This past May, at the REALTORS® Legislative Meetings & Trade Expo, officials from the U.S. Department of Veterans Affairs asked the National Association of REALTORS® for help in debunking common misconceptions regarding the VA Home Loan Guaranty Program.
First established 70 years ago as part of the Servicemen’s Readjustment Act, the VA loan guaranty is a military benefit available for any individual who has served in active duty in any branch of the U.S. military for a minimum of 90 days. Since its inception, it has helped more than 21 million veterans.
At the meeting, John Bell, the Department of Veterans Affairs assistant director of loan policy and valuation, thanked REALTORS® for their role in helping make sense of the home-buying process.
“I have been so impressed with being able to work with the National Association of REALTORS® and its members on improving our outreach to the community,” said Bell. “You are the front line of defense when it comes to helping veterans understand this program. Without REALTORS®, veterans will not come.”
One common misconception regarding the loan concerns eligibility. While many believe the VA Home Loan Guaranty Program is just for servicemen and servicewomen, non-active duty personnel, such as those in the Army Reserves or National Guard, may also apply for a VA-backed mortgage—provided they have completed six years of service. Additionally, spouses of deceased or missing military members are also eligible if they’ve never remarried.
Another common misconception is the notion that VA-backed loans cost more than traditional loans over the long run, but this could not be further from the truth. In fact, one major advantage of a VA loan is that it doesn’t require a down payment. Another factor that ultimately keeps the cost down is the fact that VA loans don’t come with private mortgage insurance.
A VA loan will, however, require a borrower to pay a one-time funding fee on their purchase, which can be paid up front or financed into the total cost of the loan. The funding fee for regular military members is 2.15 percent of the loan, while reservists pay a fee of 2.40 percent. Bell recommends that REALTORS® remind lenders to request an appraisal early on in the process to make sure a VA-certified appraiser is able to value the property in advance of the closing date.
“People worry that they’re challenging to close or difficult to underwrite, and that the appraisal process drags on too long, yet the facts show that appraisal and closing times are on par with the rest of the industry,” Bell said.
To qualify, borrowers must show enough monthly income after paying personal debts and housing costs to meet “residual income” levels set by the department. A VA loan must be for a primary residence and the limits on the amount someone can get are based on median home prices in the area.
For more information about the VA Home Loan Guaranty Program, contact our office today.
Published with permission from RISMedia.