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VA Loan summary
In 1944, the U.S. government created a military loan guaranty program to help returning service members purchase homes. The result, the VA Loan, is a mortgage loan issued by approved lenders such as Veterans United Home Loans and guaranteed by the federal government. Since its inception, the VA Loan program has helped place more than 20 million veterans and their families into an affordable home financing situation through its distinct advantages over traditional mortgages.
Today, the VA Home Loan program is more important than ever to service members. In recent years, lenders nationwide have tightened their lending requirements in the wake of the housing market collapse, making the VA Loan a lifeline for military homebuyers, many of whom find difficulty when faced with tough credit standards and down payment requirements.
Like all home loans, VA Mortgages have considerable details and information to review. I Loans encourage you to yourself on the specifics of this exclusive home loan benefit. If you have further questions, I invite you to call me (414) 627 8286.
Regulations and Fees
Although the VA Loan is a federal program, the government generally does not make direct loans to veterans. Instead, private lenders finance the loan while the Department of Veterans Affairs offers a guaranty.
This guaranty, which protects the lender against total loss should the buyer default, provides incentive for private lenders to offer loans with better terms.
In most parts of the country, veterans who qualify for the VA Loan can purchase a home worth up to $417,000 without putting any money down; however, with the 2013 VA Loan Limits, borrowers in high-cost counties may be able to purchase homes far exceeding that amount without a down payment. To find out the VA Loan Limit in your area, give me a call toll-free at (414) 627 8286.
The VA Funding Fee goes directly to the VA to ensure the program keeps running for future generations of military homebuyers veterans. The fee varies depending on the borrower’s
circumstances and does not apply for veterans with service-connected disabilities. For example, if this is your first time using the VA Home Loan Program, the funding fee is typically 2.15 percent of the purchase price of the home. For subsequent use of your VA Loan benefit, the fee is 3.3 percent.
VA borrowers can roll the funding fee into their overall loan amount. The VA also limits closing costs for veterans and allows sellers to pay most or all of those expenses. Many of our borrowers purchase a home with no money due at closing.
VA Loan vs. Traditional Mortgages
Military homebuyers have access to one of the most unique and powerful loan programs ever created. See how the VA Loan compares to a traditional home mortgage:
|VA Loans||Conventional Loans|
|0% Down(for qualified borrowers)VA Loans are among the last 0% down home loans available on the market today.||Up to 20% DownConventional loans generally require down payments that can reach up to 20% to secure a home loan, pushing them out of reach for many homebuyers.|
|No PMISince VA Loans are government backed, banks do not require you to buy Private Mortgage Insurance.||PMI RequiredPrivate Mortgage Insurance is a requirement for borrowers who finance more than 80% of their home’s value, tacking on additional monthly expenses.|
|Competitive Interest RatesThe VA guaranty gives lenders a greater degree of safety and flexibility, which typically means a more competitive rate than non-VA loans.||Increased Risk for LendersWithout government backing, banks are taking on more risk which, in turn, can result in a less-competitive interest rate on your home loan.|
|Easier to QualifyBecause the loan is backed by the government, banks assume less risk and have less stringent qualification standards for VA Loans, making them easier to obtain.||Standard Qualification ProceduresConventional options hold stricter qualification procedures that can put homeownership out of reach for some homebuyers|
VA Home Loan Eligibility Requirements
Through dedicated service to our country, military service members and veterans qualify for a range of benefits. Chief among those is an opportunity to take part in the VA Loan
program – a mortgage option that provides the opportunity for qualifying veterans to purchase a primary residence without putting any money down towards the sale price of the home.
While the VA Loan is designed specifically for those who served, there are a handful of requirements. In order to qualify for a VA Loan there are specific service conditions each borrower must meet.
You may be eligible for a VA Home Loan if you meet one or more of the following conditions:
- You have served 90 consecutive days of active service during wartime, OR
- You have served 181 days of active service during peacetime, OR
- You have more than 6 years of service in the National Guard or Reserves, OR
- You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.
