VA guaranteed loans are made by lenders and guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase of a home. The guaranty means the lender is protected against loss if a veteran fails to repay the loan. In most cases, no down payment is required on a VA guaranteed loan and the borrower usually receives a lower interest rate than is ordinarily available with other loans.
Other benefits of a VA loan include:
Closing costs comparable – and sometimes lower - than other financing types.
No private mortgage insurance.
No prepayment penalties
Mortgage can be taken over (or “assumed”) by the buyer when a home is sold.
Counseling and assistance available to veteran borrowers having financial difficulty or facing default on their loan.
A VA loan can be used to buy a home, build a home and even improve a home with energy-saving features such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA.
Although mortgage insurance is not required, 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 above the sales price. This fee varies by whether the veteran is Regular Military or National Guard/Reserves. It also varies based on the down payment paid (if any at all). The fee ranges from 1.25% with a 10% down payment to 3.3% with no down payment. Again, this CAN be financed into the loan and does not have to be paid out of pocket.
There are certain closing fees that the VA will not let the veteran pay. These include processing, underwriting, closing and document preparation fees. More detailed information on these fees will be discussed at the time of making an offer on a property.
A Certificate of Eligibility from the VA must be presented to the lender to qualify for the loan. Veterans, have your DD-214 ready at the time of application.
Give us a call today at 479-530-4569 or 866-530-4569 to discuss your VA mortgage options.
