Let’s Talk Loans: VA

VA (Veterans Administration) Loans

What is it? VA loans are home loans available to individuals who have served, are presently serving, or are eligible surviving spouse members in the U.S. Armed Forces. These particular loans are for the purchase of a primary residence, and while the Department of Veteran Affairs (VA) does not fund these loans, they back the loans that are made by private lenders to those veterans who qualify.

Why is that important? If the individual qualifies for this particular loan choice, they can look forward to no down payment, negotiable interest rates, no mortgage insurance premiums, closing costs that are comparable or even lower than conventional loans,, and a right to repay without penalty. With all the benefits available to eligible members, this is often a primary choice when choosing a loan for eligible borrowers.

What are the guidelines? For eligibility, you must have a valid Certificate of Eligibility (COE) and, suitable credit with sufficient income. Typically, VA does not set a maximum limit on how much you can borrow, but rather they limit the amount of liability that VA can assume which in turn affects the amount of money you can borrow. The basic entitlement that is available is $36,000 and lenders will generally lend up to 4 times a veteran’s available entitlement without down payment assuming they meet the additional eligibility requirements.

What’s the downside? In a hot market like the Washington DC, area, buyers are often competing for properties, and some sellers prefer conventional borrowers over FHA and VA. This is in part due to some costs being home by the seller instead of the buyer (VA will not allow a borrow to pay their own service fee, for example) and also because of the impression it creates regarding the financial stability of the buyer when they do not have a down payment available. VA Loans also require a specific type of appraisal, which is often more onerous than a conventional appraisal. Work with your agent to make sure you’re making the best case possible if you find yourself competing against non-VA buyers in a hot market.

Check out our previous blog posts, Let’s Talk Loans: FHA ,and Let’s Talk Loans: Conforming Conventional for more information. As always, contact us today for more information!

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