Refinancing with a VA Loan
The VA Home Loan program provides qualified homeowners with a simple way to take advantage of lower rates and decrease their monthly mortgage payment. Beyond that, military homeowners can get cash back on a VA refinance and use the proceeds for a variety of needs, from paying off debt or making home improvements and much more. The current economic climate makes now a great time or many military homeowners to take advantage of the numerous benefits found in a VA refinance.
Two main programs help VA borrowers refinance to a lower rate — the VA Streamline Refinance, also known as the Interest Rate Reduction Refinance Loan (IRRRL), and the VA Cash-Out Refinance.
Two Great VA Loan Refinancing Options:
|VA Streamline (IRRRL) Refinance||Cash-Out Refinance|
|Often called a “Streamline” refinance, the Interest Rate Reduction Refinance Loan (IRRRL) option is great for existing VA Loan holders who are looking to realize significant savings and take advantage of lower interest rates.||An option for those with a VA or conventional loan looking to take advantage of their home’s equity to access cash for home improvements, emergencies, pay off debt, or any other purpose.|
A Streamline Refinance allows veterans who currently have a VA Loan to refinance into a lower interest rate, reducing monthly mortgage costs. Streamline refinance loans feature little paperwork and often require little-to-no costs out of pocket. Borrowers can roll closing costs into their overall loan amount. Some homeowners can also secure a Streamline refinance without an appraisal.
The other popular option, known as the Cash-Out Refinance, allows borrowers to tap into their home’s equity and use it as cash. This type of refinance is available to any qualified veteran homeowner, regardless of whether they have a FHA, USDA or conventional loan.
The current economic climate makes now a great time for many military homeowners to take advantage of the numerous benefits found in a VA refinance.
VA Streamline (IRRRL) Refinancing
The Streamline refinance, or Interest Rate Reduction Refinance Loan (IRRRL), is one of the best options for homeowners who already have a VA Loan and would like to refinance into a lower monthly mortgage rate.
This refinance type is relatively easy and can be completed quickly, due to the fact that homeowners are refinancing from one VA Loan product to another. With this type of refinance, there are several prominent advantages, including no required appraisal in some cases, no need to obtain another Certificate of Eligibility and little to no out-of-pocket costs.
To avoid out-of-pocket costs, homeowners can choose to roll the closing costs and fees into the balance of the loan.
There are only a few requirements and stipulations. Primarily, the borrower is not allowed to receive any cash back from the IRRRL and the borrower must also certify that he or she currently or has previously occupied the property.
Save with Lower Rates
Today’s interest rates are at competitive levels, and with a reduction of just a half of a percent, a borrower could potentially generate tens of thousands in savings over the life of a loan:
|Amount Paid In Interest||Total Savings over 30 years|
|150K 0.5% lower interest||$19,033.75|
|150K 1% lower interest||$32,696.48|
|250K 0.5% lower interest||$31,254.16|
|250K 1% lower interest||$54,494.12|
|350K 0.5% lower interest||$43,755.83|
|350K 1% lower interest||$76,291.77|
|450K 0.5% lower interest||$56,257.50|
|450K 1% lower interest||$98,089.43|
Savings and interest rates shown here are for illustrative purposes only and may vary based on a variety of factors. All loans require approval and proof of eligibility and are subject to the complete terms and conditions outlined in the loan agreement documents.
- The Streamline refinance is a simple process compared to originating the first VA mortgage.
- Closing costs and fees can be rolled into the new loan, meaning no out-of-pocket expenses.
- The IRRRL, or Streamline program, allows you to refinance into a fixed rate or adjustable rate loan.
- Your monthly payment for the IRRRL must be lower than the previous loan’s monthly payment; the Streamline payment may be higher than your current payment if you are refinancing into an adjustable rate mortgage
- You must be current on your mortgage with no more than one 30-day late payment within the past year.
Getting started on a Streamline refinance is easy and the whole process can be completed in a surprisingly short amount of time.
- NO re-appraisal needed in most instances
- NO new Certificate of Eligibility required
- NO requirement for out-of-pocket costs
The George Waldkirch is a VA Loan expert and is proudly ready to guide you through the refinancing process and can answer all the questions you may have.
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