VA Loan Benefits...The Best Home Loan Everybody Forgot About

It absolutely surprises me everytime I talk to a Veteran about VA Loans (Veteran’s Affairs). VA Loans are loans insured by the US Department of Veterans Affairs for honorably discharged military veterans.  It seems that most Veterans either have a hard time finding a VA lender who knows what they’re talking about or if they do find somebody, they’re often out of state which makes communication difficult between the buyer, the lender and the agent.

I’m going to discuss some old benefits and new benefits of VA Loans.  To many of you, old benefits may be news to you.  If you feel this way, you’re not alone.  I find it very rare when I run across a veteran who truly knows many of the benefits related to VA loans.

OLD BENEFITS

Here is a list of some benefits that have existed for VA Loans for sometime.

  • 100% Financing
  • No Mortgage Insurance
  • No Minimum Investment or Down Payment needed from the buyer
  • Lenders are limited to only charging 1% Origination Fees
  • Seller must pay the entire escrow fee (Lender pays this if it’s a refinance)
  • If the property does not appraiser for the sales price, the Veteran’s earnest money is protected
  • No Credit Report or Appraisal needed for VA Interest Rate Reduction Refinance Loan (A VA-to-VA refinance with no cash-out.  Often called VA Streamline refinances).
  • Low rates
  • No limit in seller’s concessions used to pay Veteran’s closing costs
  • 4% Seller’s concessions for non-VA costs as well as Veteran’s debt (That’s right, the seller can pay off some of the veteran’s debt in the transaction).
  • Can be used for a Stick Built House, Manufactured home (must be on land), Condo, Townhouse, and multi-family from 2-4 units
  • No Funding Fee for disabled Veterans (It doesn’t matter if the veteran is 10% disbaled or 100% disabled, they won’t be charged a Funding Fee).

NEW BENEFITS

Here is a list of some recent benefits added to VA Loans.  These changes were made to help Veterans acquire properties in higher cost counties or refinance from a less attractive conventional or subprime loan to a VA Loan.

VA Loans were created in 1944 to help Veterans buy homes when they came back from World War II.  It also was made to help stimulate the economy and real estate market after the Great Depression.  Sound familiar?  We may not be in as big a war and our recession may not be as bad as the Great Depression, but nonetheless there’s similarities to today’s times.  I suspect most lenders will be forced to learn how to do VA Loans simply due to demand, similarly to FHA loans during the end of 2008 and all of 2009.

Here are some basic guidelines to remember for VA Loans:

  • Most lenders will want the Veteran to have at least a 620 credit score
  • You must be 3 years separated from a foreclosure
  • You must be 2 years separated from a Bankruptcy
  • The Veteran should have at least 3 tradelines on credit to review.
  • Nobody can be on the VA Loan with the Veteran other than a Spouse
  • Surviving Spouses of deceased Veterans with VA Benefits can also use a VA Loan
  • VA Loans are assumable, which means you can sell the house and pass the loan to another Veteran as long as they can cover the difference between the sales price and the existing loan.
  • VA Funding Fees, which is a fee that goes directly to the Department of Veterans Affairs, varies depending on whether the Veteran was full-active duty or reserve, how much the Veteran puts down, the type of transaction (Purchase, Streamline refinance or Cash-out Refinance) or if the Veteran is disabled.

UPDATE

You can also gross up BAS (Basic Allowance for Subsistance) and BAH (Basic Allowance for Housing) 115% to qualify for a home loan.  Active-duty veterans should be sure to work with a VA Loan Officer who’s familiar with calculating income for active veteran’s which includes knowing how to read your LES (Leave and Earning Statement).

Here is an excerpt from a blog Justin Williams, an experienced VA Loan Officer in Virginia Beach, VA:

Your Base Pay should NOT BE THE ONLY income to qualify for a house. If just your base pay is used you could lose out on purchasing a higher value.

  • BAS can be used to qualify.  BAS is Basic Allowance for Subsistance.  BAS is meant to offset costs for a member’s meals.  You can gross this income up by 15% aswell.
  • BAH can be used to qualify. BAH is Basic Allowance for Housing. BAH is an allowance to offset the cost of housing when you do not receive government-provided housing.  You can gross up this income by 15% too!

To read Justin’s entire blog post, follow this link.

The income used to qualify home buyers for a home loan is their gross income, which is their income before tax.  An active duty serviceman is only taxed on their Basic Pay, which makes their gross income look much less.  Loan officers typically use this figure to calculate a buyer’s income on non-VA loans.

BAH and BAS income not only can be used, but can be increased by 15% as mentioned on the referenced blog post.  By using these income calculating guidelines, a lender can get a better representation of a veteran’s income to qualify for a home loan.

UPDATE

The Department of Veteran’s Affairs have just released their updated High-Cost County loan limit for 2010.  Most loan amount limits have decreased from 2009 but are still higher than the traditional $417,000 limit.  You can find a list of the new loan limits by state and county HERE.

Category: Loan Programs | 49 comments

49 comments to VA Loan Benefits…The Best Home Loan Everybody Forgot About

Leave a Reply

 

 

 

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Subscribe without commenting