Question: I’m a Veteran, and someday I want to buy my own house.
> When I joined the service, I never thought to inquire much about the > VA home loan program.
> But from what I understand, a VA loan is a very, very, good way for > someone to buy a house.
> Has anyone hear used a VA home loan to buy a house ? Is it that great > of a deal to use one of these loans ?
Answer: I used the VA guaranteed loan program in 1994.
There were additional inspection criteria on the house linked to the loan. These were primarily added to protect the purchaser from substandard properties and were not out of line with the inspections required using a HUD/FHA loan.
The VA does not lend the money. It is a “loan guarantee” program, and you must apply for a mortgage (specify VA) with a mortgage lender and meet the underwriter’s financial criteria to qualify for a home loan.
The real savings is due to the 20% loan guarantee. That saves the cost of Personal Mortgage Insurance (PMI) in the event something happens and the loan is abandoned or otherwise defaulted. This protects the lender’s top 20% of the mortgage value due to devaluation or damage resulting from foreclosure. The cost savings is roughly .05%, or $50.00 per month on a $100,000 mortgage. PMI is generally required on all mortgages with a less than 20% down payment or in the case of refinance 20% equity.
The interest rates are the same over the term of the mortgage as any other mortgage. Because the closing costs are based on a % of the sale (funding fee, appraisal, title insurance) the overall interest rate may calculate higher to show interest charged against these items. Nearly all mortgage lenders require insurance to protect from damage and escrow funds to budget for ad valorum property taxes and insurance premiums.
At that time, all that was required was a $500.00 down payment opposed to 3% for FHA/HUD and 5% for conventional financing. The closing costs were also be “rolled into the loan”, roughly leaving a 103% loan against the purchase price of the home. As I recall, most of the $500 paid the homeowners insurance policy and escrow account due at closing.
Best wishes,
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