VA loans provide significant buying power for eligible Veterans. If you’re a servicemember considering the purchase of a home, you probably have questions about your VA benefits and eligibility. Fortunately, Penrith Home Loans branch manager and mortgage consultant Cherie Kesti is a VA loan expert. Below she’s weighed in on the potential advantages of VA loan programs and what you need to know about utilizing your benefits.
What are the advantages of using VA benefits to purchase a home?
VA usually sports the lowest interest rate and lowest payment option for the least amount down, which is zero, up to a purchase price of $484,500 or up to $1,000,000 with a minimum down payment requirement.
Other program benefits include flexibility regarding seller contributions. At the time of purchase, the seller is allowed to cover all of a buyer’s closing costs and pre-paids along with up to 4% toward a consumer’s debt and or toward the VA funding fee. Not all sellers will consider doing this, but it is allowable. Other loan types are much more limited in the way of a seller contribution.
When you refinance a VA loan, you can pull out 100% of equity. If you refinance just to lower the rate with no request for cash out, there is no need for an appraisal report
Additionally, VA loans are assumable! An assumable mortgage means a home buyer can take over the mortgage from the seller with lender approval, with little to no change in term. This can make your home more appealing when you plan to sell. Anyone can assume a VA loan and your VA eligibility is released. Remember to ask your loan servicer for an assumption package when you’re ready to sell your home.
How does a borrower know when and how they can utilize their VA eligibility?
It’s best to visit a professional loan officer/mortgage consultant, like myself, who can guide you through the utilization qualifications as well as the credit qualifications necessary to successfully navigate the best options under the VA home loan program. It’s never too early to ask such questions when you’re thinking of buying a home using VA financing.
Who can use VA benefits?
Active Duty and retired military members who qualify to use the VA loan program. On occasion, the number of years served in the active duty military or the reserves will govern who can utilize the benefit. Sometimes, the widow of a deceased active duty member may have the opportunity to utilize the VA benefit. An experienced lender can assist you in figuring out your eligibility or you can consult the VA directly.
What are the loan limits outlined for VA programs?
The loan limits change from time to time but currently it’s $484,350 for zero down payment or $1,000,000 with a minimum required down payment that is often less than required on a conventional loan.
Are there any disadvantages to using VA benefits?
Usually not, however, an applicant who is putting 20% down, may choose a conventional loan over VA just to have the option to re-amortize (or lower) their mortgage payment after applying a significant principal balance decrease. VA doesn’t currently allow this service.
It would really need to pencil out for the borrower because oftentimes, VA financing will offer a lower interest rate than conventional financing. Even though a large principal balance decrease may be made on a VA loan, by sticking with the initial payment, the VA loan payoff is accelerated, and the amount of interest paid over the life of the loan is greatly reduced in comparison to how much interest overall is paid on the conventional loan.
What are the specifics of reusing your VA benefits?
It can be reused as often and whenever it makes sense regarding the eligibility and credit qualifications. When using VA eligibility subsequently (after the first time) and putting zero down on the purchase, the VA funding fee is 3.30% of the purchase price unless the member is exempt from the funding fee.
VA Loans – Good to Know:
Did you know that you can have a VA home loan active on two homes at the same time as long as the total use of eligibility is not exceeded? No, not an investment property purchase – VA is not designed for that! The homes must have been purchased and used as a primary residence at the time of acquisition and initial use of the VA benefit.
Did you know that VA will allow the refinance of a current VA loan into a new VA loan that may happen to be on a home currently rented but was previously occupied by the applicant? It would be a rate term refi as the cash-out option is only allowed on homes that are currently owner occupied.
Did you know that the VA funding fee is allowed to be financed into the loan amount or paid in cash at closing? Most Veterans or Active duty members will finance it:
- First time use and zero down is currently 2.15%; subsequent use and zero down is 3.30%
- 5% - 9.99% down payment would change the funding fee to 1.50%
- 10% or more down will reduce the funding fee to only 1.25%
- 0% VA funding fee for members who qualify with a VA related disability
One question often asked is “Can my significant other be on the VA loan with me?” Not unless the significant other has their VA eligibility too (in that case, they would each use ½ of their eligibility on the home purchase loan). VA eligibility can be used upon verification that the couple is married or in a legally recognized domestic relationship.
VA loans offer flexible terms and underwriting standards, allowing you to take advantage of your earned benefits. These loans are a good option for past and current military personnel as they offer lower rates than other loan programs and a 0% down payment on standard loans. At Penrith, we offer multiple VA options including VA Jumbo loans, allowing for greater flexibility in high-cost areas, as well as VA refinance loans, which may reduce your monthly mortgage payment.
With over 20 years of experience within the home financing industry, Cherie prides herself on her knowledge and problem-solving skills. She knows how to develop a strategy with each of her clients to ensure a successful home buying process, from pre-approval to closing. Cherie looks forward to providing her clients and business partners with a truly satisfying experience. Learn more about Cherie here.