Unlike many of the other loans I have written about, this week I wanted to talk about a loan that is earned by our nation’s heroes. However, it is under used by many men and women who have risked life and limb to qualify for it.
VA loans are home loans for the purchase of a primary residence available to those who have served or are presently serving in the U.S. military. The Department of Veterans Affairs backs the loan made by mortgage companies by insuring a percentage of the loan to reduce the risk to the lender if the loan payments were defaulted on. This generally allows for the VA interest rates to be lower than that of conventional loans. The VA does not lend the money. The mortgage company lends it after underwriting based on VA guidelines.
If you're an honorably discharged veteran, are currently serving on active duty or have completed a total of six years of service in the National Guard or selected reserves, you are eligible for a loan. Certain surviving spouses of veterans are also eligible.
Loan limits are $417,000 in most areas of the country, but are higher in certain regions. California has certain counties that qualify for loans up to $625,500. We are seeing a lot more veterans using VA loans because there just aren't the alternatives for no-money-down loans that there used to be.
VA guaranteed loans waive the requirement of PMI (private mortgage insurance) that most lenders require for loans with down payments of less than 20 percent. Sellers may also assume the 3 percent to 4 percent closing and administrative costs required as part of the loan and build it into the home's purchase price, making these loans even more attractive. The loans are only available for owner-occupied homes. So you won’t be able to use it to buy an investment property or a home for a family member.
A VA loan can take longer than a conventional loan, which is a big reason for their decline in popularity over the years. Especially in the early 2000s when there were a lot more mortgage program options. Many realtors would steer borrowers away from government loans, including VA and FHA loans, because of all the documentation required as part of the appraisal and inspection process. There was a perception that these government-backed loans got more scrutiny and that they take longer to close.
While the process may take longer than a conventional loan, the lower interest rates can really be worth it, and there are steps you can take to speed it along, such as obtaining your certificate of eligibility (COE) before you sign an agreement to purchase a home.
To make a long story short, the VA loan is something every veteran should at least take a look into using, your bravery and courage to serve earned you the right to own a piece of the country you risked your life to protect.
At WLM Financial, our goal and my dream is to teach people how to get in the position to be financially free, and with a little bit of hard work and endurance, you can get there.