The Pros of Using VA Loans for Homeownership in El Cajo, by John Costigan.

The Pros of Using VA Loans for Homeownership in El Cajon

By John Costigan

The VA loans became known in 1944 through the original Servicemen’s Readjustment Act. This act was signed into law by the then-president Franklin D. Roosevelt and provided veterans with a federally insured home with no down payment. The government made such an arrangement was made to provide housing and help to the veterans and their families. More than any other program in history, the Servicemen’s Readjustment Act helped improve the welfare of the veterans and their families, helping in the economy’s growth.

The VA loan is a mortgage loan made available through a program established by the United States under the Department of Veterans Affairs. Just as the name suggests, VA loans assist service members, veterans, and eligible spouses to own a home. The VA sets everything from the qualifying standards, mortgage terms, and a portion of the loan. These loans are provided by private lenders.

For the vast majority of military borrowers, VA loans represent the most powerful lending program on the market. A VA loan is a down payment-free mortgage option issued by private lenders and partially insured by the Department of Veterans Affairs (VA). This flexible, $0down payment mortgage has helped more than 24 million service members become homeowners since 1944. At the same time, most eligible Veterans often bypass this homebuyer assistance program for various reasons such as lack of knowledge of its advantages and the notion of thinking the program involves a tedious process. Moreover, even most real estate agents and lenders lack a deep understanding of the program’s unique benefits and quirks. Whether you fall under these categories or not, take a few minutes to read the below facts about VA loans.

NO DOWN PAYMENT OR MORTGAGE INSURANCE IS REQUIRED.

Did you know that you do not need to put down anything to get approved for a VA mortgage loan? While most mortgage programs such as FHA and Conventional loans require between 3%-5% down payment, VA loans require zero down payment. Moreover, with a VA loan, you get to avoid steep mortgage insurance fees, whereas private mortgage insurance (PMI) costs $150 per month on a $250,000 home.

Consequently, with a VA loan, you can buy a home almost immediately, rather than having to save for years for a down payment. Also, by eliminating PMI, a buyer using a VA loan can afford a home worth $30,000 more with the same monthly payment. This means that VA loans save you money while tremendously increasing your buying power.

VA LOAN BENEFITS ARE REUSABLE.

The benefits that come with a VA loan are not one-and-done. You can use them as many times as possible as long as you pay off the loan each time you

WHAT MAKES VA LOANS SPECIAL

One, assume that you purchased a home with a VA loan and you’ve outgrown it and need a bigger one. You can sell the home and pay off your VA loan completely, then reuse your benefits to buy another home.

Another way is you can reuse your VA benefits as an eligible Veteran or Service person by getting a one-time restoration when you pay off the VA loan and want to keep the home but still want to buy another one, perhaps for investment purposes. It also applies if you refinance the VA mortgage with a non-VA loan.

VA LOAN BENEFITS HAVE NO EXPIRY DATE.

Once you’re declared eligible for a VA loan, it never expires. Even those who served 20, or 50 years ago can still buy a home today with a VA loan as long as they’re eligible. Eligibility is determined by the length of time served, and the period in which you served. For example, a U.S. Army Veteran with at least 90 days in service during the Vietnam era is likely eligible.

To check if you’re eligible, first obtain your DD Form 214. With that document, a VA-approved lender can request your VA Certificate of Eligibility for you, or you can request it directly from VA’s eBenefits website.

SURVIVING SPOUSES MAY BE ELIGIBLE.

Un-remarried spouses of Servicepersons who died in action can buy a home with a VA loan with zero down payment, no mortgage insurance, and their VA funding fee is waived as well. This is no way to repay the fallen heroes but just a benefit to help surviving spouses move forward after tragedy.

LOWER INTEREST RATES.

30-year VA mortgage loan rate was 2.720% and an APR of 3.070% as of February 11, 2021, according to Interest.com. This compares to a 30-year fixed rate of 2.820% and APR of 3.110% market average as of February 10, 2021, according to Interest.com. Moreover, VA loans feature some of the lowest foreclosure rates of any loan type, further reducing risk for lenders.

VA LOANS REQUIREMENTS AND ELIGIBILITY

Just as the name suggests, most members of the military, veterans, reservists, and the National Guard are eligible to apply for VA loans. Also, the next of kin that is the spouses, of the military members who died while on duty, or even because of a service-connected disability is eligible for the VA loans. Active members of the military qualify for the VA loan after just 6 months of service. Reservists and the members of the National Guard have to wait for about 6 years to apply, if they are called to active duty, their eligibility status changes after just 181 days of service.

You may qualify for the VA loans if;

• You have served for 90 consecutive days of active service during wartime. • You have served actively for 181 days during peacetime. • You are married to a service member who died in active duty. • You have been with the National Guard or

Reserve for 6 years.

Unlike many other low down-payment mortgages options, VA loans do not require private mortgage insurance. The Federal Housing Administration and the conventional loans with a down payment of less than 20 percent require a PMI, which costs the borrower the life of the loan.

The cost of getting a VA loan is lower compared to other types of low-down-payment mortgages, however, they still carry a one-time funding fee that varies depending on the amount of the down payment and the military category. This one-time fee offsets the taxpayers’ cost since there is no PMI or down payment required.

JUNE 2022 | 117