VA Loan

[getsome35]

Marines,

Can anyone tell me what exactly is involved in a VA home loan. I am finally looking towards financing a house with the old lady and want to use the benefits that I rate.


Cpl Brija

[Phantom Blooper]

Should you try a VA home loan?
By Dana Dratch •

If you need a home loan, you might consider hitting up your Uncle Sam.

Department of Veterans Affairs home loans -- VA loans for short -- are a popular option with home buyers. In the past fiscal year alone, the government has guaranteed 489,418 VA loans totaling more than $63 billion.


And with good reason. The loans require no down payment and are available from most lenders. In addition, the government limits the amount of closing costs and origination fees lenders can charge, as well as the appraisal fees. In general, the loans are available to some veterans, active service members, reservists and members of the Public Health Service.

Another big benefit to VA home loans -- no private mortgage insurance. Not only does the VA not require PMI, it also prohibits lenders from requiring it, says Bob Finneran, the VA's assistant director for loan policy and valuation.

"We're putting a guarantee on the loan, so we're not expecting them to get other insurance and charge the veteran for that," he says.

On a $126,000 loan, PMI would run approximately $40 to $64 a month for the first three to five years of a 30-year loan, says Jeff Lubar, spokesman for the Mortgage Insurance Companies of America, an industry trade group. Total savings: $1,440 to $3,840.

Rates generally follow the market, just like any other home loan, says Keith Pedigo, the director of loan guaranty services at the VA.

"Rates are generally in line with conventional rates," he says. "The advantage of going VA is that you do not have to make a down payment."

And, according to VA statistics, 91 percent of VA buyers skip the down payment.

There is one down side. Starting in 1982 Congress levied a one-time funding fee on VA loans, says Pedigo. Fees range from 1 1/4 percent to 3 percent, depending on the veteran's service and whether it's a first or subsequent loan.

"The typical fee is 2 percent," he says.

The VA will lower the fee if the borrower makes a down payment of at least 5 percent.

For refinancing loans, the fee ranges from a half percent to 3 percent, with a half-percent being the usual fee, says Pedigo.

Many buyers simply finance the fee along with the home. But that can have a hidden cost. On a $129,245 mortgage a 2-percent fee can bloom into $14,474 over the 30-year life of a 6-percent loan.

The fact that buyers can qualify for a VA loan doesn't mean they should automatically use one, says Tim Doyle, a director in the government affairs office of the Mortgage Bankers Association of America.

"Prospective homeowners should still shop around," says Doyle, who recommends that home buyers also evaluate conventional and FHA options. "But if they don't have a down payment and are offered as good an interest rate as what they would get elsewhere, it's a good option."

Who's getting VA loans?
On average, borrowers tend to be the middle-class neighbor down the street. A little more than half are first-time home buyers. The typical household has an annual income of $50,000, with about $4,900 in ready cash, according to VA statistics. So it's not surprising that 91 percent of borrowers forgo a down payment. The average age of borrowers is 39. And, feminists take note, only 9 percent of VA mortgage holders are women.

Loans are open to active and former members of the armed forces who meet specific criteria for length and time of service, as well as discharge conditions. Reservists and National Guard members could be eligible if they served at least six years and received an honorable discharge. Veterans discharged for a service-related disability are potentially eligible, as are some members of the Public Health Service and foreign veterans who served with the Allied forces during World War II, according to the VA's field operations office.

A widow or widower may also apply for a loan, provided the spouse's death was service related. Likewise, MIA and POW spouses could also qualify. For more details on eligibility, visit the VA Web site.

Other than the military or public service requirement, applying for a VA loan is just like applying for a conventional loan -- with one extra step. The applicant must obtain a certificate of eligibility from the VA.

"They are pretty easy to get," says Pedigo, and it's gotten even easier this year.

The certificate verifies service and discharge. It's also important because it will spell out how much the vet can borrow under the program. Before June of 2002, vets had to fill out forms requesting the certificate, attach a copy of their discharge papers, send the whole thing off to the closest VA center and wait a week or two for the results.

Now, thanks to a new automated network, many first-time borrowers can learn the amount they are eligible to borrow while they wait. Lenders put the vet's name and Social Security number into a computer and "have the determination in seconds," says Pedigo.

But the actual loan process takes about the same time as a conventional loan -- two to six weeks, says Pedigo.

So where can you go to find a VA loan? Just about every lender that handles FHA or conventional loans also makes VA loans, says Pedigo.

Loan limits
VA loans definitely aren't for everyone. While the maximum guaranteed -- $240,000 -- will buy a lot of house in most parts of the country, potential buyers in high-priced markets such as California or Manhattan may have to go another route for their financing.

While the eligibility certificate indicates how large a loan the government will guarantee, that doesn't mean the vet is automatically entitled to a loan of that amount. Most first-time buyers will be guaranteed up to the VA maximum of $240,000, says Pedigo. But the actual mortgage amount will be based on income, assets, debts and credit history -- just like a conventional loan.

With permission from the VA, sellers can also allow a buyer to assume their loan, making a resale very attractive. But that also means that the veteran can't use the loan to buy the next home. Until the loan is paid off, a veteran can only borrow the difference between the outstanding loan and the maximum allowed by the certificate of eligibility, Pedigo says.

If you pay off a VA loan, save the paperwork. That way, if you ever apply for a second VA loan, you can ask for the maximum amount you're allowed.

And it's really not any easier to qualify for a VA loan, according to Pedigo.

"Because we're a no-down-payment program, that's a benefit to vets," he says. "We do try to be as flexible as we can. But that doesn't mean we approve an application with a serious lack of credit or insufficient income."

But the major distinction for a VA loan is that a buyer can get into a home without investing a down payment, says Pedigo, "which is a huge advantage."

Dana Dratch is a freelance writer based in Atlanta.


-- Posted:March 16, 2004



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WHAT IS A VA LOAN?
The VA Loan became known in 1944 through the original Servicemen's Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation's economy.

With more than 25.5 million veterans and service personnel eligible for VA financing, this loan is attractive and has many advantages. Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.

VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed. All veterans must qualify, for they are not automatically eligible for the program.

VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.



http://valoans.com/va_facts_whatis.cfm

[Sgtj]

I wasn't that impressed with the VA loan program, you don't get as good as a rate, and there are some costs that are assumed in the loan. Yeah you don't have to pay PMI, but if you add up what the intrest rate is on top of the fees assumed in the loan I bet you'll see you its not that great of a deal. Especially if you in an area where homes appreciate quickly, once you have 20% equity in your house you can drop PMI. I bought the house down here in Mississippi using the VA. We close on a house up in Maryland (twice the value as this house) and we have more got an interest rate about a point and a half lower, and we purchased this one 2 years ago when rates were real low. So my point is shop around compare, and do the math.

[getsome35]

roger that!! what about the VA covering your down payment? I heard they cover the payment up to a 250,000 dollar piece of property?