Is it difficult to buy a home with no money for closing costs or a down payment if my loan is backed by the VA?

Asked by grinddog, 14221 Thu Feb 9, 2012

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Terry McCarl…, Agent, Cape Coral, FL
Thu May 22, 2014
If your credit is good and you have sufficient income it shouldn't be difficult at all. Work with a real estate professional experienced with VA buyers. I currently am working with a buyer using his VA loan and the contract was structured to where he will not be out of pocket anything.
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Dan Woods, Agent, Williamsville, NY
Sat May 25, 2013
Hello Grinddog -

First let me say thank you for your service. It is truly appreciated and on behalf of all my colleagues we appreciate the sacrifices that you and your family make.

Great question and the short answer is Yes, it is possible. I have used the VA Loan myself and the qualifying amount will depend on the geographical region and limits set by the VA. I would also say, that while they do back the loans and provide some incentives there are some fees associated with them that go to the VA. I would suggest contacting a few mortgage group that have worked with VA Loans and get some direct feedback. I would be honored to help you through the process if you were interested.

Again, thanks for your service and good luck with your exciting search.
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Lee Ferenc, , Williamsville, NY
Mon Feb 20, 2012

Andrea and Diana make some great points. It is not difficult. It is merely a type of loan that allows assistance for those who qualify. Once you qualify, the next step is finding a home within your range. Like any governent backed loan their will be some additional disclosures and inspections required, that are not always present in a traditional conventional loan.

The ability to put no money down will not affect the type of home you buy or location. In addittion, you can ask for seller's concession for upto 6% of the price of the home. The only difference is that home must appraise for the inflated amount.

Example you find a home you like for $100,000. Seller agrees to the contract. Your mortgage amount would be $106,000 with a $6,000 credit for your closing costs. Seller will still get their $100,000.

Good luck with your home search.
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Andrea Bedard, Agent, Silver Spring, MD
Sun Feb 19, 2012
Hi grinddog, it is not difficult to purchase with a VA loan financing a 100% - that is one of the benefits available to you. Having no money for closing costs is a different story however, not only will you have to find a home that you really like and that is up to the VA property standards but it must also have a seller willing to pay all the closing costs for you. VA allows a lot of concessions and it is possible to purchase with no money out of pocket - finding the home that meets all 3 criteria above can be a bit of a challenge depending on your market.

If your market has seen increased buyer traffic and you could possibly be in competition, the seller will look at their bottom line. If an equally good offer (good in regards to all the other terms that are part of an offer - price and closing help are not everything) is asking for half of the seller subsidy that you need, then they'll likely go with the competitor.

Last, but not least, I agree with a point Sally made below. I advice all my clients, VA or not, to have a little cushion in place for emergencies - there will be repairs and you want to be financially prepared to be able to handle those! If you have absolutely no savings, it may not be the best time for you to purchase (just yet).

I suggest you find a buyer's agent familiar with VA who'll be able to guide you and answer your question specific for your market. Best wishes!
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Diana, Home Owner, 14207
Sun Feb 19, 2012
I only had to come up with money for my first year's home insurance ($568), my inspection ($175), my lawyer's fee ($300) and my bank application fee ($380). I took a seller's concession of $2800 (basically this is added onto whatever you are actually paying for the house but the seller is "conceeding" that this money does not go to them - the bank keeps it and uses it towards fees, escrow, etc). I also got a grant for first time homebuyers who make less than $35k a year, of about $2380, that paid for all other closing costs and my downpayment. Look into grants with Black Rock Riverside Neighborhood Housing Services, even if you aren't looking in that area because they can still help you out applying for stuff or direct you to a service that can. I went through Homefront, which focuses more on the West Side but will also help you regardless of area, and they were very wishy-washy and ill-informed - I ended up not needing the seller's concession but didn't know it because the grant I qualified for was actually $5000 and they told me it was $2500. Because I had already taken the seller's concession I couldn't utilize all of the grant money and I now have to pay interest on that seller's concession as part of my mortgage for the next 30 years. Plus Homefront's homebuyer education courses are a joke - poorly taught, rushed through just to say they did it to meet HUD's requirement and 99% stuff you would know from doing like a day's research online into buying a home. If you do use Homefront, avoid Jovino at all costs. He loses paperwork, ignores phone calls and is generally distracted and ill infom=rmed. I had him and so did a friend and we were both disappointed with his performance. I posted some information about BR RS HS below.
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, ,
Thu Feb 9, 2012
There are two ways to do this, one is have the seller pay the closing cost, the other is to work with a lender that will allow you to imbed those cost in the interest rate. Generally speaking on the second method, the larger the loan the smaller the difference it will make in the interest rate. GNMA 1 pricing is usually a better choice, slightly better than GNMA 2, but is only offered in ½% increments. The lowest rate I have today on the GNMA 1 side would have 1.5% overage that could be used for closing cost and pre-paids, on a $200,000 loan that would be a $3,000 credit. All lenders are different, in my shop you could use both seller assist and overage to pay costs but the seller assist would be first in line. Good luck,
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Tim Moore, Agent, Kitty Hawk, NC
Thu Feb 9, 2012
I have, in years past, closed a VA loan and the buyer actually walked away with a check for some money. The seller has to agree to pay some closing costs. Have your agent and your lender get together with the numbers.
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Sally Grenier, Agent, Boulder, CO
Thu Feb 9, 2012
With a VA loan you can borrow up to 100% of the value of the home (so no down payment). However you may need to pay for some closing costs. Oftentimes, your agent can negotiate and get the seller to pay for some or all of your closing costs, but not always. it wise to have ZERO invested in your new home? In my opinion, no. This is why we're in this housing crisis in the first place! People were able to get loans without putting anything into it. People were given loans who couldn't afford it. What happens if/when your home's value goes down? What happens when the furnace goes out, or the water heater breaks? If you couldn't afford to put any money down on your home, how are you going to pay for expensive repairs when they happen? (notice I say WHEN, not IF).
When people have zero invested, it's pretty easy for people to just walk away.

Don't get me wrong. I am all for home ownership and think it's a huge part of economic recovery. It's great that buyers can buy homes with little money down. But I do think buyers need to have something invested. Just my two cents! Good luck!
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