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Brent Mendelson's Blog

By Brent Mendelson | Mortgage Broker
or Lender in Bethesda, MD

Benefits of the VA loan program

My name is Brent Mendelson and I specialize in VA loans for both purchases and refinances.
I wanted to take a few minutes and explain how a VA loan works, the features and benefits, a few of the restrictions lenders and VA put on the loan and the main drawback of a VA loan.

First the benefits.

A veteran can purchase a home with no down payment. That's right no money is required.
Even better the loan has no mortgage insurance as conventional or FHA loans.
There is a funding fee that is waived if the veteran receives VA disability.
The funding fee ranges from 2.15% for active duty military to 2.4% for National Guard/Reserves if you are a first time buyer. If you are a subsequent user the fees are 3.3%

If you put down 5% or 10% the funding fee is reduced across the board for all buyers.

Active duty or retired Army, Navy, Air Force, Marines, Coast Guard are of course eligible provided they were honorably discharged. A little known fact is members of NOAA and the Public Health Service are also included in the VA loan program.

Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement)

The loan limits could be as high as $625,500 depending on which county you wish to live. Here is a link for every county in the US. http://www.benefits.va.gov/homeloans/documents/docs/Loan_Limits_2012_Dec_2011.pdf

If the county you seek isn't listed then the limit is $417,000

If anyone else knows a loan program that allows a loan of $625,500 with no money down, no mortgage insurance and a possibility of no funding fee please let me know. :) The funding fee is rolled into the loan, you
  do not have to pay it in cash.

The loan process works much the same as any other loan as far as documents required except for a DD-214. There are other steps though that involve the actual home you wish to buy,

VA residual income is one of the major underwriting guidelines required to qualify for a VA mortgage.  Residual income is calculated by determining the gross monthly income of the veteran and spouse.  Then deduct from that total gross monthly income the following monthly expenses:

  • State Taxes
  • Social Security
  • Federal Taxes
  • Proposed new monthly house payment (PITI: principle, interest, taxes and insurance)
  • Estimated Maintenance and Utilities
  • Monthly Child Care Expense
  • Alimony or Child Support
  • Monthly consumer debt payments: installment and revolving credit cards

These are important guidelines and again if the loan officer isn't up to speed on VA loans this is where it generally falls apart.

There are both fixed rates and ARM'S available as well.
The loans are assumable which means when you sell the home under certain circumstances the  buyer could assume the actual terms of the loan. In an era of 30 year fixed rates around 3% this could be a HUGE factor in selling the home.

You are only allowed one VA loan at a time under almost all circumstances but there are exceptions to this rule.

If rates ever do fall you are eligible for a low cost reduced paper work refinance loan called an IRRL.

You can also do a cashout to up to 100% limit later if need be also. Most lenders do limit you to 90% however.

Credit scores are not a priority to VA but they are to lenders. Most will not approve loans under a 640 however 1st Mariner mortgage will down to 600 scores under certain circumstances.

You can get up to 6% of closing help from the seller but..... you'll probably not need it right now because VA loans currently come with very large lender credits under most circumstances. This amount is different in every case and subject to change with no warning.

If you have any questions about VA loans in general or specific questions please let me know. We offer VA loans in almost all 50 states for purchase and refinance loans.

Now for the downside to these loans. There aren't many but there are a few that Realtors and buyers and sellers need to know.

VA appraisals have never been selected by lenders and are randomly assigned.
They are much tougher on certain repair aspects of the appraisal process usually on paint and wood issues. Chipped and pealing paint and a rotted deck will ALWAYS be flagged for repair per VA rules. There is no rehab loan like the FHA 203K loan.

No one else other than a spouse can be on the loan to help qualify for the loan. Not even if the couple is engaged and living together the non married spouse CAN NOT be on the loan.
There is no non occupant co-borrower.like FHA allows.

If a married couple uses a VA loan and gets a divorce it's much tougher to remove the spouse from the deed and loan. You can do it but it must be an IRRL hybrid loan.

The last one might be the biggest downside but actually has the least actual basis in reality.
Many sellers and their agents believe VA loans involve more red tape than other loans.
This is up to your lender to step in and help them understand the steps involved and relieve them of the mis-guided anxiety they may feel. VA loans should take no longer than a conventional loan if you have the right VA lender working for you.

I am the right lender for your VA purchase clients. If I can ever be of service to explain these loans or pre approve your veteran loan please do not hesitate to contact me. I hope this was helpful.

Sincerely,

Brent Mendelson
1st Mariner Mortgage
bmendelson@1stmarinermortgage.com
240-235-5314
Licensed in ALL 50 states
nmls#111407

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