Back in 1944 the federal government put into motion what was then referred to as the Serviceman’s Readjustment Act of 1944 and what is referred to today as the G.I. Bill. This expansive program was developed to help soldiers returning from war more easily and quickly assimilate back into civilian life. There are programs to help start a business, buy a farm and other benefits but the most popular feature was the VA home loan program. Here in Austin, Texas and surrounding Travis County, the VA home loan program is the ideal loan option for those who qualify for this special program.
Who exactly qualifies for this home loan? The VA mortgage is available to veterans of the Armed Forces, Armed Reserves and National Guard with at least six years of service, active duty personnel with at least 181 days of service and unremarried surviving spouses of eligible veterans who have died while in service or as the result of a service-related injury. The VA makes available to both the veteran as well as the approved VA lender access to a special database which provides validation of the loan applicant’s eligibility. This Certificate of Eligibility states whether or not the applicant is eligible for the VA home loan benefit and is the only documentation the lender can accept to make this determination.
Perhaps the most popular feature of the VA home loan program is there is no down payment requirement. VA loans don’t need a down payment and borrowers can finance 100% of the sales price of the home. VA loans also carry a government-backed guarantee to the lender. Should the loan ever go into default- and that is very rare for a VA home loan- the lender is compensated at 25% of the loss as long as the lender used proper VA approval guidelines during the loan approval process.
This guarantee is financed by what is known as the Funding Fee. The VA funding fee is based upon a percentage of the loan amount and can vary based upon the term of the loan, first time use and the amount, or lack of, a down payment. For those who use the VA home loan benefit for the very first time, the funding fee is 2.15% of the sales price of the home. Disabled Vets are exempt from paying the funding fee.
Consider a single family home here in Austin, Texas or anywhere in Travis County on the market for $300,000. The veteran makes an offer and it is accepted. There is no down payment and the funding fee of 2.15% equals $6,450. However, the VA funding fee does not have to be paid for out of pocket and is most often rolled into the loan amount. The VA loan can be used to finance a single family home, a condo or a townhome as long as the veteran occupies as a primary residence.
The VA also limits the type of closing costs the borrower is allowed to pay. For example, escrow or attorney fees are not considered allowable closing costs. The closing costs the VA allows the veteran to pay include the appraisal, credit report, title insurance and related title charges, origination fees, recording and for a property survey. The veteran is also allowed to pay for discount points as long as the discount points reduce the interest rate on the loan. Further, there is no monthly mortgage insurance payment on a VA loan, making it even more competitive.
For those that qualify for the VA home loan, there really is no better choice if the borrowers are seeking a competitive rate that requires as little cash as possible at the settlement table. If you think you’re VA eligible and this description fits you, it’s time to pick up the phone can speak with a loan officer. Learn more about all the VA home purchase benefits here. Contact us 7 days a week by calling ph: 904-385-3988 or just submit the short contact form on this page. VA Mortgage Hub serves buyers nationwide.