In this episode, we went over what you need to know about buying a home with a VA Mortgage. If you’re an active duty service member or a military veteran looking for a great deal on a home loan, you owe it to yourself to look into the VA loan. With incredibly low rates and a minimum credit score requirement of 620, VA loans are one of the best loan programs in the mortgage market. You might be surprised at how easy it is to qualify and be approved for your home loan.

One of the first questions is…

Have you accessed your certificate of eligibility?

The certificate of eligibility is one of the first things we’ll ask for. You can find this on the VA site, you can Google “certificate of eligibility VA,” or you can give us a call and we’ll help you find it. What we’re really looking for on that certificate is whether or not you have an exemption from the funding fee. A funding fee is very similar to upfront mortgage insurance. If you’re not disabled, according to the VA department, you will need to pay a funding fee, the exact amount of which will vary.

This will also help us answer the question of whether you have used any of your entitlement that’s not recoverable. If you have, that still might not be a problem. You just may not have full entitlement. The typical person probably doesn’t need full entitlement to buy their homes, particularly if that person is a first-time homebuyer. It obviously helps, but we look at the certificate of eligibility, we’re looking at not only the funding fee, but also if it has been used or if there has been a charge-off or any foreclosures.

We have a page on our site called VA Loans that highlights the program details and shows the funding fee schedule. In most cases, most veterans who buy a home are actually going to go with zero down because the interest rate is the same and there are no extra costs.

What exactly is the funding fee?

The funding fee acts as an insurance bank so that when a loan has 0% down and is defaulted on, the VA can be made whole again. The VA actually has a guarantee to the bank. The bank funds the mortgage and the VA guarantees that that veteran. You can think of it, essentially, as insurance.

Are there any limits to the purchase price?

In Maricopa County, today, veterans can go zero down for up to $484,350 on a loan. Once you go past that a down payment will be required.

The Application Itself

The application itself is very similar to a normal loan application. We’ll be asking the borrower for their names, social security numbers, date of birth, where they’ve lived and worked for the last two years. However, for assets like where they bank, veterans do not need reserves and, in some cases, no reserves are needed.

A veteran with just $500 can purchase a home. We’re not too concerned if a borrower has a little money saved or not. It’s possible to do that mortgage because they can have the seller kick in 4% of the sales price toward closing costs and prepaids, which in most cases will cover all of their closing costs and prepaids.

How about mortgage insurance?

There’s no mortgage insurance with VA loans and the interest rates are fantastic. If you have a 660 credit score your rate will still be better with a VA loan than it would be for someone with an 800 credit score getting a conventional loan with 25% down.

What is the veteran allowed allowed to pay for and what does the seller have to pay for?

There used to be a lot of old rules that said that veterans couldn’t pay for some fees. But today, veteran’s can basically pay for everything. The one thing to note is that the lender cannot be charging more than one point. The lender fees cannot be more than 1%. For example, let’s take a $200,000 loan. If I’m a lender and I’m charging $2000 in origination charges, then the veteran cannot pay the escrow fee nor the lender fee. The fees will be capped at 1% for the borrower.

Termite Reports

When you’re buying a home with on a VA loan, you have to get a termite report. And in Arizona, the buyer can pay for it.

On the Appraisal Process

Once we actually start the loan, the VA appraisal is a very normal process. However, one of the unique things about it is that it’s ordered through the VA department. VA appraisers have had a bad rap for being tough, but it’s very rare to have issues today.

Wrap Up

The VA loans are great loans. They’re not difficult and they have a ton of flexibility and allowance for high debt ratios. Once we start the loan, we can finish these things up in 30 days. The only case a conventional loan might compete with a VA loan is if you’re going to be in the home for less than two years and you’ve got a great credit score. In these cases it might not be worth paying the funding fee, so we’ll want to explore a different route.

If you have any questions about this or if you have any questions you’d like us to answer on our podcast, you can email your questions to team@azmortgagebrothers.com or give us a call at (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

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Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.

Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.

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