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Veteran Home Loan Program: Your key to homeownership

National Mortgage Professional
Mar 24, 2014

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 john@johnmazzara.com.