Benefits of VA Loans
There are about 20 million veterans in the United States.
Almost all of them are eligible for VA financing, and, unfortunately, many have no idea of just how advantageous it is.
So, it is our job to make sure every veteran understands that VA financing is often the most competitive option available.
I blogged about VA loans recently but am hitting a few key points again in response to some of the feedback I received.
- No Loan Limits. The VA used to have loan limits, but no longer does. Veterans can now finance a $1mm home with no money down.
- Low Rates/Refis Too. Because VA rates are sometimes as much as 3/4% lower than many jumbo options, VA financing is often the best option for eligible vets even if they have substantial equity (for refis) or down payments for purchases. Many vets mistakenly believe that VA financing is only for borrowers with no down payment funds. And yes, vets have to pay a VA funding fee (explained below) but that can be financed and it is quickly offset by the savings from the lower rate.
- Cash Out to 100% LTV. This is another huge advantage of VA financing, as there is no loan-to-value limitation like there is with conforming and jumbo financing.
- Clear Section I. VA still requires a clear pest report in most locations.
- Covering Closing Costs If Vet Has No Cash. If a vet has no cash at all and is pursuing 100% financing, she will have to do one of the following to cover closing costs: (1) get a lender credit in exchange for a higher rate; (2) get a seller credit; or (3) get a gift from a relative.
- JVM Lending Has VA Experts. I am repeating this because we continue to get asked if we do VA financing. We not only offer VA financing, but we are experts and we love to assist veterans!
VA Financing Explained
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.
Exception: If a non-spouse will be a co-borrower (e.g. boyfriend), 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 2.30%, 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. In addition, the fee drops significantly with larger down payments/more equity.
How are Termite/Section 1 repairs handled?
These repairs are usually paid for by the seller, but buyers/vets can also pay for them if they formally agree to in the contract and have sufficient funds. Clear Pest Reports are required to close a VA transaction.
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. If there is a non-spouse/non-Vet co-borrower, we need additional underwrites and at least 30 days to close.
