Veterans Administration (VA) home loans are one of benefits for those who serve in the military. They offer many advantages, but may not be right for everyone.
There are several advantages of VA home loans that make it easier for veterans to become homeowners.
No Down Payment
Veterans do not have to make a down payment if your home is under the county loan limits (currently $484,350). If your loan amount is over the limit, you can still get a VA loan but you will have to pay a down payment. Your lender can help you calculate your down payment.
Because the VA guarantees the loan, you are not required to buy Private Mortgage Insurance (PMI). This reduces your overall monthly payment. This is a great benefit that could save you thousands of dollars over the life of a loan.
PENFED Dream Makers Grant
The Dream Makers grant is one of several special grants for veterans in a lower income bracket. To qualify for a Dream Makers mortgage grant, you must meet the following eligibility requirements:
- Be active duty military, Reserve or National Guard, or a military veteran.
- Be a first-time homebuyer, have not owned a home for the last three years, or have lost your home through divorce or disaster.
- Have a gross annual income of no more than 80% of the area’s median income, adjusted for household size, for the state and county in which you’re planning to buy. For example, in Cleveland County, Oklahoma, the maximum income can range from around $38,850 - $73,300 depending on how many people are in the household.
- Have received a mortgage pre-qualification or pre-approval letter from any lender.
Not Sure if a VA Home Loan is Right for You?
VA home loans are a great opportunity for many prospective home buyers, but they aren't right for all veterans.
Funding fees are expenses that are added to your loan. You don’t pay them out of pocket. Funding fees go to the Veteran’s Administration to help offset the costs of guaranteeing VA loans.
- Your fee amount depends on your down payment and veteran’s classification (i.e. regular military or reserves) Paying a 5%- 10% down payment reduces the size of your funding fee.
- It is higher than most other government backed loan programs. However, paying a funding fee is usually less than paying for PMI, so you still come out ahead.
- If the veteran is disabled, the funding fee is usually waived by VA. Your Certificate of Eligibility tells us whether we have to charge a funding fee.
- The funding fee increases as you get additional VA loans in the future.
VA loans are for your primary residence only. You cannot buy a rental property using a VA loan.
- If you move, you can keep your home with the VA loan as a rental, but it may affect whether or not you qualify for a new home loan. This depends on multiple factors, such as cost of new home and remaining VA eligibility. Your lender can help you determine your eligibility.
- If you sell your house, you can ask to have your eligibility reinstated so that you can qualify for a VA loan on you next house. This often happens when you sell one home and buy a new home at the same time. Your lender can help with this.
VA appraisals may take a little longer than conventional appraisals because you must use a VA-approved appraiser. The VA appraiser list is relatively small, so they tend to have pretty heavy workloads. Your wait time will depend upon the individual appraiser and his/her workload at any given time.
How Do I Decide Which is Best for Me?
Start by talking with a lender. By reviewing your specific situation, the lender can help you weigh your options.
It’s also a good idea to secure your VA certificate of eligibility form to verify your eligibility for a VA loan. It will also help your lender calculate your funding fee.
Sometimes the lender will also need a DD-214.
Every situation is different and a mortgage lender can’t give financial advice. But Lincoln Lending (NMLS # 398026) has an experienced team that can review your information and discuss options. They can review the advantages and disadvantages of a VA home loan based on your specific situation.
We offer a no-cost, no-obligation information session to help you make wise choices about home ownership. To schedule a session, please call (405) 799-5363 or email us at info@LincolnOK.com.