It began in 1944, when service members were returning from WWII and needed to establish new lives after the war ended. To assist, the VA housing benefit was passed and has since helped over 20 million military veterans and their families obtain affordable housing.
As the lending requirements have tightened in the last several years, homeownership has begun to slip, making the VA benefit even more valuable to those who have served our country.
Key Benefits Include:
- Zero down payment. VA loans are one of the few loans that eliminate the down payment requirement for home ownership. FHA loans offer qualifications with 3.5% down and conventional mortgages require 20% down. Individual banks sometimes have special programs with reduced down payments of around 5%. With no down payment, veterans are able to purchase a home without being required to save thousands of dollars before home ownership can become a reality.
The impact of no down payment can be seen in the following chart:
|Down payment Requirement||$100,000 Purchase Price||$200,000 Purchase Price||$300,000 Purchase Price||$400,000 Purchase Price|
- No PMI. Typically, homes purchased with less than a 20% down payment require mortgage insurance, commonly referred to as PMI. This insurance adds fees to the front end of the loan along with ongoing monthly payments that last until 20% equity is established in the home. In some cases, the PMI is present for the life of the loan.
Eliminating the PMI payment can save home owners thousands of dollars per year. Examples of estimated payments are shown below:
|Loan Amount||Estimated PMI Payment|
- Competitive interest rates. VA loans offer market rates due to government guarantees.
- More generous qualification parameters. Private lenders underwrite the loans, and they are then backed by the federal government. Each lender has its own guidelines for loan approval, but are often more lenient than conventional loans. Those with less than perfect credit and tighter debt to income ratios may find they are able to get approved for VA loans.
VA Loans are available up to $417,000, for the purchase of a primary residence. Some counties with higher home values, can receive approval for amounts exceeding the $417,000 benchmark.
In addition to zero down payment, there are also limits on closing costs that can be charged and sellers can pick up the closing costs enabling some buyers to purchase a home with no money due at closing. The only additional fees involved with a VA loan are VA fees which go directly towards VA administration costs. These can be financed into the loan.
VA Loan Qualification
Military members and veterans qualify if any of the following criteria are met:
- Active duty of wartime service of at least 90 days.
- Active duty of peacetime service for at least 181 days.
- National Guard or Reserves service for a minimum of 6 years.
- Service member spousal benefits are available for service members who are killed in the line of duty or from a related disability.
To qualify for a VA loan, a Certificate of Eligibility must be obtained from the VA office and presented to a lender who offers VA loans. Lender loan qualifications must also be met.
VA benefits are a valuable way to achieve home ownership. The ability to purchase a home with no money down enables you to buy a home sooner and frees up cash for other long term goals such as debt reduction or retirement savings. To receive a FREE debt consultation, and to learn how a VA loan or VA mortgage refinancing program can help you, contact Finance Solutions today and speak to one of their financial specialists.