A VA backed or direct home loan is a valuable resource active duty and retired veterans and their loved ones can use to purchase a home at reasonable interest rates. Plus, people eligible for the loan don’t need a down payment or to pay for monthly mortgage insurance. However, some people who buy, build, repair, improve or refinance their home using a Veterans Administrations home loan may have to pay a VA funding fee. The fee helps to reduce how much the loan costs the American taxpayers. The funding fee is between 1.4% and 3.6% of the loan. But not everyone has to pay the VA funding fee.
Secret Number One: Who Does Not Have To Pay The VA Loan Fee
There are several groups of people who aren’t required to pay the VA funding fee when they get a home loan through the Veterans Administration home loan program. They include:
1. People who receive or are eligible to receive service-related disability payments from the VA, but elect to receive active-duty or retirement pay instead.
2. Surviving spouses of veterans who were totally disabled, or were killed in service or died from a service-connected disability and are currently getting Dependency and Indemnity Compensation.
3. Service members who have a proposed or memorandum rating indicating they’re eligible for compensation due to a pre-discharge claim before the date of the loan closing.
4. Active duty service members who show evidence they received a Purple Heart before or on the date of the loan closing.
Veteran may be eligible to have their VA funding fee refunded if a service-connected disability results in them being awarded VA compensation later and the VA compensation effective date is retroactive to before the loan closing date.
Secret Number Two: No Down Payment Is Required On VA Home Loans
One of the things that causes veterans to put off purchasing a home is because they do not have the money for the down payment. Typically, the down payment on a loan can be 5% to 10%. That means even if they qualify for a loan, the buyers need to have $5,000 to $10,000 as a down payment when they want to buy a home. With a home loan from the VA no down payment is required. That means if a veteran or their spouse qualify for a Veterans Administration home loan they don’t have to wait until they save up or scrape together the thousands of dollars they need for a down payment. They can just take the loan from the VA and buy their dream home.
Secret Number Three: Veterans Can’t Be Charged Certain Closing Fees
There are hundreds of dollars in fees home buyers must pay when buying a home using a traditional mortgage. When veterans buy a home with a VA loan, charging them many of the VA loan closing costs fees isn’t allowed. That can save veterans from a lot of financial stress when they decide to buy a home with a loan from the Veterans Administration home loan program. Some of the fees you can’t charged veterans with a VA loan include:
A. Attorneys Fees B. Escrow, Settlement or Closing Fees C. A Closing Protection Letter Charge Fee D. Fees for Document Preparations E. Underwriting and or Processing Fees F. What are called Lock In Fees G. Courier, Shipping or Postage Fees H. Notary Public Signing Fees I. Loan Application Fees J. Taxation Service Fees K. Mortgage Loan Brokers Fee
By eliminating the fees, the home loan program from the VA makes it easier financially for veterans and their surviving spouses to be able to close on the home they need.
Secret Number Four: Very Lenient Debt And Credit Ratio Guidelines
Another secret making closing on a Veterans Administration home loan more attractive is the debt and credit ratio guideline are much more lenient. That means it is easier to qualify to get a home loan from the VA than it is to be approved for any other type of home loan. For veterans who want to purchase a home, but have been turned down by several traditional sources of financing, Veterans Administration home loans is a great option. Even though your credit and debt ratio may be too high to qualify for other types of home loans, the Veterans Administration home loan’s more lenient guidelines make it possible for you to be able to buy the house that you need.
Secret Number Five: You Can Sell Or Refinance Without Penalty
One of the things that make veterans hesitate to close on a home loan from traditional lending sources is the penalties they will have to pay should they decide to refinance or sell the home. Buying a home through the Veterans Administration loan program is different. When you use a home loan from the VA to purchase your home, you are able to sell or refinance your home any time you want without having to pay any penalty at all. This means if you want to pull some of the equity out of your home or simply sell the property, if you have a home loan from the VA you can do so without paying a penalty.
Secret Number Six: The Seller Can Pay Your Closing Costs
The large amount of money in closing costs needed is another barrier stopping veterans from buying a home using a traditional mortgage lender. When you finance your home loan using the Veterans Administration’s home loan program, that type of barrier is removed. With a home loan from the VA, the home’s seller is allowed to make the process much less expensive for the buyer by paying all the VA loan closing costs related to the home’s sale as long as it doesn’t exceed 4% of the home’s purchase price. If you have a motivated seller, they can expedite the sale of their home by agreeing to pay all of the closing costs.
Just A Few Secrets
These are a few secrets people should know when considering a Veterans Administration home loan.