On last week’s show, we discussed the VA home loan program, its history, and my personal experience using it to acquire not only my primary dwelling but also to build a portfolio of investment properties. I also explained how my long history of originating home loans in Colorado Springs, coupled with my employees’ personal histories of both serving in the military and using the VA loan product, helped make Garvens Mortgage Group the premier home loan resource for veterans in the region. Due to the response to last week’s show, I wanted to spend this week filling in the details of how the VA loan program works.
The greatest advantage of the VA home loan is the ability to purchase a home with no money down. The VA does not require a down payment, unlike conventional or FHA loans which may require anywhere from 3-5%. However, to ensure the program’s viability, the VA does require a ‘funding fee’ for both purchase and refinance loans. These funding fees are diverted to a pool of money that is used to cover any guaranteed loans that have defaulted. The funding fee varies based on service type, down payment, and whether the veteran has used their VA benefits before, but generally a first-time veteran homebuyer putting no money down can expect a funding fee of 2.15%. The funding fee is waived, however, for veterans with a registered disability. And, most importantly, the funding fee can be financed into the loan; you do not have to come up with the funding fee out-of-pocket.
Many individuals who have served in the military ask whether they are eligible to use the VA home loan program. Eligibility varies based on the type of service and when they served. Retired or discharged veterans generally need to have served for 24 continuous months or for 90 days of active duty service. Current active duty service members need only 90 days of active service. Reserves and National Guardsmen need 6 years of service with 90 days of active service.
Occasionally we are asked by surviving spouses of veterans whether they are eligible to use the VA home loan program. While there are certain conditions by which a surviving spouse may inherit a veteran’s eligibility, they do not apply to most people. The surviving spouse cannot have remarried (unless they are 57 or older at the time of re-marrying) and their spouse’s cause of death must have been service-related. It is often difficult to establish a surviving spouse’s eligibility, but is possible.
Many individuals who come into our office are often surprised to learn they are eligible for a VA loan. Many served for a few years two or three decades ago or have a service-connected disability that makes them eligible. If you have served in the military for any amount of time, it’s best to check with your loan officer to see if you are eligible for a VA home loan. VA loan products offer more flexible terms, better rates, and additional help and resources from the regional VA office than conventional or even FHA products. It is a benefit veterans have earned, and I am sure more will take advantage of it as they learn more about it.
4-25-15 Serving Those Who Serve Part II