- VA Loans- A Small Token of our Appreciation
- May 30, 2014
- Law Firm: Kohrman Jackson Krantz PLL - Cleveland Office
As many of you know, Memorial Day is a federal holiday in the United States, established to formally remember the men and women who died while serving in our country’s armed forces. The holiday was originally known as Decoration Day, originating after the Civil War to honor the soldiers who died in that war.
While some members of my family have served in the past, fortunately, none of them (to my knowledge) have “made the ultimate sacrifice”. Nonetheless, I resolved a number of years ago to do away with the celebratory barbeque on Memorial Day, and instead, help place flags on veteran graves, attend Memorial Day tribute parades, and just thank those I know and/or see in uniform for serving our Country and helping preserve the peace and prosperity we are fortunate to have at home.
This year, I thought of one more, “better than barbeque idea” for Memorial Day. I would write to remind veterans and those on active duty of the advantages of VA Loans.
VA loans are home loans for the purchase of a primary residence available to those who qualify, who have served or are presently serving in the U.S. armed forces, to reservists and to some surviving spouses. The VA loan was made possible by the Servicemen’s Readjustment Act (GI Bill of Rights) on June 22, 1944. The Department of Veterans Affairs (“VA”) guaranties loans made by private lenders to veterans/those currently serving who qualify. With the government backing these loans, lenders can afford to offer advantages not available under other loan programs.
To qualify for a VA Loan, there are four basic requirements:
1. Service Requirements/Discharges- To obtain a “Certificate of Eligibility”, you must not have been dishonorably discharged, and (i) be currently serving in the armed forces for a minimum of 90 days, (ii) have served six years in the Selected Reserve or National Guard (and meet discharge requirements), (iii) be a veteran and meet certain minimum service requirements; or (iv) be a surviving spouse of a Veteran, MIA or POW and meet certain conditions. Log on to: http://benefits.va.gov/HOMELOANS/purchaseco&under;eligibility.asp to determine the specific requirements.
2. Specified Properties- single-family homes, certain condos, townhouses and multi-family homes (not exceeding 4 units) are eligible properties.
3. Owner Occupied-Borrowers must occupy the homes they are financing as their primary residence, within 60 days after closing (subject to extension of up to 12 mos. for those deployed away from home).
4. Income/Credit-Eligible VA borrowers, like other borrowers need a steady income and adequate credit. VA lenders, however, have more flexibility to determine who is a good credit risk. There is no minimum credit score, but the VA recommends borrowers have no more than a 41% debt-to income ratio. In other words, if your income is $3,000/mo., your debt should not be more than $1,230/mo.
There are a number of definite advantages over conventional financing:
1. Attorneys fees (beyond title related fees);2. Escrow/Closing Fees;3. Closing Protection Coverage Fee;4. Document Preparation Fees;5. Lender Underwriting Fees;6. Loan Application Fees;7. Messenger Fees/Postage/Notary Fees;8. Mortgage Broker Fees;9. Interest Rate Lock Fees; and
A VA lender will not deny a loan solely based on a low credit score, and most VA lenders will not change the interest rate based upon the credit score.
- There is no down payment required.
- Borrowers can often refinance at a lower rate, within the VA program, without having to re-qualify.
- Closing Costs are lower. In fact, there are a number of costs/fees that VA borrowers are not permitted to pay, including:
10. Tax Service Fees
VA Borrowers must still pay for appraisals, credit reports, title insurance, recording fees, origination fees and survey fees, but clearly there are distinct advantages to VA loans, most translating to saving a lot of money up front, as well as throughout the term of the loan.