FAQ Friday: Exciting New VA loan benefits!
Posted by: kateg 6 months, 3 weeks ago
Known for low rates, secondary benefits, flexible qualification guidelines, and much more – VA loans have long helped veterans and service members become homeowners at an affordable cost. Now, the advantages just got even better.
As of January 1st, 2020, veterans living in San Diego County (or other higher-cost markets) will no longer be subject to federally established loan limits. This means VA-eligible buyers can get a bigger VA home loan without a down payment in all areas of the country, regardless of home prices. You can search the new maximum conforming loan limits in your county here.
In light of this new law, we’re providing you with a list of the VA loan benefits, and why it could be your best loan choice in 2020:
No Down Payment Required
Thanks to the new 2020 law, VA-eligible buyers can finance up to 100% of the purchase price, no down payment required. In the past, there were certain pricing limits on 100% financing, but no longer! The Department of Veteran Affairs guarantees a lender that veterans are a good credit risk, allowing the borrower to get a home loan without making a down payment.
Funding Fee Flexibility
VA loans require an upfront cost based on your loan amount, your type of eligible service, and other factors – known as a “funding fee.” The new law implements changes in “funding fees” for certain veterans, including active duty Purple Heart recipients. Under the new law, veterans who receive disability benefits are exempt from the “funding fee,” as well as Gold Star Spouses. For those still required to pay “funding fees,” you don’t need to pay in cash. The VA allows the fees to be financed with the loan so that nothing is due at closing.
Mortgage Protection to Veterans & Lower Rates
The VA works with loan servicers to help veterans find alternatives to foreclosure. According to themortgagereports.com, “More than 90,000 veteran homeowners avoided foreclosure in 2015 alone. More than 300,000 current and former service members have kept their homes since 2012. The initiative has saved the taxpayer an estimated $10 billion.” This protection provides a huge number of veterans the opportunity to own a home.
Furthermore, the VA loan is viewed as a very low-risk mortgage type, which allows banks to lend to veteran borrowers at very low rates. VA loans have the lowest average interest rates compared to other loan types.
Typical Turn Times
Despite misconceptions, a VA loan is approved in as much time as it takes to close a conventional or FHA mortgage. In fact, VA lenders who we work with can typically fund VA loans in under 30 days! This allows VA Buyers to write competitive offers.
Note, if you want to buy a condo using a VA loan, the building has to be VA Approved. You can search for the thousands of approved condos across the U.S at VA’s website. If the condo isn’t approved, there are a few options we can talk through with you to get the building approved during escrow.
Limitations on Buyer’s Closing Costs
Imagine all of the ways you could spend your money (furniture, home improvements, etc.) if it weren’t for those pesky closing costs! Fortunately, VA loans limit the closing costs VA-eligible buyers have to pay, which makes the loan more affordable than others. Currently, Sellers can pay all of a Buyer’s loan-related closing costs and up to 4 percent in concessions.
Note, any seller-paid closing costs will be part of the offer negotiation. With that said, we will help you navigate closing costs and what you can request from the seller.
No Mortgage Insurance Costs
Oftentimes mortgage insurance is required if you make a down payment that is less than 20%. With VA loans, there is no monthly mortgage insurance premiums (or PMI) to pay. This makes a VA-backed mortgage very affordable.
There is a Government Guarantee
With VA loans, the federal government guarantees that a certain amount of the loan will be repaid to the lender even if the borrower cannot make monthly payments. This encourages lenders to offer VA loans with great terms for the borrower.
VA Loans Make it Easier to Qualify
Just like all mortgages, VA loans require credit history, documentation, and sufficient income so you can make your monthly payments. However, the qualification guidelines for VA loans are a lot more flexible because of the VA loan guarantee. As mentioned above, VA guarantees a portion of your loan against loss, which helps lenders provide you with more favorable financing terms.
More Streamlined for the Seller
There are a lot of misconceptions about VA loans, especially from a seller's perspective. Back in the day, VA had a reputation of costing sellers more money, time, and energy. Today the process is so streamlined that if the home is in decent condition (which is verified by the VA appraiser), the only extra requirement is Section 1 termite clearance. This long-esteemed loan program provides new opportunities for sellers and agents, while including a demographic that has led the nation’s homeownership rates for years.
VA loans are one of the greatest perks available to qualified veterans and service members. With the benefits expanding even more, it’s time for you to pursue your dream home. Enjoy the advantages that the VA loan has to offer! * We'd love to thank you for your service by connecting you with a top-ranked mortgage broker who can help you qualify for your VA home loan. Give us a call today at (619) 933-5319 so we can help!
*VA loan criteria varies by institution. Please check with your mortgage provider for their requirements.
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