VA Financing! Key Questions Answered & Explained
We want to answer some common questions regarding VA loans to help our agents negotiate and close more VA purchases.
VA loans represent one of the most competitive financing options available with respect to interest rates, fees and down payment options.
In addition, VA loans are also more lenient than conventional and FHA financing in many regards.
They are so competitive, in fact, that they are one of the greatest benefits of being a Veteran.
Who pays what?
The VA does not allow veterans to pay for:
• Attorney Fee – if required
• Escrow Fee/Settlement Fee/Closing Fee
• Closing Protection Letter
• Document Preparation Fee
• Underwriting Fee/Processing Fee
• Lock-in Fees
• Courier Fee/Postage Fees
• Notary Fees
• Application Fee
• Tax Service Fee
• Mortgage Broker Fee
These fees amount to ~$3,000 on average, but can vary.
So, how are “unallowable” fees paid for?
We actually offer a lender credit for VA loans to cover these fees. Sellers can cover unallowable fees as well, but in competitive markets, we have observed that offers are simply much more competitive when lenders cover them.
What’s the minimum down payment required?
No down payment (0% Down) is required in most cases, depending on debt to income ratios and eligibility. Here are just a few exceptions:
1) If the loan is above the County Loan Limit. For example, the Alameda County Loan Limit is $679,650. If a veteran wants to purchase a $1MM home, he/she has to come in with 25% of the difference between the purchase price and County Loan Limit, which is $80,087.50.
($1,000,000 – $679,650) x 0.25 = $80,087.50
2) If a non-spouse will be a co-borrower (e.g. boyfriend). Then, a minimum 12.5% down payment will be required.
Is there Mortgage Insurance?
VA financing requires no Mortgage Insurance, irrespective of the down payment percentage. This is a major advantage of VA financing.
What is the VA Funding Fee?
The VA Funding fee is the fee charged for all VA loans to fund the VA guarantee program. The typical fee is 2.15%, but it can vary depending on eligibility status (type of service), down payment, and other factors. The fee can be financed and included in the loan amount.
How are Termite/Section 1 repairs handled?
These repairs must be paid for by the seller, before close of escrow. Clean Pest Reports are required to close a VA deal. Buyers, however, can pay for the termite repairs if they are not billed through escrow.
How fast can we close a VA loan?
We can close VA loans as fast as 23 days, remaining competitive against many conventional and FHA offers. We also have an in-house VA underwriter, which helps expedite the process.
Our Mortgage Analysts are well versed in VA financing. Please don’t hesitate to give our team a call or shoot us an email with questions.
Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646