We are fortunate that we have a strong population of veterans that call Prescott home. However, most people do not realize that we have one of the largest veteran populations in the country for a community that doesn’t contain a military institution. We should all take the time to thank our veterans for their service and the sacrifices they made during that time of service.
Many veterans come here to take advantage of all the wonderful things that the Quad Cities region has to offer. Interestingly though, many do not inquire about one of the best VA benefits provided to them, which is the VA home loan program. This may be because of a misunderstanding of how the program works or a lack of knowledge about what it provides. So, let’s take a look at the VA loan program.
The VA loan program allows a veteran, or a veteran and his or her spouse (including the spouse of a deceased veteran), to purchase a home with $0 down payment and slightly more leniency on the amount of monthly recurring debt they may have. The home that is being purchased will be appraised by a VA approved appraiser who will not only calculate the market value of the home, but will also look for health and safety issues to make sure the home is suitable for the veteran and/or the veteran and the family.
In return, the VA will charge what is called the VA Funding Fee, which can be financed into the loan. This funding fee is for the sole purpose of providing a type of insurance to the lenders in case the borrowers were to go into default. The VA Funding Fee is waived, however, if the veteran has been awarded at least a 10% VA related disability. The waiver of this fee is another great benefit to our servicepeople who have made sacrifices in serving our nation.
There are some other requirements that go along with a VA loan, such as a termite inspection and well inspection to make certain that the veteran is not inheriting some problems with the home that were not apparent. Outside of these few items, a VA home loan is not much different from other loan programs. Unfortunately, many times we speak to people who have either heard or believe some of the misinformation about VA financing and therefore do not pursue that form of loan program.
One of the largest fallacies about the VA loan program is that it can be used only once. Nothing could be further from the truth. The VA determines the amount of the loan for the program based on the amount of the veteran’s entitlement. A veteran starts with an entitlement of $36,000 and currently that would allow a veteran to obtain a mortgage of up to $484,350. If the veteran at any point pays that loan off, the entitlement of $36,000 is re-established and another VA loan up to $484,350 can be obtained.
Another fallacy is that a veteran cannot obtain another home with a VA loan if he or she currently has a VA loan on a home. That also is not true. A veteran can buy another owner-occupied home – the key is owner-occupied – with a VA loan, depending upon the amount of entitlement that is left. In my previous example, all the entitlement was used. So, let’s look into a hypothetical example. Let’s say a veteran purchased a home 10 years ago with a VA loan and that loan amount was $230,000. Today, that person wants to buy another home and move into it. Without going into the specific mathematical details, we can say that the veteran has approximately enough VA entitlement to buy another home up to $254,000 with zero money down. This again is just an approximation and I would be more than happy to discuss specific numbers with anyone interested in learning more.
Finally, but not the final fallacy, that I will discuss is one where a veteran believes he or she cannot get another VA home loan because of losing a previous home to either foreclosure or bankruptcy. Again, this one is not true if the veteran has re-established a good credit history. Determining the amount that the veteran can borrow on the new VA loan can be a little tricky, again because of the amount of eligibility remaining. But certainly, a new VA loan can be obtained if the veteran meets certain requirements. QCBN
By Mick Szoka
Szoka can be reached at 928-220-3504 or email@example.com. Union Home Mortgage is located at 325 W. Gurley St, Suite 104, in Prescott.