Our mortgage customers at Gulf & Southern Mortgage here in St Petersburg FL typically have many questions regarding the mortgage benefits they are entitled to use towards purchasing a home through the VA. If you are living in the Clearwater, St Petersburg, Tampa or Pinellas and Hillsborough County and are going to be considering a home purchase and you have questions about the benefits to you regarding your ZERO down mortgage as a veteran, this list of questions and answers should cover most of the mortgage related inquiries. If you have further questions, please call our office at 727-644-3656.
Are conventional mortgage rates better than VA rates?
Conventional mortgage rates aren't necessarily lower than VA rates. Once approved for a VA loan, the veteran or active duty service person is eligible for the best rates on their mortgage regardless of score or credit history. VA rates are comparable to conventional rates where the borrower has near perfect credit and 20% to put down, with a VA loan the borrower can have less than perfect credit, a very good rate and no money down on their mortgage.
My Community Loans, which is a special Fannie Mae program and Home Possible Loans, which is a Freddie Mac program are more recent additions to the ZERO down options. Both programs were created with credit challenged, zero down borrowers in mind. Those 2 programs require income qualification or purchasing in certain census tracts, which can be difficult to work with.
Do I have to pay my closing costs out of pocket when I get my mortgage?
In most cases the answer is no. If you are purchasing a home, the contract can be structured to where the seller will pay up to 3% of the loan amount towards borrower's closing costs for a conventional loan. You can have the seller pay as much as 4% of the borrower's closing costs for a VA loan. The veteran is not allowed to pay for the wood destroying insect (termite) report; it is generally paid by the seller. If you are refinancing your home loan, however, you will be responsible for all your costs unless you have enough equity in your home to roll the costs into your new loan.
If I have my certificate of eligibility, am I guaranteed to get a VA loan?
You are guaranteed for a VA mortgage once qualification is complete. The lender will make sure you are able to support the mortgage payment for the home or sales price you have selected. The borrower must still qualify based on his/her income, assets, and the previous 12 months credit history. This does not mean credit score. The borrower will just need a clean credit record for the past year.
What are the benefits of a VA loan vs. a conventional loan?
- You can get 100% financing with no mortgage insurance.
- You can get approved with less than perfect credit and still get a great rate.
- When you are ready to refinance a VA loan you can do what is called a streamline refinance that requires no income, asset, or credit verification. Not to mention, it is much cheaper that a conventional mortgage refinance because many of the traditional closing costs are waived.
I've had a past bankruptcy; can I still get a VA Loan?
- If you've had a Ch. 7 bankruptcy, you need to wait two years after it has been discharged to be able to qualify for the VA loan. If you've had late payments on anything credit related after your bankruptcy has been discharged, it will be very difficult for you to qualify for a mortgage.
- If you've filed a Ch. 13 bankruptcy, you must wait one year after it has been discharged. Remember, Ch. 13 bankruptcies can take several years to become discharged. If you are going through a Ch. 13, just remember that you have to wait one year after discharge to become eligible, not one year after you file for the Ch. 13. Also, just like the Ch. 7, any late payments during or after the bankruptcy will make it almost impossible to qualify for a VA loan.
I was turned down for a conventional loan. Can I qualify for a VA loan?
Yes, it is still possible to qualify for a VA loan. The VA doesn't base their mortgage approvals solely on credit like many conventional lenders. All the VA wants to see is a clean credit record for the past 12 months, as well as documentation that proves you can make a house payment based on your income in relation to the loan amount you are requesting.
What is the maximum VA loan amount?
VA does not have a maximum loan amount. However, lenders do sell loans on the secondary mortgage market, so they will generally limit loans to $417,000 ($625,500 in Hawaii, Guam, Alaska and U.S. Virgin Islands) with no down payment. With a down payment, loans may exceed these amounts. Just remember, even if you are eligible for a VA loan, you still have to qualify for the requested loan amount. This means that you may not be approved for the entire maximum loan amount even if you are VA eligible. If you want to purchase a home that is selling for more than the maximum VA loan amount, then you would need to come up with the additional money in the form of a down payment.
One of the great benefits of using a VA loan is that you can do the loan with no money down and many times without having to pay money out of pocket for your closing costs, either. If the loan and sales contract are set up correctly, you can basically get a home loan for 100% of the sales price and have the seller cover all of your closing costs.
The VA charges a funding fee to issue a guarantee to a lender against borrower default on a mortgage. The fee may be paid in cash by the buyer or seller, or it may be financed in the loan amount. Disabled vets are exempt from this fee. A big benefit of a funding fee is that the fee DOES NOT have to be paid at closing. This fee is simply added to your base loan amount and is paid over the life of the loan.
How much can the veteran afford (and other important factors)?
Please note that VA uses two methods for qualification purposes. The primary method of evaluating a veteran's income is the residual income method. Under this method, the underwriter determines that a veteran has sufficient income to cover day-to-day living expenses after paying housing expenses, taxes, and other debts such as car payments and credit card payments. VA also uses a debt-to-income ratio method like many programs. However, VA uses only one ratio which is the ratio of total debt (both housing and other debt) to income. To calculate the ratio click here.
Important: This is provided for informational purposes only. A VA approved lender is the best resource to see how large a VA loan the veteran truly qualifies for. The lender will look at income (amount and stability), credit and compensating factors involved when rendering a decision. VA also allows lenders to use certain approved automated underwriting systems.
Will I have mortgage insurance?
One of the great benefits of the VA loan is that it enables you to borrower up to 100% of the home's appraised value (up to $417,000) with out having to pay mortgage insurance. The VA charges a funding fee which is generally much less expensive than mortgage insurance and has NO MONTHLY COST after you buy or refinance the home.
OTHER VA loan posts for your use:
|
VA Loan Funding Fee Tables
Comments(16)