November 19, 1999
"We're from the government, and we're here to help you." That's a favorite line of skeptics who don't think that the government is always your best friend.
But if you're a veteran interested in buying a home, you simply can't afford to ignore the VA home-financing program.
"VA home financing is just too good a deal to pass up," says Richard Roll, president of American Homeowners Association. "Although government-backed loans sometimes take a bad rap for excessive red tape, the advantages of a VA loan are well worth it, especially because there's no down payment required in most cases." For more information, see http://www.ahahome.com
And if the lender is approved by the VA for automatic processing, your loan can be processed and closed by the lender without waiting for VA approval on the credit application and appraisal.
The VA (Department of Veterans Affairs) says that more than 29 million veterans and service personnel are eligible for VA financing. Check with the VA on your eligibility. Different requirements apply depending on when and how long you have served.
Other than that, vets must clear the same types of hurdles as most borrowers in applying for a loan. Income must be stable and sufficient to meet the mortgage payments plus any other loans, as well as pay living expenses. The lender will do a credit check, too.
Why is it such a deal? Again, the big-ticket item for most homebuyers is the down payment, and with a VA loan there is no down payment required in most cases. VA loans also have caps that limit the closing costs you'll have to pay.
In addition, you won't have to purchase private mortgage insurance, which lowers your mortgage costs. And you can get a graduated payment plan with lower initial monthly payments that gradually rise to a fixed payment starting in the sixth year.
What does it cost? Borrowers must pay a basic funding fee of 2 percent to the VA. (Certain veterans are exempt.) The funding fee may be paid in cash or rolled into the loan. A down payment of 5 percent or more will reduce the fee to 1.5 percent and a 10 percent down payment will reduce it to 1.25 percent.
All eligible Reserve/National Guard individuals pay a funding fee of 2.75 percent.
You can refinance an existing VA home to lower the existing interest rate if you pay a 0.5 percent funding fee.
Veterans who are using their loan entitlement for a second or subsequent time, who do not make a down payment of at least 5 percent, are charged a funding fee of 3 percent.