Wednesday, February 15, 2012
Calling All Soldiers Past and Present.
Uncle Sam wants you to know that you have access to the best home loan program available today through the VA! Wow, I feel like Snoop Dogg rhyming like that (sarcasm font).
As you may have guessed by now, this post is all about the VA home loan program which I believe to be one of the best loan programs available to purchase a home. Why you ask? It's simple, VA loans have lower interest rates than Conforming loans, usually about 0.25% lower. On top of that, there is no down payment required to obtain a VA loan and unlike just about any other purchase loan without a 20% down payment, there is no Mortgage Insurance (PMI)! Let me slow down and explain how this works in practice.
Last year my good friend Gus who is a Marine called me up to ask some questions about VA loans. Gus really believes in the value of home ownership and in a conversation with one of his Marine buddies Juan, he asked why he was still renting. Well Juan really had never thought about buying a home before but he was married with a small child and the idea sounded good to him. When Juan called me up he told me that his credit was not great and that he only had about $3,000 saved up which was from his tax return. He also told me that he could not really afford to spend more than he was paying in rent which was about $1,700 per month.
With a traditional loan program these are all red flags. Questionable credit, little to no savings and a tight budget. With a VA loan, it turned out that none of these things stood in our way. The VA does not have a minimum credit score so that was not a problem. Once he found the house that he wanted I made sure to tell him to ask the seller to pay for his closing costs which they did. With no down payment and no closing costs Juan didn't have to bring any money in to close the loan. As for his budget, we were able to reduce his payment to $1,450 per month which included his tax and insurance saving him $250 per month. Needless to say, Juan and his family were very pleased with the end result and are enjoying their home which is actually bigger than the home they were renting. This is why I believe that the VA Purchase Loan is one of the best available loans out there.
Now for the million dollar question, what is the catch? The primary "catch" is that you must be active in the military or be a veteran. The VA also has what is called a funding fee that varies depending on what type of service you completed. If you were considered a disabled veteran there is no funding fee. If you were/are a reservist the fee could be as high as 2.45% of the purchase price of the home. That fee is rolled into the loan balance so it is not something that has to be paid at the loan closing.
If you are active military or a veteran, or you know someone who is, do them a favor and pass this post onto them. Just like Gus, you may be responsible for helping them get a home of their own.