5 Things You Didn’t Know a VA Loan Could Do for You

Angela & Brian O'Hare - The O'Hare Team
Angela & Brian O'Hare - The O'Hare Team
Published on August 18, 2018

5 Things You Didn’t Know a VA Loan Could Do for You

Because of the bravery and sacrifices of veterans and active military, the rest of the country’s civilians can live the American dream in safety. As one tangible way to say “thank you for your service,” current and former members of the military have access to Veterans Affairs home loans. These unique mortgage options allow veterans and those still serving to own a piece of the American dream by potentially qualifying for homes they might have thought were out of reach. Veterans, active-duty service personnel, and select Reservists or National Guard members are among those who can quality for VA loans. (Find specific eligibility requirements here.) Wondering what some of the benefits of a VA loan might be? Here are five to consider.

1. No down payment

This is one of the most valuable and touted benefits—and for good reason. Saving enough for a down payment can be the biggest obstacle to buying a home. But a VA loan eliminates that roadblock. In most parts of the country, qualified buyers can purchase up to $424,100 before factoring in the cost of a down payment. In pricier areas, borrowers can go beyond that threshold. A VA loan still requires closing costs and the earnest money deposit (a negotiated amount of money that the buyer puts in escrow to essentially “hold” the house).

2. More lenient loan requirements

The required credit score for a VA loan can be lower than for a conventional loan—around 620 for a VA loan compared with a range of 650 to 700 for most conventional loans. In addition, the required debt-to-income ratio for VA loans is often more flexible than for conventional mortgages.

3. No mortgage insurance

Most conventional buyers have to pay private mortgage insurance if they put less than 20% down. FHA loans come with their own forms of mortgage insurance. But a VA loan waives that insurance requirement. And trust us—this one’s important.

Even though there’s no mortgage insurance, there is a “funding fee”—an upfront cost applied to every purchase loan or refinance. The proceeds help the VA cover losses on the few loans that go into default. But borrowers can roll it into their monthly payment, or pay it all at once. Plus, it’s tax-deductible. And veterans with a service-connected disability don’t have to pay the funding fee at all.

4. Limited closing costs

Legally, veterans are allowed to pay for certain closing costs, which include the following:

  • Appraisal
  • Credit report
  • Origination fee
  • Recording fee
  • Survey
  • Title insurance

But there are some fees that veterans are not allowed to pay. And the VA allows lenders to charge no more than 1% to cover the costs of originating and underwriting the loan. So for example, if the purchase price is $280,000, the veteran might offer $300,000 and ask for 3% back to cover the closing costs.

5. Extra assistance with appraisals

When a home that a veteran is considering purchasing is having trouble reaching the purchase price during the appraisal process, buyers and lenders can ask the VA appraiser to consider adjusting the valuation before making a final determination. Appraisers notify lenders in the event the appraised value is likely to come in low, giving buyers and real estate agents 48 hours to supply additional information that the appraiser might not be aware of to help justify the home’s value.

It’s just another benefit of VA loans aimed at helping our service men and women buy the home of their dreams.
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