What is a VA Loan?
A VA Loan is a guaranteed, or “insured” loan for America’s Veterans. Funds are available for up to 100% loans and do not include mortgage insurance premiums. If ever in trouble, and payments are not be made, the government steps in to cover the costs to the lender for recovery of funds.
The VA loan is originated by approved VA lenders. However, the VA does not get involved in the VA loan process. That is where we can help! The Home Sales of Tallahassee Team will help you get through the steps of acquiring your VA loan.
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Overview of the VA Home Loan Program
Who’s Eligible For a VA Loan?
- Active duty personnel
- Certain reservists and National Guard members
- Surviving spouses of persons who die on active duty or die as a result of service-connected disabilities
- Certain spouses of active duty personnel who are (a) missing in action, (b) captured in line of duty by a hostile force, or (c) forcibly detained by a foreign government or power
What It Can Do for You
Here are some advantages of the VA program:
- You can buy a home without a down payment – as long as the sales price doesn’t exceed the appraised value. (Of course, you have to qualify in terms of income and credit.)
- You won’t need to buy private mortgage insurance.
- VA rules limit the amount you can be charged for closing costs.
- Closing costs may be paid by the seller. (You should keep this in mind when negotiating the sales price.)
- The lender can’t charge you a penalty fee if you pay the loan off early.
- VA may be able to provide you some assistance if you run into difficulty making payments.
You should also know that
- You don’t have to be a first-time homebuyer.
- You can reuse the benefit.
- VA-backed loans are assumable, as long as the person assuming the loan qualifies.
Size of the Loan
VA doesn’t specify a maximum loan amount. But the law does set limits on the amount of liability we can assume. This usually affects the amount of money an institution will lend you.
The lender may be able to increase the size of the loan if you can make a down payment.
We will only recommend a local VA approved lender. In making a decision, the lender must look at income (amount and stability), credit, and “compensating factors.” Lenders may use certain automated systems to help with their decisions.
Your Closing Costs
The VA Funding Fee. Although we don’t require private mortgage insurance we do charge a funding fee. (This can be folded into the loan.) If you receive service-connected disability payments each month, you’re exempt from the fee.
Other Costs of the Loan. Other costs will be involved. Of course, the lender charges interest. And some other fees and charges have to be paid at closing. Here are some general rules:
- The lender, not VA, sets the interest rate, the “discount points,” and closing costs. These rates may vary from lender to lender.
- The seller can pay for some closing costs. (Under our rules a seller’s “concessions” can’t exceed 4% of the loan. But only some types of costs fall under this 4% rule. Examples are: payment of pre-paid closing costs, VA funding fee, payoff of credit balances or judgments for the veteran, and funds for temporary “buydowns.” Payment of discount points is not subject to the 4% limit.)
- You’re not allowed to pay for the termite report, unless the loan is a refinance. That fee is usually paid by the seller.
- You must live in the home as your primary residence.
- You must qualify in terms of income and credit. You could be turned down if you’ve had problems with credit or your income is not considered stable.
7 Steps in the Process of Getting a VA Home Loan
Getting a VA-backed loan – or any home loan – takes some time. Read the 7 Steps to Getting a VA Loan.