Too many vets pass up VA loans

The VA mortgage is truly one of the best benefits offered to those who have worn our country's uniform. Millions of veterans have benefited from this loan program. Here are several reasons to use a VA mortgage.

  • No down payment. With a VA loan, you can finance up to $417,000 with no money down. If you want to buy a higher-priced home, the law has now changed. To buy a property at a price that exceeds $417,000, you will typically need to pay the excess in cash. For instance, if the property you buy is priced at $450,000, you'll need a down payment of around $33,000 ($450,000 less $417,000).
  • Easier qualifying. Similar to FHA, VA loans offer liberal qualifying guidelines. Many (but not all) VA lenders will forgive properly explained credit blemishes. The VA loan also permits higher qualifying ratios. I've seen veterans with good compensating factors close loans with a .48 total debt ratio.
  • Closing costs paid. New home builders and cooperative sellers will often pay all of the veteran's settlement expenses. In fact, builders sometimes advertise that veterans can buy homes in their developments for just $1 total move-in costs.
  • Assumable. Similar to FHA, a nonveteran buyer may assume your VA mortgage when you sell. Also like FHA, if interest rates fall, you can streamline a no-appraisal, no-qualifying refinance.
  • No mortgage insurance. Unlike FHA, you won't buy mortgage insurance when you use a VA loan. You will, however, pay a one-time "funding fee" ranging between 1.25 to 2.14 percent of the amount you borrow. If you don't pay this fee in cash at closing, the lender can add it to your mortgage loan balance. (Reserves/National Guard members pay up to 2.4 percent.)

As with many types of mortgages, VA loans require mountains of paperwork as well as compliance with various guidelines that look into job history; property condition; home value report, called a Certified Residential Value (CRV); and seller prepaids. That's why you should work with a mortgage loan rep who is skilled in getting VA loans approved. "The devil is in the details," says loan consultant Abe Padoka. "Make sure you work with professionals who know the ins and outs of the VA home buying and loan approval process."

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