Home>>Mortgage News>> Are VA Loans Legit?
Short Answer: Yes. VA Loans are legitimate and a great way to secure housing if you have served our country.
However, According to recent data, VA loans are often overlooked in comparison to conventional loan funding.
Some veterans are finding it difficult to obtain a home in today’s market. According to the National Association of Realtors (NAR):
“Conventional conforming mortgages (mortgages that conform to guidelines set by Fannie Mae and Freddie Mac), accounted for 74% of mortgages obtained by homebuyers in May 2021, an increase from about 65% during 2018 through 2019…The share of VA-guaranteed loans has also decreased to 7% in May 2021 from about 10% in past years.”
Why does this happen?
Well, unfortunately, there are some caveats to VA financing. To learn more about VA financing options click here. If you are a veteran we want to ensure you are getting the most out of your benefits. However, there is nothing in the VA loan process that makes it lesser than conventional loan financing.
As a seller, it’s important to consider every offer in front of you regardless of loan type. If you’re selecting an offer because some contingencies are waived, keep in mind that it doesn’t always mean the offer is what’s best for you.
Buyers who can’t waive specific contingencies may adjust other terms in their offer to make it more appealing to sellers. This may depend on several factors, including their loan type and location, but a motivated buyer and their agent will do everything they can to present an offer that’s as appealing to you as possible.
Ultimately, you should make sure you take time to really understand the terms of their offer and see the big picture. Working with a driven buyer who’s motivated to purchase your house may provide a better opportunity for you to reach your overall best option and what’s most important to you.
As a realtor, it’s important for you to ensure that your clients are considering each and every offer that comes in. VA Financing is just as sound as any other financing. You should take pride in helping veterans obtain the home of their dreams.
As a veteran, you should know that a VA Loan is a great option for you. Often times VA loans can lock you into a lower mortgage rate in comparison to other loan options. VA Loans typically require a lower down payment as well. To read more about VA Loans click here
In order to qualify for a VA loan, the following must be true:
- Qualify for a VA-backed home loan Certificate of Eligibility (COE)
- Meet the designated standards for credit, income, and any other requirements
- Will live in the home you’re buying with the loan
What is a VA Loan?
A VA Loan is a home loan that is backed by Veteran Affairs. There are several loan types available to those who meet the qualifications.
VA Home Loan Benefits:
- No down payment as long as the sales price isn’t higher than the home’s appraised value
- Competitive terms and interest rates than other loan types
- No VA Loan Limit (for more information regarding VA Loan Limits please click here)
- No need for private mortgage insurance (PMI) or mortgage insurance premiums (MIP)
- PMI is a type of insurance that protects the lender if you end up not being able to pay your mortgage. It’s usually required on conventional loans if you make a down payment of less than 20% of the total mortgage amount.
- MIP is what the Federal Housing Administration (FHA) requires you to pay to self-insure an FHA loan against future loss.
- Fewer closing costs, which may be paid by the seller
- No penalty fee if you pay the loan off early
If you qualify for a VA-backed purchase loan, you can use the loan to:
- Buy a single-family home, up to 4 units
- Buy a condo in a VA-approved project
- Buy a home and improve it
- Buy a manufactured home or lot
- Build a new home
- Make changes or add new features (like solar power) to make your home more energy efficient
You can also:
- Get a VA-backed home loan to buy your first home
- Use your VA loan benefit to obtain a secondary loan
- Assume a VA-backed home loan (which means that instead of opening a new mortgage loan, the buyer takes over the seller’s loan)
What other loan types are available to veterans?
If you currently have a VA loan and are looking to reduce your monthly payment amount or change the terms of your mortgage a VA IRRRL may be right for you.
VA IRRRL (interest rate reduction refinance)
In order to qualify for a VA IRRRL, the following must be true:
- Already have a VA-backed home loan
- Are using the IRRRL to refinance your existing VA-backed home loan
- Can certify that you currently live in or used to live in the home covered by the loan
What are the benefits of a VA IRRRL? You may be able to:
- Lower your monthly mortgage payment by getting you a lower interest rate
- Make your monthly payments more stable by moving from a loan with an adjustable or variable interest rate (an interest rate that changes over time) to one that’s fixed (the same interest rate over the life of the loan)
Cash-Out Refinance
If you currently have an existing VA Loan and are looking to take cash-out for home renovation projects, education funds, consolidating debt, or other reasons, a cash-out refinance may be for you.
A VA Cash-Out Refinance may help you to:
- Take cash out of your home equity to pay off debt, pay for school, make home improvements, or take care of other needs
- Refinance a non-VA loan into a VA-backed loan
In order to obtain a cashout refinance out the following must be true:
- Qualify for a VA-backed home loan Certificate of Eligibility
- Meet VA’s and the lender’s standards for credit, income, and any other requirements
- Will live in the home you’re refinancing with the loan
At Geneva, we take pride in our ability to help those who have served our country. Curious to see what your loan payment could look like? Try our interactive mortgage calculator below:
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