Honoring our veterans through VA mortgagesby Tim Manni
In honor of Veterans Day, I thought I’d go over some of the particulars of a VA home loan. Think of VA loans as one small way our country tries to honor our veterans for their service through an easily-accessible mortgage program, one which even offers a streamline refinance choice.
What is a VA loan?
VA loans are mortgages designed and designated for America’s servicemen and servicewomen. Just as Fannie Mae and Freddie Mac guarantee conventional loans against loss, VA loans are fully backed by the United States’ government.
Who is eligible?
You don’t just have to be on active duty to be eligible for a VA loan. Veterans of past wars, active duty personnel, reservists, members of the National Guard, and even certain surviving spouses are all eligible. The Department of Veterans Affairs has a “General Rules for Eligibility” page which offers the specifics and requirements for both wartime and peacetime service members.
What are the particulars?
There are several advantages that come along with a VA loan:
1) Down payment: Unless the loan size is greater than the value of the property being purchased, there is no down payment requirement for VA loans.
2) Loan size: There are no maximum loan amounts placed on VA loans.
3) Underwriting standards: Veteran applicants must have “satisfactory” credit and must possess the financial ability to repay the loan amount. Borrowers must also have a stable income stream and an acceptable debt-to-income (DTI) ratio. According to the VA, “A ratio in excess of 41% requires closer scrutiny and compensating factors.”
Besides very reasonable down payment and credit requirements, VA loans come with some additional advantages:
1) Homebuyer tax credit extension: Veterans who were out of the country on active duty during the time period which the homebuyer tax credit was in place have an extra year to take advantage of the tax credit:
Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011.
2) Refinancing is easy: VA mortgages can be refinanced easily, quickly and inexpensively. Veterans with existing VA Mortgages can refinance into a significantly lower interest rate or trade an adjustable rate mortgage (ARM) for a fixed-rate home loan regardless of your income, credit or home’s value. The loan that can get this accomplished is called an Interest Rate Reduction Refinancing Loan, or IRRRL.
Are you are a homeless veteran or know a veteran who is without a home? HUD has a page which offers both state and local resources for homeless veterans.
Don’t forget to take time to thank a veteran today.