VA Mortgages have been around in some form since 1944 through the original Servicemen’s Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home loan requiring no down payment. This feature was designed to provide housing and assistance for veterans and their families, and ever since this program has assisted millions of veterans in becoming homeowners. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation’s economy. At the time this was written it is estimated that more than 25.5 million veterans and service personnel are eligible for VA financing. This mortgage is beneficial to those who serve or have served our country and has many advantages over other finance types.
Eligibility for the VA mortgage is restricted to Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.The Veterans Administration will guarantee a maximum of 25 percent of a home loan amount based on the veterans entitlement. Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed. All veterans must qualify, for they are not automatically eligible for the program but restrictions are eased for veterans in comparison to conventional mortgage financing.
VA guaranteed mortgage loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy and Guaranteed by the Veterans Administration. The guaranty means the mortgage lender is protected against loss if you or a later owner, via assumption, fails to repay the mortgage loan. The guaranty replaces the protection the mortgage lender normally receives by requiring a down payment or mortgage insurance allowing you, as a qualified veteran, to obtain favorable financing terms.
Blemished Credit History
If your credit is less than perfect, VA might be the loan for you. You may qualify for a VA mortgage loan with 100% financing even though you have had financial problems.
- Credit scores can be lower than those for a conventional mortgage. Global Home Finance Inc. has access to more than one lending source providing financing for Qualified Veterans with Credit Scores as low as 560!
- Bankruptcy. You can obtain an VA mortgage loan two years from the date of your bankruptcy discharge, as long as you’ve maintained good credit since your debts were discharged.
- Foreclosure. If you keep your credit in excellent shape since a foreclosure, a VA loan will be available to you three years from the final date of your foreclosure.
Competitive Rates & Terms
Even if you have less than perfect credit you still get an “A-paper” like interest rate.
- There is little adjustment to the interest rate for a VA mortgage loan due to credit score versus a conventional mortgage loan.
- A VA funding fee(see chart below) of 1.25% or more for first time use is added into the loan balance instead of being paid out-of-pocket.
In addition, there is no need for any monthly mortgage insurance premium when your loan to value is over 80% as is the case with FHA and Conventional mortgages.
- Borrowers can finance 100% of the purchase price.
- Allowable debt ratios are higher than the debt-ratio limits imposed for most conventional mortgage loans.
VA Funding Fee Chart (as of 12/05/2013)
Note: The funding fee for ALL subsequent use loans closed on or after October 1, 2006, and before October 1, 2007, is 3.35 percent. This applies to all purchase loans where no down payment of 5 percent or more is made as well as cash-out refinances where the fee would have been 3.3 percent. Effective October 1, 2007, the subsequent use fee reverts back to 3.3 percent.
Purchase and Construction Loans:
|Type of Veteran||Down Payment||% For First Time Use||% For Subsequent Use|
|5% or more (up to 10%)||1.50%||1.50%|
|10% or more||1.25%||1.25%|
|5% or more (up to 10%)||1.75%||1.75%|
|10% or more||1.5%||1.5%|
Cash-Out Refinancing Loans:
|Type of Veteran||% For First Time Use||% For Subsequent Use|
*The higher subsequent use fee does not apply to these types of loans if the veteran’s only prior use of entitlement was for a manufactured home loan.
Other VA Loan Scenarios
|Type of Loan|
|Manufactured Home Loans (NOT permanently affixed)||1.00%|