Real Estate Agents are always learning so that we can be a valuable resource for our clients and contacts. I recently took a seminar on VA Loans and I wanted to share what I learned.
The VA Mortgage Benefit was introduced in 1944 as part of the Serviceman’s Readjustment act. This act provisioned that Veterans would be eligible for home loans through the VA Mortgage Benefit, small business loans, the GI Bill for education, relocation assistance, and an apprenticeship stipend. These benefits were intended to help servicemen to live their best lives in exchange for their service in the military. In the beginning, the benefits were only allowed to be used one time, and expired after ten years, but things are much better now! Today’s VA Loan is a fantastic way for veterans to buy a home.
The VA Mortgage Benefit is different than a conventional loan because there is no down payment requirement, and eligible servicemembers are guaranteed to receive favorable interest rates. This is because a VA Loan is guaranteed for 25% of the loan’s value, which means that the lender will get 25% of the loan’s value in the unfortunate event of default. Lenders see that as a big win and don’t require a down payment or Mortgage Insurance, PMI.
VA Mortgage Benefits don’t expire, and you can use it again and again. You can also have more than one VA Loan at a time, but there are some occupancy rules that we’ll get to soon. VA Loans have no limit on the amount that you can borrow; a county loan limit exists, but veterans can purchase above the limit with a 25% down payment. The county loan limit varies from place to place, your lender can tell you more about county loan limits in your area. With a VA loan, each bank will evaluate your credit and risk differently. There isn’t a minimum credit score requirement, the lender has the final say on whether they’ll approve the loan based on their requirements.
When you're ready to apply for your VA Loan, you’ll need a Certificate of Eligibility. Your bank can help to get this for you, or you can use the VA's website to apply for your Certificate of Eligibility. You can use ebenefits.va.gov to retrieve your documents. Your DD-214, CG-718a, DD-256, or NGB-22 (depending on branch) will show your service dates, and length of service to help your lender to determine your eligibility. There is a mortgage funding fee for VA Loans, and it varies based on the type of mortgage you’re pursuing. If you are a servicemember receiving benefits for a service-related injury, you are eligible to have those fees waived, and should be sure to tell your lender if that is the case.
The VA Mortgage Benefit has requirements to determine a servicemember’s eligibility. Servicemembers enlisted from 8/2/90 (Gulf War) through the present time are eligible if you’ve completed 24 continuous months of service, or at least 90 days for which you were ordered or called for active duty. Prior to the Gulf War, the minimum active-duty service requirement varies. A servicemember in the National Guard or Reserves is eligible after six years of service, and honorable discharge, or being placed on the retired list, or transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable or continue to serve in the Selected Reserve.
The property also has requirements in order to be eligible for a VA Loan. The property can be a home or condo and needs to be titled as Real Estate. For condos, there may be approval needed from the condo association and most condos for sale will indicate their eligibility for VA loans, just ask your realtor to check for eligible homes when searching. The property must also be attached to a permanent foundation, and be safe, sanitary, and sound.
The veteran has 60 days from closing on the sale to move into the home, or up to 1 year in a VA approved situation, like deployment. A veteran’s spouse can occupy the residence and fulfill that requirement. Once you’ve purchased your home with a VA loan, you must live there for at least one year, unless a VA approved situation occurs, such as change in family size, deployment, or job transfers.
The appraisal and inspections are an important part of any real estate transaction, and the same is true for VA loans. In Hawaii you’ll need to have a termite inspection any time you buy or sell a home, and an appraisal will be requested by the lender.
The VA Mortgage Benefit is a great way for servicemembers to get a home, and I hope that anyone who thinks they might be eligible will talk to their lender about their options. If you don’t have a lender, don’t hesitate to reach out to your real estate agent. We have lenders that we trust and would be glad to share their info with you!
Thank you, servicemen and servicewomen, for your bravery and sacrifice.
*information shared from handouts and webinar training provided by David Smith NMLS: 1632145 with Mutual of Omaha Mortgage in Houston, TX www.thevaloan.org/