Veteran Home Loan Program: Your key to homeownershipJohn MazzaraU.S. Department of Veterans Affairs, closing costs, adjustable-rate mortgages
Many people are kept out of the housing market due to lack of a
sufficient downpayment and/or funds available for closing costs.
However, these potential homeowners can afford to make a rental
payment that would be equivalent to a mortgage payment. In fact,
the lack of resources is what keeps veterans renting (instead of
becoming owners), as they try saving money to buy a home.
Meanwhile, home prices continue to appreciate as housing continues
to rise in cost.
Here is where the U.S. Department of
Veterans Affairs' (VA) Veteran Home Loan Program excels over
competing loan products. VA mortgages allow for a home to be
financed, in one loan, up to 100 percent of the acquired home's
value. In addition, the seller is allowed to pay most, if not all
of the closing costs and prepaid items. This means little to no
cash out of pocket. Most housing types are
eligible—residential homes, condominiums, townhouses,
manufactured homes, new construction and even one- to four-unit
rentals, additional conditions apply. If a lack of available funds
is the issue preventing homeownership, VA loans offer the
solution.
Still, very few veterans take advantage of this type of
mortgage. It is a shame that more veterans don't familiarize
themselves with this benefit. The interest rate is the same or
lower than most conventional financing. The mortgage products
offered range from 10- to 30-year fixed-rate mortgages,
adjustable-rate mortgages (ARMs) and even temporary buy-downs are
allowed. The eligible loan amount is the same as a conforming
conventional loan, which is currently at $417,000. In addition, VA
financing can be used for refinancing existing homes. As you can
see, the product isn't the problem. The product is as competitive
as most that are available. The lack of awareness is the problem.
Ask your Mortgage Broker or lender to explain your options. If he
doesn't offer the VA mortgage, then find someone who does. In the
end, you may end up with a conventional or Federal Housing Administration (FHA)
loan, if these products are better suited for your situation. Until
you compare mortgage options, you won't know what is right for
you.
Another advantage of a VA mortgage is the flexibility found
within the underwriting process. Employment history is very
flexible. Credit for all types of mortgages is more stringent today
than in the past. That being said, the focus is going to be on the
last 12 months of payment history. Underwriting can use alternative
sources of credit such as utility bills and cancelled checks if the
credit depth is weak. A prior bankruptcy or foreclosure is also
forgivable. Depending on the type of bankruptcy, you would be
eligible one to two years following your discharge date, if you've
re-established positive credit.
Who is eligible to obtain this loan? Many veterans and even some
of their spouses can obtain a VA mortgage. Here is a very short
list of who is eligible: Veterans who served during World War II,
Korean Conflict, Vietnam War or Persian Gulf Conflict, as well as
veterans who have served 90 days of active duty, been honorably
discharged or veterans that were National Guard/Reservists
activated. Veterans with service during peacetime periods and
active duty military personnel must have had more than 181 days of
consecutive active service before becoming eligible. Reservists and
members of the National Guard are eligible after six years of
enrollment in a selected service. There is even a program for
non-active duty spouses. Consider this: An un-married spouse of a
veteran who died while in service or from a service connected
disability, or a spouse of a service person who is considered
missing-in-action/prisoner-of-war for at least 90 days is also
eligible.
Veterans have spent a part of their lives defending our way of
life. Freedom isn't free. Why shouldn't they be allowed to
participate in the very same American dream that they selflessly
protected for you and me? The VA loan was created to help those
that have helped all of us. Collectively, we can spread the word
about the benefits of this unique type of loan.
John Mazzara, CMB is president of Venture Development Inc.
He may be reached at (952) 929-2577 or e-mail
[email protected].
