July 1st, 2019 9:03 AM by Joan Rusco
There are, in our opinion, huge advantages to a V.A. loan and over the past few years we have outlined many on these pages.
Along with all the good there comes some bad, at least in the eyes of some, so we’re going to spell them out.
As we’ve repeatedly written you can buy a home using your V.A. loan benefits with no money down. That’s good eh? However, there are some home sellers who see it as a bad. Recently we had a realtor reject an offer on a home saying the buyer “had no skin in the game” because she was not putting any money down. The buyer’s realtor should have told the selling agent the “skin in the game” comes from the Veterans Administration which is guaranteeing the loan. Still, some sellers see it as a negative. Make sure your realtor knows how to convince sellers a V.A. loan offer on a house is a rock-solid offer.
There are home sellers who shy away from V.A. loan offers because of the super strict home conditions required. The V.A. is trying to protect Veterans by putting these requirements on a property. The intention is to prevent Vets from buying money pits. They’re sort of a second set of eyes looking over your shoulder as you determine the quality of the home. This can scare some sellers, especially those who may be trying to hide something.
Perhaps a drawback to some Veterans is the funding fee required. On conventional and FHA loans if you have less than 20% down payment you’re going to pay a monthly mortgage insurance fee. There is no such thing with a V.A. loan. There is however an upfront funding fee. For first time users of the V.A. loan benefits it is 2.15% of the loan amount. If you’ve used your benefit before it increases to 3.3%. These apply to loans with a less than 5% down payment and Veterans and active duty personnel. The funding fee decreases if you have more money down. We at VALoansMN can provide details. Keep in mind, this funding fee can be part of the loan so no up-front money is required.
Finally, a V.A. loan cannot be used for secondary or vacation homes. The borrower is required to move into the home within 6 months of purchase and must stay there 1 year unless orders or other unforeseen circumstances occur.
We urge you to call us (612-240-9922) if you’re thinking about taking advantage of this benefit you’ve earned. We are a top, local V.A. lender in the upper midwest (we also serve Florida and Arizona) and are here to help you determine the best route for you to take when buying or refinancing a home.