What are veteran Loans?
FDR established Veteran loans when he signed the GI Bill in 1944. This bill provided veterans the ability to purchase a home with no down payment. Through Veteran loans homeownership became a reality for thousands of military families. The GI Bill and Veteran loans, arguably contributed more to the welfare of veterans and their families than any other government program.
Veteran loans are available to the more than 25.5 Million veterans who have served in our nation’s armed forces. Eligibility for Veteran loans is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 181 continuous days during peacetime and 90 days of service during wartime. There is a two-year requirement if the veteran was an officer and began service after October 16, 1981 or enlisted and began service after September 7, 1980. There are specific rules concerning the eligibility of surviving spouses to qualify for Veteran loans. There is also a six-year service requirement for National guardsmen and reservists to be eligible for Veteran loans.
Veteran loans of up to $417,000 are guaranteed by the VA, and even higher amounts are guaranteed where the housing costs dictate and increased ceiling on the Veteran loans. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms. Veteran loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy.
Answers to Commonly asked questions
How do Veteran loans work?When a veteran in considering using their VA eligibility this is perhaps the most common question asked. Veteran loans are a great option for a veteran who is looking to purchase a home with little or no money down. Because the VA is willing to guarantee up to 25% of the loan, banks are willing to issue loans without their usual security blanket, a down payment. Also most of the closing costs on Veteran loans can be rolled into the loan balance further reducing the need for money at closing. For help in obtaining Veteran loans speak with a certified Veteran loans specialist for more details. Are Veteran loans given at a fixed rate?This can be answered both in both the negative and the affirmative. Depending on the program Veteran loans can be either a fixed rate or a variable rate. If your desire is for a fixed rate loan, make sure that your closing paperwork indicates this. How do I qualify for Veteran loans?Qualification is not difficult for veteran loans. First you must be veteran or current member of the military. You must also have eligibility remaining. A copy of your DD-214 can establish this. Also you must be planning to occupy (or continue to occupy) the home as your primary residence. Meaning, in most cases Veteran loans cannot be used for a second home. Does my credit Matter?Yes credit is generally a factor in any mortgage loan. While the lenders who are actually giving out the money in most cases do have credit guidelines, the VA does not have specific guidelines with regard to credit qualification for Veteran loans. The good news is that in general the credit requirements for Veteran loans are lower than those of a more traditional mortgage. What interest rate can I expect on Veteran loans?Interest rates change on a constant basis, but Veteran loans rates and conventional rates should be in roughly the same range at any given time. Veteran loans offer very competitive rates, as compared with their conventional counterparts. Rates on a Hybrid Veteran loans are typically lower than that of fixed rates. |
What are Hybrid Veteran loans?Hybrid Veteran loans are a mixture of the best parts of a fixed rate loan, combined with the flexibility of an adjustable rate loan. The low starting interest rate is fixed for usually 3 to 5 years and then is allowed to adjust. However, specific caps are set in place so that the Veteran is protected from run-away interest. In contrast to the option ARM, Hybrid Veteran loans cannot adjust more than once every 12 months. In any given adjustment period it cannot adjust more than 1% in either direction. And, over the life of the Veteran loans the hybrid cannot adjust more than 5% about the initial starting rate. For example Hybrid Veteran loans that begin at 4% for 3 years could never get higher than 9% during its life time. What are the costs involved?As with any mortgage Veteran loans has associated costs and fees. Most notably there are four groups of fees: Title, VA Funding fee, Origination, and loan discount. Title Charges are those fees charged for the legal recording of the Deed to the home. Any fees for the title insurance, title examination, or state and county taxes incurred with the recordation of a new mortgage are included as a part of title fees. The VA funding fee is charged on all non exempt veteran loans and ranges between .5% (for a VA streamline) to 3.3% (for a second use VA Cashout). Origination charges are those paid to a bank or broker to do all the processing of the loan. Discount refers to the loan discount (also called points) that cost of securing a particular interest rate. The amount of discount paid will vary based on the rate as well as the market conditions at the time the loan is originated. On Veteran loans the origination charge may not exceed 1% of the total loan amount. This 1% is generally regarded as the commission for the loan officer of processing the loan from origination through the funding process. On Veteran loans the maximum amount of discount that can be paid by a borrower is 2% of the loan amount. |
