A VA loan is 100% financing with NO monthly PMI. It is available to all on active duty and their spouses and those veterans not currently active. This loan is easier to obtain than conventional financing. A veteran CAN use their entitlement again under certain conditions. It can be used for 1-4 unit owner occupied residences.
The veteran borrower is charged a nonrefundable upfront funding fee, which can be financed, instead of a mortgage insurance premium. This fee is 2.15% of the loan amount for a first-time service veteran making no down payment. It is higher for reservists & for second-time borrowers. It is lower for those making at least a 5% down payment.
Up to the Freddie Mac limit, there is no down payment required on VA loans. In addition, the seller can pay up to 4% of the sales price for anything of value added to the transaction. These value-added items can include prepaid taxes and insurance, the VA funding fee, temporary buy down fees, and gifts, all of the borrower's nonrecurring closing costs and discount points, with no limit.
A VA loan is usually easier to qualify for than a conventional loan. The VA uses a 41% debt-to-income ratio or a residual income method. If the veteran has income left over after covering all his fixed debts and living expenses, he/she may still qualify even if they did not qualify using the 41% debt-to-income ratio method.
The VA loan is available to veterans of the armed services and currently on active duty and their spouses. In order to receive the loan, the applicant must obtain a certificate of eligibility from the lender or VA. This shows how much can be borrowed. It shows his remaining entitlement (which is the amount of the guarantee to the lender). The maximum entitlement is 25% of the Freddie Mac conforming loan limit. The VA guarantees the entitlement % to the lender up to the Freddie Mac limit. So, as long as the lender can sell a foreclosed property at 75% of its initial value, there is no loss to the lender. The VA will cover all loss over 75%.
A veteran can buy over the Freddie Mac limit, but they would need a down payment of 25% of the excess over the limit. VA would only guarantee, to the lender, the entitlement percentage up to the Freddie Mac limit.
A veteran can obtain a VA loan again if: 1) The prior property has been sold; loan has been paid in full 2) A qualified veteran buyer assumes the outstanding balance on the VA loan and substitutes his entitlement to the selling veteran 3) One time the veteran can repay the prior VA loan in full and not dispose of the property securing that loan 4) If an existing VA loan has not been paid off, the applicant has "remaining entitlement" due to any increase in the maximum entitlement amount since he obtained that loan.
The veteran must stay in the home as a primary residence for 12 months and take occupancy within 60 days of purchase.
A VA loan is not concerned with peeling paint, like an FHA loan, UNLESS if the home was built prior to 1978, then the peeling must be corrected. A Lead Paint notification disclosure must be presented to the veteran.
Ann Sabbagh
Vice-President
Seacoast Mortgage Corporation
508-243-1190
Residential & Commercial Financing
"When you choose me as your mortgage consultant, you also choose a financial planner who cares about YOUR financial strength."
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