June 7th, 2009 1:36 PM by Joan Rusco
Just a few short years ago it seemed that any home buyer with a pulse could purchase a house with no money down. Those days are now gone. Even the most liberal lenders require at least 3.5 % down payment even then it’s hard for those loans to be qualified for the required mortgage insurance. Many would-be home buyers are left on the sidelines because they don’t have thousands of dollars for the down payments necessary to qualify for mortgage loan insurance. Veterans are in a very sweet spot today. The VA Loan is the only program available that does not, in most cases, require a down payment. We are seeing some down payment requirements in areas where the VA appraiser is classifying the property as in a ‘declining market’. In these cases a 5% down payment requirement is being instituted by lenders.
VA loans are guaranteed. The loans are made by a lender (not the Veteran’s Administration) and are backed by the VA. This means if the borrower defaults the VA protects the lender (bank) against any loss. Credit scores are less important than in conventional mortgage lending. The amount of the guaranty depends on the amount of the loan and whether or not the Veteran has used the program previously (a Veteran can use the program over and over again and we’ll discuss that later). Under current guidelines the Veteran who has not previously used the program may be able to obtain a VA loan for up to $417,000 (if you live in places considered high cost like some counties in California, Hawaii, Alaska and Colorado the limit can exceed three quarters of a million dollars).
How do you get a VA Loan? Visit www.VALoansMN.com
Another attractive aspect of the VA loan is no monthly mortgage insurance payment. In conventional lending if a loan exceeds 80% of the value of the home a borrower is required to pay for insurance to protect the lender. This insurance cost is tacked on to the monthly principal and interest payment. It generally ranges from $40 to nearly $200 per month depending on the amount of the loan and the borrower’s credit history. Many borrowers are able to qualify for a loan with less than 20% down but insurers are unwilling to guaranty the loan. This is a result of the current high rate of foreclosures. Veterans do not have to worry about this change.
Earlier I mentioned that you can use this benefit over and over. Even if you’ve had a VA loan before you may still have “remaining entitlement”. The Department of Veterans Affairs in the booklet Home Loan Guaranty Services states
Veterans can have previously-used entitlement restored to purchase another home with a VA loan if:
· The property purchased with the prior VA loan has been sold and the loan paid in full, or
· A qualified veteran…agrees to assume the VA loan and substitute his or her entitlement for the same amount of entitlement originally used by the veteran seller. The entitlement may also be restored one time only if the veteran has repaid the prior VA loan in full, but has not disposed of the property purchased with a prior VA loan. Remaining entitlement and restoration of entitlement can be requested through the VA Eligibility Center by completing VA Form 26-1880.
We can help you with any questions concerning eligibility, entitlement and other VA loan requirements. Visit www.VALoansMN.com.