BENEFITS OF VA HOME LOANS
The VA loan program is one of the most powerful lending programs in the market. VA lending options have allowed over 22 Million Service men and women to become homeowners since the inception in 1944.
Here’s a look at six of the biggest, most unbeatable benefits of these long-cherished home loans:
No down payment
This is far and away the program’s signature benefit. Qualified Veterans, service members, or surviving spouses can purchase a new home with zero down payment up to the VA posted loan limits.
This allowance is dramatically different from conventional and FHA loans. Under these other programs, buyers are typically looking at minimum down payment requirements between 3.5% and 5% of the purchase price AND will incur private mortgage insurance (PMI).
VA example: On a $200,000 purchase, the Veteran can finance 100%. This allows $0.00 down and NO private mortgage insurance.
Conventional example: On a $200,000 purchase, most conventional loans require 5% down. That equates to a $10,000 down payment. In addition to the $10,000 down payment, the borrower will incur private mortgage insurance ranging from $68/month to $268/month depending on their FICO score.
FHA example: On a $200,000 purchase, the borrower can finance 96.5%. This will require a $7,000 down payment for FHA. In addition to the down payment requirement, the borrower will incur monthly mortgage insurance, on a 30 year loan, between $160/month and $170/month.
No private mortgage insurance
Coming up with a down payment is just the first hurdle for borrowers obtaining a conventional or FHA loan. As detailed in the example above these borrowers are then left paying an additional $68/month to $268/month in private mortgage insurance that VA borrowers do not incur. FHA borrowers will pay this monthly mortgage insurance for a minimum of 11 years. Conventional borrowers would need to put down a 20% down payment in order to avoid paying Mortgage Insurance. On that same $200,000 purchase in the example above, that would equate to a $40,000 required down payment.
VA loans do come with a mandatory funding fee that goes directly to the Department of Veterans Affairs. Borrowers with a service-connected disability are exempt from paying this fee, which helps keep the program going for future generations.
Less restrictive DTI ratios (Debt to Income)
First Federal Bank will allow VA loans receiving an approved/eligible response on the Automated Underwriting System (AUS) to have debt to income ratios up to 55%. That’s a higher allowable debt-to-income (DTI) ratio than many other loan programs.
But it’s possible to have an even higher DTI ratio and still obtain a VA home loan. First Federal Bank has lending options that allow ratios to exceed 55 percent with compensating factors.
This additional flexibility can make it easier for Veterans to truly maximize their purchasing power.
100% Cash Out option
First Federal Bank allows VA cash out refinancing up to 100% of the appraised value. This program is perfect for Veterans who want to lower their interest rate while accessing the equity in their home.
The VA cash out option allows veterans to pay off their current loan and receive proceeds at closing to payoff non-mortgage debt, pay for school, finance home improvements, or simply set aside for other needs. No other loan program allows the borrower to access 100% of the equity in their home.
Foreclosure and Bankruptcy
First Federal Bank allows VA borrowers who have run into previous credit issues to obtain a new VA loan just two years removed from a foreclosure, short sale or bankruptcy. In some cases, veterans who file for Chapter 13 bankruptcy protection can be eligible just a year removed from the filing date.
Home-buyers seeking conventional or FHA financing will find the waiting periods significantly longer.
Even veterans who lose a VA-backed mortgage to foreclosure can still be eligible for another.
Please call one of First Federal Bank’s VA loan specialists at 1-877-455-4677 or simply click one of the “apply now” buttons below, for either VA Purchase loan or a VA Refinance loan and one of our VA Loan specialists will call you and review your options.