are just a few, and there are actually many more reasons, www.themortgagereports.com/13222/10-biggestbenefits-of-a-va-home-loan, to use the VA Loan program.

The freedom afforded to this country by members of all branches of the military, past and present, is not easily repaid. But consider this program a small “thank you” for their service and dedication.

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