Memorial Day reminds us of the sacrifices of our military families today and in the past. One of the ways our nation honors and rewards veterans and their families is VA loans that enable them to buy and finance a home at a low interest rate, currently 3.37 percent on a 30-year fixed-rate loan -- and with zero down payment!
The VA does not make the loans. Instead it guarantees them, up to 100 percent of the appraised value of the property. And there is no mortgage insurance payment. In essence, the VA is guaranteeing the loan payments to the lender on your behalf, as a reward for serving your country. A VA loan can be accessed over and over again, as long as the original loan is repaid, with no age limit.
Here are some key facts about VA loans.
1. Service Eligibility: VA loans are available to those who served 90 days active duty in wartime or 181 days during peacetime (two years for those who began service after September 7, 1980) or six years in the National Guard. Applicants must have been honorably discharged.
2. Personal Criteria: Financial standards are somewhat less stringent for those applying for a VA loan (and yet VA loans have a far lower default rate than conventional loans). An applicant's credit score must be above 620 (although some VA lenders allow as low as 580). He or she must demonstrate steady income, a two-year history of self-employment or a stream of retirement/disability benefits. Spousal income can help qualify, and some spouses of deceased vets can qualify if the spouse died of a service-related disability. Applicants must have no unpaid liens or judgments, and they must wait two years after a Chapter 7 bankruptcy and one year after Chapter 13 to apply.
3. Qualifying Properties: A VA loan can only be used for a personal residence (a house or condo) but not an investment property. However, if the vet occupies the property, a VA loan can be used to purchase two- to four-unit properties, using the rental income from the other unites to offset the mortgage payments.
4. Loan Limits: The current maximum amount of a VA loan is $417,000 but as high as $801,950 for a multi-unit, owner-occupied property. And the loan limits are higher in Alaska, Guam, Hawaii and the U. S. Virgin Islands. However, VA loan eligibility can be applied to a jumbo mortgage of up to $1 million if the applicant makes a 25 percent down payment on the amount above the conventional $417,000 limit. (Thus on a $517,000 purchase price, the vet would only have a $25,000 down payment -- which amounts to less than 5 percent on the overall purchase price.)
5. Refinancing for Cash Out: A VA loan can also be used to take cash out of a home. Since the mortgage is guaranteed up to 100 percent of the home's value, many vets choose to refinance even non-VA loans into a new VA loan, in order to withdraw much needed cash from home equity.
If you qualify for the VA mortgage program, you'll need a Certificate of Eligibility (COE). Once you have that, most lenders will work with the VA to get the loan guarantee and process your mortgage. To learn more, go to the VA benefits website www.ebenefits.va.gov.
Or call the eBenefits Help Desk at 1-800-983-0937. In Illinois, and six other states, my VA loan expert is Daniel Chookaszian at Perl Mortgage, 312-376-2215. He is also a military chaplain, and has been a long-time proponent of helping vets access these benefits.
America remembers our veterans' service. And that's The Savage Truth.