In 1944 the U.S. government created the Veterans Affairs loan guaranty program to help returning service members purchase homes. A VA loan is a mortgage issued by approved lenders such as Fairway Independent Mortgage Corporation, guaranteed by the federal government.
The VA Home Loan program is more important than ever to service members as lenders have tightened their requirements in the wake of the housing market collapse. The Department of Veterans Affairs guaranteed more then 707,000 loans in fiscal 2016, an all-time high, allowing veterans and their families to obtain affordable home financing that offers distinct advantages over traditional mortgages.
These flexible, government-backed loans have significant benefits that open the doors of home ownership to veterans and their families who may otherwise struggle to obtain financing. VA loans offer a number of benefits that are not available through other types of mortgages. These include:
Building credit and saving money is often difficult for service members constantly on the move. With the VA Loan, qualified borrowers can finance 100% of a home’s value, meaning no down payment is necessary.
Conventional lenders often require borrowers to pay monthly private mortgage insurance (PMI) unless they can put down at least 20%. This is a difficult task for many veterans. Private mortgage insurance protects the loan company protects lenders in case the borrower defaults. A VA loan, however, requires no PMI because the federal government backs these loans and assumes risk on behalf of the borrower. This advantage allows VA loan borrowers to build equity in their homes and save thousands of dollars over the life of their mortgages.
Interest rate for mortgages are based on risk assumed by the bank to finance the loan. The VA backs each loan with a guaranty, thus a financial institution carries less risk and can offer interest rates typically 0.5 to 1% lower than those for conventional loans. Lower interest rates can add up to thousands of dollars over the life of the loan.
Another significant benefit is the ability of qualified active military members to use their Basic Allowance for Housing (BAH) as effective incoming, meaning that all or some of the allowance may be used to pay monthly mortgage costs.
Many other loans have a pre-payment penalty if the borrower pays off the loan before it matures. The VA Loan allows borrowers to pay off their home loans at any point without having to worry about a penalty. This advantage allows VA borrowers to consider future home purchases and refinancing options.
Length of service or service commitment duty status and character of service determine your eligibility for specific home loan benefits. Spouses of military member who died while on active duty or as a result of a service connected disability may also be eligible. The VA ultimately determines eligibility for specific benefits, not the mortgage lender.
You may be eligible for a VA loan if you meet one or more of these conditions:
Obtaining a VA Certificate of Eligibility (COE) is an important part of the loan application process. This document verifies your length and character of service that make you eligible for VA home loan benefits. Fairway Independent Mortgage Corporation can help you obtain your COE, or if you prefer, you can contact the Veterans Administration directly and fill out a Certificate of Eligibility) VA Form 26-1880).
Veterans and active military members have several options for financing that include:
What is the VA Loan limit?
Generally, veterans who qualify can purchase a home worth up to $42,100 without putting any money down, however borrowers in high-cost counties may be able to purchase homes exceeding that limit without a down payment.
What is the VA Funding Fee?
The Funding Fee goes directly to the VA to ensure the loan program continues to run for future generations of military homebuyers. The fee varies depending on the borrower’s circumstances and does not apply to veterans with service-connected disabilities. Borrowers can roll the funding fee into their loan.
How much is the VA Funding Fee?
It depends on several factors including: Whether you are Active Duty, Retired, Guard or Reserve and whether you this is a first time use, subsequent use, or a cash-out refinance as well as how much of a down payment you are putting down. The fee can range from as little as 1.25% up to 3.3% of the loan. Generally, the more money you put down the lower the VA funding fee. Please contact us and we will help you to determine how what the exact cost of the VA Funding Fee would be for your particular situation.
Do I have to pay the VA Funding Fee out of pocket?
No, you can include the VA Funding Fee in your loan and pay the funding fee over the course of your loan.
Are there closing costs?
The VA limits closing costs for veterans and allows sellers to pay most or all of those expenses.
What are the income requirements?
Homebuyers aren’t required to reach an income threshold to use their home loan benefits, but they are expected to have stable, reliable income that will cover monthly expenses, including their new mortgages, and have a certain amount of income left over for needs such as food, transportation and other necessities.
What determines my interest rate?
Several factors determine you interest rate, including credit score, debt-to-income ratio, loan duration (15- or 30-year) and current market conditions.
How do I lock in my rate?
Once you have identified the home you wish to purchase and have entered into a contract for the property, we will help you determine what the rate and your payment will look like.
Do I still have to pay other normal closing costs like Appraisal, Title and Escrows?
Yes, however with a VA loan if you are purchasing a new home the seller can pay for all or part of your closing costs.
What is a VA Streamline Refinance?
A VA Streamline Refinance is a refinance option that is available if you already have a VA mortgage and you want to lower your interest rate with little or no out-of-pocket closing costs. You don't have provide bank statements, W2s, job verification or paychecks.