Mortgage

Why don't 76% of Veterans benefit from their VA mortgage companies?

Veterans miss out on the benefits of buying a home

VA home loans are arguably the best mortgage available.

With no down payment required and the running costs extremely low, the VA mortgage program is cheaper than almost any other. And it's only available to those who have served in the U.S. military.

And yet – only 24% of current homeowners in the military enjoy these benefits. Which means that many leave money on the table.

If you are planning a purchase or refinancing, the VA loan should likely be your first port of call for financing.

Check your VA loan eligibility. Start here (3.11.2021)

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Seasoned homeowners do not take advantage of their VA loan services

Keep in mind that there are approximately 19 million veterans in the United States. And 78% of veteran households are homeowners.

That makes up about 14.8 million veteran households in the country. (And we don't even count active duty members.)

However, currently only 3.55 million eligible borrowers have VA loans.

Only 24% of qualified homeowners are currently using their VA loan services – and 76% are not.

That means that currently only about 24% of qualified homeowners are using their VA loan services – and 76% are not.

That's pretty amazing, given the unique benefits of a VA loan only available to veterans and service members.

Let's dig a little deeper into what these perks are, and why veterans may not take full advantage of them.

VA loans are the best on the market

VA loan benefits offer great value for those who qualify for the program.

“A VA loan may be the perfect mortgage as it gives applicants the opportunity to qualify for a no down payment option, a very attractive interest rate, and the benefit of being a government loan. That means the lender is exposed to less risk, ”said Jason Gelios, a real estate agent in southeast Michigan.

But the benefits don't stop there.

A VA loan does not require private mortgage insurance, although you do not have to pay a down payment. That means your monthly payment will be much lower than if you had chosen another loan that had monthly mortgage insurance fees.

“VA loans are (also) very lenient when it comes to credit requirements. Additionally, this loan includes acquisition cost limits, no prepayment penalties, and foreclosure avoidance, ”said Wayne Brown, senior partner at Dugan Brown, a state pension planning firm and retired captain of the United States Air Force.

Contrary to popular belief, once your loan is paid off, once your loan is paid off, your full eligibility will return and you can be eligible for a subsequent VA loan.

Finally, "The VA loan limit was lifted so a veteran can literally buy a million dollar home with no down payment as long as he qualifies for the payments," said Ron Siegel, of the Siegel Lending Team at Geneva Financial.

Why aren't more borrowers using their VA loan services?

All these advantages with one simple conclusion: The VA loan offers the best financing offer in the industry. People who do not qualify would happily be eligible for this mortgage loan.

Why isn't it more popular with veterans, service members, and other qualified borrowers?

“There are two main reasons more and more people are not taking advantage of their VA loan services,” notes Brown.

“The first is that many veterans are simply not aware of the benefits or how far the benefits go,” he says.

Second, there are additional processes and procedures that must be followed in order to use a VA loan. For example, a VA home inspection is much stricter than one done in the non-VA mortgage market. Expert opinions with VA loans also usually take longer. "

"A lot of veterans just don't know what the benefits are (home loans) or how far the benefits go" – Wayne Brown, Senior Partner at Dugan Brown, retired Air Force captain

“That means even people who are aware of its benefits may not be eligible for a VA loan if the home they are trying to buy is currently under construction or time is short,” explains Brown.

In addition, according to Chuck Vander Stelt, a real estate agent with Listing Leaders, VA loans are often not popular or competitive in the current real estate market because bidding wars and multiple offers can penalize these loans.

“Unfortunately, many real estate agents and home sellers have a misunderstanding of the additional requirements when buying a home with a VA loan. This makes home sellers reluctant to take a VA loan, ”says Vander Stelt.

> Related: Here's how to get a seller to take your VA loan offer

Just not knowing the VA loan exists is another big reason, according to Gelios.

“I have spoken to many veterans who were surprised when I asked if they were pre-approved for the VA loan. I don't think the benefits of this type of loan are conveyed enough to qualified veterans, ”he says.

Buying a Home Using a VA Loan

A VA loan offers many advantages over other types of mortgage loan, including no down payment required, no private mortgage insurance required, low interest rates, lower credit requirements, and the security of being a government-secured loan.

This makes it the perfect financing instrument for a new or existing purchase.

“Buying a home with a VA loan is similar to buying an FHA loan. It requires standard credit and income pre-approval and verification, a qualified valuer who is VA certified to make sure the house is compliant with VA department guidelines, and extra time to do credit checks, ”adds Gelios.

Brown says the steps required are relatively straightforward.

First, you need to make sure you find a VA approved lender, at which point you would choose your home, next you would draw up the sales contract, then a VA approved appraiser needs to ensure that the loan does not match the VA estimate of the home value Finally, the loan must be completed after the lender approves everything taking into account your creditworthiness and income

Start Your VA Loan Approval Here (Nov 3rd, 2021)

Refinancing with a VA Loan

If you currently have a non-VA loan, e.g. If you have the appropriate qualifications, you can refinance yourself with a VA loan, for example a conventional mortgage.

Keep in mind, however, that the only non-VA-to-VA refinancing option is a VA cash-out refinance, even if you're not looking to tap into your equity and pull cash out of your home. (Note that you don't actually need to withdraw cash.)

"The process involved mimics a regular refinancing, where the lender checks your creditworthiness, income, debt-to-income ratio and other factors," says Gelios.

"A VA Certified Appraiser will evaluate your home to ensure it meets VA guidelines and is valued."

One caveat: As with a VA purchase loan, you will have to pay a VA financing fee, which can be 2 to 3% of the loan amount if you refinance.

If you already have a VA mortgage loan but want to cut your interest rate, you can also get a VA Interest Rate Reduction Refinance Loan (IRRRL).

“For an IRRRL loan, all loan costs must be amortized within 36 months to remain eligible. Very few documents are required for this loan as the veteran has already made the payments and the new loan is by definition lower than the current payment, "says Siegel.

Check your VA eligibility for refinancing. Start here (3.11.2021)

When is a VA loan not useful?

Of course, just because you can qualify for a VA loan doesn't mean it is always the best option.

For example, if you are looking to purchase an investment property or a second home, the VA loan is not eligible.

"The VA loan is designed solely to help veterans and other skilled applicants with their primary home dream," says Gelios.

Another case where a VA loan may not be your best bet is when you are looking to build a new home from scratch.

“Buying land with a VA home loan is subject to strict requirements. You must start building your primary residence on the purchased property right away. If your goal is to use the land for farming, hunting, logging, or other activities, a VA loan would not be a viable option, ”warns Brown.

Siegel also recommends thinking twice about buying a VA loan if you don't expect to be stationed in the desired location for long.

The bottom line

Even if you are considering another type of loan, it is wise to understand how the VA loan works and what advantages it can offer over other programs.

“Any qualified borrower looking to buy a home should take advantage of the VA loan as it can offer a lower interest rate than a traditional loan, no down payment required, no private mortgage insurance and the elimination of potential junk fees, the other are more likely to have loans, ”says Gelios.

When in doubt, take the time to consult an experienced loan officer or lender who offers VA financing. They can help you evaluate all of your options and choose the best loan type for your situation.

Confirm your new price (November 3, 2021)

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