A Comprehensive Look at VA Loan Benefits
Monday, November 11th is Veterans Day. A time to pay tribute to those who served during war and peacetime in the U.S. armed forces. There were 18.5 million military veterans in 2016, according to the Census Bureau. And the top three states where veterans live are California, Texas and Florida. But even if you don’t live in those states, chances are, you know a veteran. Because these selfless men and women served their country, they’re entitled to benefits. Some of which are lifelong, like the VA loan. For eligible veterans, and their spouses, the VA loan is the best path to homeowners. No money down, no monthly fees, these loans remove many of the barriers to homeownership.
This year marks the 75th anniversary of the GI Bill which was signed into law by President Franklin D. Roosevelt in 1944. The GI Bill's VA Home Loan Guaranty Program has provided an affordable path to homeownership for many service men and women. In fact, the VA loan has helped raise veteran homeownership rates to over 75 percent in 2017 -- much higher than the national average of 64 percent, according to the National Association of Realtors.
"And while the tremendous debt we owe to our brothers and sisters in arms may never be fully repaid, we can and will do everything in our power to leverage the GI Bill and HUD's programs to provide affordable housing for all Americans," said HUD Secretary Ben Carson.
More than 24 million VA loans have been backed in its 75 year history. This as the homeless rate among veterans continues to decline, said Carson.
- After 181 days of active duty service in peacetime
- After 90 days of active duty during wartime
- After 6 years of service in the National Guard
- After your spouse was killed in the line of duty and you have not remarried
No Money Down
One of the most highly touted benefits to veterans is the no money down mortgage. While most buyers struggle to save for a 20 percent down payment, veterans don’t have to. With a VA loan, eligible veterans can finance 100 percent of the purchase price!
Lower Interest Rates
Interest rates are on the rise, but VA loans usually carry a lower interest rate than the average mortgage. Because VA loans are backed by the Federal government, there’s less risk to the bank and rates can be up to 1 percent cheaper than conventional interest rates.
No Closing Costs
In addition to zero-down payment, VA loans allow sellers to contribute up to 4 percent of the purchase price to help cover closing costs and pre-paids. That could include property taxes, title insurance, and homeowners insurance, to name a few.
Most buyers who put down less than 20 percent pay private mortgage insurance. Not so with a VA loan! That’s because these loans are backed by the federal government. Eligible veterans save thousands of dollars over the life of the loan because VA loans do not require mortgage insurance premiums.
No Pre-Payment Penalty
Veterans enjoy the option to pay off their mortgage early without fear of their lender charging a pre-payment penalty fee. Some mortgages penalize borrowers for pre-paying. Not so with VA loans.
Looser Credit Guidelines
With a VA loan, eligible veterans can get a mortgage with a lower than standard credit score. Most lenders want to see a 620 minimum, but that’s far cry from the 720+ that the average borrower must have.
If your spouse died in the line of duty or passed away due to a service-related disability, you can still use their VA benefit to purchase a home with no money down and no service fee, if you haven’t remarried. One exception, if you remarry after age 57, you can still use those benefits!
Veterans with a VA loan are entitled to easy refinancing to get a lower rate. No credit check required, and no appraisal necessary for veterans. It's called the Interest Rate Reduction Refinance Loan (IRRRL) and this benefit cuts the processing and documentation time so veterans can reduce their interest rate quickly and easily.
High Net Worth Included
If you qualify to buy a $750,000 house, you can do it using your VA benefits as long as you make a down payment on the amount over the VA loan limit. For instance, take the home price ($750,000) minus the VA loan limit in your country, say $650,000. The difference ($100,000) is what you make your down payment on, 25%, or $25,000. That’s a deal, if you can afford it.
Most lenders charge buyers a fee to originate the loan. With a VA loan, those fees are capped. The Veterans Administration sets a limit to what lenders can charge veterans, but at Guaranteed Rate, we're waiving those fees until January 1, 2020 as our way of saying, "Thank you for your service."