VA FINANCING -A GOOD DEAL FOR VETERANS
More than 27 million veterans and service personnel are eligible for VA financing. Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement. Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of VA home loans:
- Most important consideration, no down payment is required in most cases.
- Loan maximum may be up to 100 percent of the VA-established reasonable value of the property. Due to secondary market requirements, however, loans generally may not exceed $417,000.00 (upto $793,750. 00 in the county of Honolulu,Hawaii)
- Flexibility of negotiating interest rates with the lender.
- No monthly mortgage insurance premium to pay.
- Limitation on buyer's closing costs.
- An appraisal which informs the buyer of estimated property value.
- Thirty year loans with a choice of repayment plans.
- Traditional fixed payment (constant principal and interest: increases or decreases may be expected in property taxes and homeowner's insurance coverage); Graduated Payment Mortgage-GPM (low initial payments which gradually rise to a level payment starting in the sixth year); and in some areas, Growing Equity Mortgages-GEMs (gradually increasing payments with all of the increase applied to principal, resulting in an early payoff of the loan.) Hybrid ARMs: VA is authorized to guarantee hybrid ARM loans where the initial rate remains fixed for at least 3 years. The initial adjustment can be as much as 2% if the fixed rate period is 5 or more years. Annual adjustments thereafter are limited to 1 percent. If the initial fixed rate period is 5 or more years, the interest rate on the loan is capped at 6 points above the initial rate. If the fixed rate period is less than 5 years, the initial adjustment is limited to 1 % and the annual cap to 5 percentage points. Traditional ARM loans: VA can also guarantee traditional one year ARM loans where the rate is adjusted annually. Annual adjustments are limited to 1 % and the maximum interest rate increase over the life of the loan is limited to 5 percentage points.
- New homes which are appraised before or during construction are inspected to help ensure compliance with the plans and specifications used for the appraisal and with VA minimum property requirements. All new houses, regardless of when appraised, are covered by either a 1-year builder's warranty or a 1 a-year insured protection plan.
- An assumable mortgage, subject to VA approval of the assumer's credit. Right to prepay loan without penalty.
- VA performs personal loan servicing and offers financial counseling to help veterans avoid losing their homes during temporary financial difficulties. WHAT IS A VA-GUARANTEED LOAN? These loans are made by a lender, such as a mortgage company, savings and loan or bank. VA's guaranty on the loan protects the lender against loss if the payments are not made, and is intended to en courage lenders to offer veterans loans with more favorable terms. The amount of guaranty on the loan depends on the loan amount and whether the veteran used some entitlement previously. With the current maximum guaranty, a veteran who hasn't previously used the benefit may be able to obtain a VA loan up to $417,000.00(upto $793,750. 00 in the county of Honolulu, Hawaii) depending on the borrower's income level and the appraised value of the property. The local VA office can provide more details on guaranty and entitlement amounts.
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