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One of the ways the US government takes care of its own military personnel, both active and retired or honorably discharged, is to provide VA home loans with significant benefits over traditional home loans. This week there have been some new changes to the program that make it even better for our military service men and women to become homeowners. First, here is some information about the program and eligibility. Then we will share the new benefit that was just announced October 1, 2011.
What Are the Benefits of a VA Home Loan?
The primary benefit of a VA home loan is that there is no required down payment. The loan can be financed up to 100%. Even better, there is no limit on the seller’s assist; therefore, it can cover the full closing costs. Another major advantage is that the VA guarantees the loan and does not require monthly mortgage insurance, an expense that can add up to $200 or more each month on top of the mortgage payment.
The primary difference from a traditional loan is that a VA requires a funding fee for the loan. (Disabled veterans are exempt from the funding fee if they receive disability benefits.) The good news is that this too can be financed into the loan and the factor for the funding fee has just recently reduced!
If you already have a VA loan, you can take advantage of the VA Interest Rate Reduction Refinancing Loan (IRRRL). You may use this program up to 90% LTV to lower your rate and term, take cash out of your home, or even refinance from an existing VA ARM loan to a fixed rate. An IRRRL may be done with little or no money out of pocket by including all costs in the new loan.
New Benefit Announced and Effective October 1, 2011
One of the requirements of the VA loan is that the homeowner must pay a funding fee that amounted to 2.15% of the loan amount. This figure was drastically reduced on October 1, 2011. The fee is now 1.40%, adding up to significant savings to the homebuyer. Not only that, if a five to ten percent down payment is made the funding fee is reduced even more to 0.75% of the total loan amount. And if the borrower puts more than 10% down, the factor is only 0.50%.
Keep in mind that the funding fee can be financed into the loan, meaning almost no money out of pocket to be able to move into your home.
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To apply for the loan you will need a certificate of eligibility. Specific requirements are available on the official US Department of Veterans Affairs website on the FAQ page. This loan is a great way to give back to our veterans so if you are reading this and you know someone who is in the military or is retired military personnel be sure to share this with them. When you factor in the low prices on homes these days plus the great interest rates that can be locked in for 5 – 10 – 30 years, this is an opportunity that you or they simply cannot afford to miss!
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