The VA Home Loan program was established in 1944 to provide Veterans, Service Members, and select military spouses with special government-backed mortgages that offer competitive interest rates and typically require no money down.
Because the loans are government-backed, VA mortgages are much easier to qualify for and require no private mortgage insurance (PMI). While there is no maximum amount that an eligible loan applicant may borrow under the VA program, the maximum amount for which the VA will guarantee one of its loans in Miramar, FL is $484,350.
More Benefits of a VA Loan
Competitive interest rates, no money down, and no PMI are just a few of the perks afforded VA home loan recipients. Beyond these, the lender or seller cannot charge the borrower for attorneys’ fees, and the real estate agent is prohibited from charging the buyer a commission. Likewise, the VA borrower doesn’t get charged for notary fees, recording fees in excess of $17, buyer broker expenses, or transaction coordinator costs. VA loans are easier to qualify for because banks, with little risk of default due to the government’s backing of these loans, allows VA borrowers a higher debt-to-income ratio than traditional loan borrowers.
And the benefits don’t end there. Not only will you not have to pay a penalty if you pay the loan off early, you’re also automatically eligible for free VA assistance if you have trouble making payments. If you’re a Veteran, Service Member, or qualifying military spouse, there’s a lot to like about the VA program.
Drawbacks of a VA loan
For a prospective homeowner looking to use the VA loan program for his or her primary residence, there really aren’t too many drawbacks other than the VA Funding Fee. The program cannot be used for investment properties or for a second home, and the borrower must stipulate at closing that he or she intends to make the home his or her primary residence.
The VA Funding Fee is a fee that gets paid directly to the VA and goes toward keeping the program going. The good news is the fee can be worked right into the loan, and those with disabilities stemming from their service are exempt from paying it. The bad news is it’s not a small fee: it is 2.15% of the loan amount. On a $150,000 mortgage, with no money down, you’ll be looking at a fee of about $3,225, which when rolled into the mortgage can add up to over $5,500 in total costs over the life of the loan.
Who is Eligible?
If you’ve done the math and have decided the benefits of a VA mortgage outweigh the drawbacks, your next step will be to obtain a Certificate of Eligibility (COE). Contrary to some of the myths surrounding VA loans, combat veterans are not the only ones eligible to receive a VA-backed loan. In fact, those eligible for the VA loan program include:
Active duty service members
Current or former activated National Guard or Reserve members
Current National Guard or Reserve members who have never been activated
Discharged National Guard members who have never been activated
Discharged Reserve members who have never been activated
Surviving spouses of veterans who died on active duty or who have a service-connected disability
Cadets at the U.S. Military, Air Force, or Coast Guard Academy
Midshipmen at the U.S. Naval Academy
National Oceanic & Atmospheric Administration officers
Public Health Service officers
Obtaining the COE is an important first step, because it confirms for your lender that you qualify for a VA-backed loan. To learn more about the application process or to apply for a COE, click here.
The VA Home Loan Closing Process
One of the first steps to take after receiving your COE from the VA is to hire a real estate attorney like Bruce R. Jacobs. You should do this even before you begin shopping for homes, so you can pivot quickly when you find one you like.
A real estate attorney can help you navigate the paperwork part of the VA home loan closing process, from preparing the purchase agreement to reviewing the closing documents and closing the transaction. VA loans can be a bit more complex than traditional loans, so hiring a closing attorney can help clear away any confusion that may arise during the process.
Once you’ve found the home you want, your offer has been accepted, and financing has been arranged with your lender, then your closing agent will get to work. At least three days prior to closing, you’ll receive a Settlement Sheet (also called a Closing Disclosure or Closing Statement) that details all of the costs and fees you’ll need to pay (or have paid) for the property to become yours. Your closing attorney will review all the documents with you and show you where you’ll be asked to sign. Once the documents are reviewed and in order, you’ll be ready for closing.
What to Expect at Settlement
Like traditional mortgages, VA loans come with closing costs and expenses. “Closing costs” is a generic term for the fees and charges that you or the seller will be obligated to pay at closing. Some of the more common closing costs for homebuyers include:
Origination Charge (up to 1% of the loan amount)
Termite inspection (typically paid by the seller in VA-backed transactions)
Flood Insurance Premium
Property Tax Pre-payment
Homeowners Insurance Premium
Homeowners Association Fees (if applicable)
Home warranty Fees
Title Insurance Premium
Your real estate attorney will go over each of these fees to be sure you understand them and to make sure your interests are protected throughout the closing process and the closing of the transaction. Your attorney may also seek seller concessions (up to 4% of the loan value) to pay for non-loan related expenses, such as prepaid taxes, insurance, or any outstanding collections, judgements, or lease termination fees.
What to Do Now
If you are considering a VA Home Loan, you will need the help of a trained, experienced real estate attorney to ensure that the contract terms are being satisfied and your rights are protected if legal issues arise in your real estate closing.]
Get A Free Case Evaluation – Call (954) 986-6446
Contact Bruce R. Jacobs to find out how he can help you. You can contact him by phone at (954) 986-6446 or by e-mail through this web site to schedule an appointment and learn more about your rights. He offers a free initial consultation.