I can't count the number of times I've been working with someone who says, "Oh, yeah, I'm prequalified, got my letter from the VA right here." I work a lot with first time homebuyers and more specifically, military personnel. I live near a large army post, it's the reason our market stays strong. However, I find that many of these young soldiers are not properly educated on how to use their VA benefits to purchase a home. Here are a few key things to know when buying a house using a VA loan.
Just because the VA says you're eligible, doesn't mean you can get a VA Mortgage Loan
If you've never paid a bill on time in your life, you probably can't get a VA Mortgage Loan. Your loan still comes from a bank, so you have to have good credit. As of today the minimum credit score to get a loan is 620, through most lenders. If your credit was bad a while ago and you know you've been making strides, call a local lender and have them pull your credit. Also, be sure you're talking to a mortgage lender. Mortgage laws are constantly changing and if you're talking to someone who does consumer loans, i.e. cars, credit cards, personal loans, etc-they probably aren't up to date on the most current mortgage guidelines.
VA Funding Fee
The VA Funding fee is the way the government reduces the cost to taxpayers. You pay one lump sum up front rather than paying monthly mortgage insurance to a third party. Currently, the amount is 2.15% of the loan amount for your first VA home purchase. Most people choose to have this financed into the loan. Basically, this means instead of financing $100,000 for a home that's $100,000, you would be financing $102,150. The percentage of the VA funding fee goes up with each additional home purchased. So if you're using your VA benefits for the second time, be sure to ask how much the funding fee is.
Price Limits For Using a VA Loan
The biggest misconception comes from people who are using their VA benefits for the second time. Many agents don't even know this. If you have already purchased one home using your VA benefits and are planning to use a VA loan again to purchase your second home, the second home has to be at least $144,000. In most places, the maximum amount for a VA Loan is $417,000; however, this can be higher in certain areas. You can click here for a list of the higher limit counties.
Type of Home Eligible
What? Home eligibility? So not only do I have to be eligible, the house I'm buying does too? That's right, Chief. The Department of Veterans Affairs is there to look out for those who have looked out for us. What that means is, they don't want you buying just any ol' shack that's going to fall down as soon as you sign the paperwork. In order for a house to be VA Eligible, it has to meet a higher standard. The VA sets these guidelines and then a VA certified appraiser comes out to verify that the home meets them.
Now that you're a little bit more informed, happy home hunting. I am not a lender, VA representative or an expert on this subject. All information contained above, can be found in a much more to the point, aka boring, format by visiting VA.gov
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