The VA Loan Guaranty program provides financing opportunities to eligible military veterans by guaranteeing a portion of the loan for purchasing or refinancing a home. This benefit is available without a veteran’s current financial resources or credit history. So, even if you have bad credit, the VA Loan Guaranty program may be able to help you buy your home.
With that in mind, the following are some crucial things all veterans should know when considering buying with a VA loan:
If you’ve paid at least one month of rent at the new house, the VA will give you up to 4% of its purchase price as a down payment. This is called “Seller/Lender’s Paid.” But keep in mind that if a veteran obtains a mortgage with an interest rate more than 1/4 point above the average on treasury securities for thirty-year fixed loans over the preceding week, they will have to repay the 4% seller/lender’s paid.
If you decide to go on with an FHA home loan, you would first need to apply for a VA Loan guaranty (you don’t need to get approved) and then submit it as supporting documentation when applying for an FHA home financing. This way, veterans won’t need to pay any upfront fees or closing costs. Getting approved is 100% guaranteed! However, the great thing about the VA homes for sale loan guarantee is that veterans can re-apply anywhere even after not getting approved by using another lender. Since the government backs it, there are no restrictions on who can qualify or not. This is unlike other types of credit, where you need to meet additional requirements before being approved.
Unlike other financing options (such as conventional loans), Veterans will be eligible for 100% cash out on this type of program. This is called “Loan Product Cash,” meaning veterans will be able to access more than what they use at closing when buying or refinancing their homes. A great benefit if you plan to use some of your home equity for other purposes, such as home improvements.
Unlike other financing options where you have to go to the lender’s office or submit your application online, veterans can get an approval letter from any VA Regional Office in the country. After getting the approval, you will access all available lenders in your area.
Most conventional loans require private mortgage insurance (PMI) because the bank considers them riskier since they offer looser qualifying criteria than government loans, FHA and VA Loans. But with this type of program, veterans are exempt from paying PMI because it is considered a no-risk mortgage.
Unlike conventional loans, you need to put at least 3% as a down payment. Veterans will not have to pay any money out of pocket when buying or refinancing with VA Loans. Even if they don’t make a down payment on the home, veterans still have the option of reducing their interest rate during closing by paying up to 10% of the principal amount borrowed as an Up Front Funding fee. If you choose this option, you will not access any cashback benefits.
Unlike most other types of financing where you are only allowed to purchase one property, VA Loan Guaranty can finance your primary residence as well as an additional investment property. When buying more than one home, veterans will have to pay a funding fee for each additional loan. Similarly, when refinancing an existing loan, veterans will have to pay this fee again if they decide on taking out more than $144,000. The Funding Fee is calculated by multiplying 1% times the total amount of your new loan (principal + doc fees + other fees). If you also financed an existing note (you already own the house), the Funding fee will be calculated by multiplying 1% times the unpaid balance on your current loan.
Unlike most other types of financing where you need to go with one type only (like conventional or FHA), veterans will be able to combine this type of program with any other programs they qualify for. This means that they won’t need to rush when applying with their first option because they will still be able to access this program if their other option doesn’t work out.
In conclusion, the VA Loan guaranty is a no-risk mortgage for veterans. There will be no upfront fees or closing costs, and there are also several benefits when compared to other types of financing programs.