Read this great article courtesy of Lime Tree Lending Group:
VA loans are phenomenal low cost loans with endless benefits.
- No down payment on loan amounts up to $417,000
- No mortgage insurance
- Fixed interest rates competitive to conventional and FHA loans
- Limitations on closing costs
- Assumable – when going to sell the home the mortgage can be used as a sales tool, by offering the interest rate associated with the current lien on the property to the new buyer for the remaining of the mortgage. The new buyer does not have to be VA eligible; however they must qualify per credit, income, assets. This is huge for VA buyers in the current market of low interest rates.
- No prepayment penalties
The main disadvantage of VA loans has been the “VA funding fee” which is required by law to minimize the taxpayer burden by contributing to the cost of the mortgage.
Currently first time buyers are required to pay 2.15% of the loan amount and for all other subsequent uses of the VA loan the required fee is 3.3% of the loan amount to obtain a VA loan.
Now for the good news! For all loans closing after October 1, 2011 the funding fee will be reduced to 1.4% for first time use of the VA loan and for subsequent uses the fee will continue to drop over next 3 years:
Loans Closed 10/01/2011 – 09/30/2012: Funding Fee = 2.8%
Loans Closed 10/01/2012 – 09/30/2013: Funding Fee = 2.15%
Loans Closed on or after 10/01/2013: Funding Fee = 1.25%
**Remember the seller may pay for the buyers funding fee. .
While there is a funding fee for a VA home loan, some people are exempt from paying:
- Veterans with 10% or more disability for service-related medical issues
- Veterans entitled to get compensation if they aren’t drawing retirement pay
- Surviving spouses of those who died in the service, or from service related disabilities are also exempt
- Remember that the VA has the last word on who is exempt, and some issues may be dealt with on a case-by-case basis. If you have any doubts, we can point you in the right direction.
There is also a funding fee for VA refinance loans, and they fall within the same general price guidelines.
Need more information on:
VA loans including how to receive your certificate of eligibility, determining eligibility or locating a lost DD214? We can help! contact us at [email protected] or call our office at 303-325-3578.