What is a VA Loan?
The VA Loan has been around since 1944. It was originally signed in to law by President Franklin D. Roosevelt to provide veterans with a home that was federally guaranteed with no down payment. This program gave veterans and their families the ability to fulfill their dream of homeownership. The original name for the law was known as the Servicemen’s Readjustment Act, but the more popular name is the GI Bill of Rights. The GI Bill of Rights has contributed more than any other program in the history of welfare to veterans and their families, and to the growth of the nation’s economy.
With over 25 million veterans and service personnel eligible for VA financing, this loan has many attractive advantages. To be eligible for a VA Loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980, or was an officer and began service after October 16, 1981. There is a six-year requirement of National Guards and Reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses. For a better breakdown of the eligibility requirements get more information here.
As we have discussed, the VA Loan has tremendous financial advantages. But the VA does place limitations on how much you can borrow without having a down payment. The standard limit around the country is $453,100, with it being higher in more expensive areas. This doesn’t mean you can’t buy a home with a price higher than $453,100. It just means that if you go over the limit set for your area, you will be required to come in with down payment at closing. For example, if your home price is $553,100, which is $100,000 over the VA limit, you will be required to bring ¼ of that amount at closing.
It’s important to remember that just because you are a veteran and you are eligible for this VA Loan doesn’t mean you can purchase the most expensive home possible. Even though this is a VA Loan, it is not funded by the VA. It is funded by a lender just like any other mortgage type. This means that you are under the same underwriting process as other mortgage programs and will need to qualify for an amount that you can afford.
Other cool things about the VA Loan
• No monthly mortgage insurance premiums. FHA and conventional loans usually require a 20% down payment to avoid mortgage insurance.
• You can use your VA Loan benefit multiple times.
• No prepayment penalties.
• Lower average interest rates than other loan types. VA Loans continue to have the lowest average interest rates of all loan types.
• You can either refinance your current VA Loan or you can refinance a different mortgage program into a VA Loan.
Please reach out to our VA Loan specialists with questions. We love to serve and we love to help. You can ask questions by getting started with our quick application, call our direct line, or email us at GreenwaldTeam@Creeksidem.com.