The VA loan, not just for active military or veterans, also allows those who have served in the Reserves or National Guard to qualify.
This great program offers so many benefits, including no down payment, no private mortgage insurance (PMI) and less closing costs, as some of these fees have to be passed on to the seller. The maximum loan amount is $417,000, which is considerably above the Federal Housing Administration limit of $271,000, and there is a jumbo VA loan up to $1.5 million.
The VA loan benefits
No down payment
A VA mortgage is one of the only home loans allowing the borrower to finance 100 percent of the home’s value and purchase with no money down.
No Private Mortgage Insurance
Many conventional lenders require borrowers to pay private monthly mortgage insurance unless they are able to put down at least 20 percent. PMI is an insurance, which protects lenders in case of a borrower default. Since VA loans are government-backed, banks do not require you to buy PMI.
Competitive Interest Rates
Interest rates on home loans are based on risk assumed by the bank to finance the loan. Because the VA backs each VA loan with a guaranty, financial institutions carry less risk. Therefore, they can offer interest rates, which are typically 0.5 to 1 percent lower than conventional interest rates.
A lower rate, combined with no monthly PMI, can substantially lower your monthly payment.
No Pre-Payment Penalty
With many different types of loans, paying off a home loan before it matures results in a pre-payment penalty. This is because lenders miss out on additional opportunities to collect interest payments. The pre-payment penalty is a way for financial institutions to recoup some of that money.
The VA loan allows borrowers to pay off their home loan at any point without having to worry about a pre-payment penalty. With the absence of a pre-payment penalty, borrowers are free to consider future home purchases and refinancing options.
Eligibility
In general, you are eligible for a VA loan if you meet any one of these requirements.
- Served 181 days during peacetime (Active Duty).
- Served 90 days during wartime (Active Duty).
- Served six years in the Reserves or National Guard.
- The spouse of a service member who died while in service or from a service-connected disability.
Can You Still Qualify for a VA Loan After a Short Sale or Foreclosure?
Yes. Even if you have done a short sale or foreclosure, you still can qualify for a new VA loan in as little as 12 months. Your eligibility entitlement will be reduced based on the deficiency amount forgiven, but only if the mortgage you had on that property was a VA loan.
Short Sale
If you were able to stay current while doing your short sale, you can qualify immediately. If you were behind on your payments, the waiting period is one year, as long as you have had 12 consecutive months of rental payments with no late payments.
Foreclosure
If you had a foreclosure, the waiting period is two years.
For more information on the VA loan program or purchasing a home, please contact me today, or visit my Web site for a link to one of our preferred lenders to determine whether you qualify.
Lorraine Ryall is a multi-million dollar producer, and recipient of the Coldwell Banker International President’s Circle Award. For more information, call (602) 571-6799, or visit her Web site at www.Homes2SellAZ.com.