I love meeting other military members and their spouses. There is a common unspoken bond we all seem to understand. I will admit it was a small adjustment moving to Denver from San Diego and Jacksonville, North Carolina. The biggest surprise for me was how much the military presence isn’t so present.
As a military wife, my family and I spent many years moving around the country. We have purchased two homes using the VA loan with great success each time. It wasn’t until recently that I realized the VA loan is an underutilized benefit that many Veterans either don’t think they are eligible to use, or don’t know about it. There are more than 400,000 Veterans, 34,000 active duty Servicemembers and 13,000 Reservists who live in Colorado.
Speaking from a military spouse’s point of view, living the military lifestyle is something that comes with a bit of heartache as well as a lot of joys and benefits.
One of these benefits is being able to use the VA loan. Fully understanding the VA loan and process on obtaining one can be quite involved. However, in this article, I will break it down into simpler terms specific to Colorado.
1. No down payment, no mortgage insurance
Read that again. No down payment and no mortgage insurance!! No down payment is needed whatsoever. FHA loans and even conventional loans require at the bare minimum 3.5% to 5% down. That’s up to $17,500 on a $500,000 home purchase.
As of January 2020, there is also not a cap (or loan limit) amount that the VA will guarantee! Hooray!! In 2019 the loan limit in Denver County was $561,200. This means you could purchase a home up to this price and the VA loan would allow you to avoid having a down payment. If you purchased a home over that amount, you would need to have a down payment depending on your VA entitlement and the difference between the purchase price and the local loan limit. This is no longer the case.
Using a VA loan saves money upfront, and tremendously increases your buying power.
2. Use the benefit over and over
When my husband and I purchased our first home in Jacksonville, North Carolina, we were under the impression that the only way we could use the benefit again was if another military member purchased our home.Definite personal life lesson learned here: interview several lenders when you are beginning your home search. Select someone who answers all of your questions and you feel comfortable with. I don’t have to tell you how big of a purchase this is, but when choosing someone to help you fund your sale, be picky.
Let’s assume that you purchased your first home with a VA loan. A few years have gone by and you’ve outgrown that home and now need something a little bigger. When you sell the home and pay off the VA loan completely, you can reuse your benefit to buy another home. Your entitlement is restored in full.
But that’s not the only way to reuse your benefit.
Eligible Veterans and Servicepersons can receive a one-time restoration when they pay off the VA loan, but keep the home. This scenario comes into play if you purchased the home long ago, and have paid off the loan. It also applies if you have refinanced the VA mortgage with a non-VA loan.
In these cases, you can keep the home, and enjoy the benefits of VA home buying one more time.
Also, the VA loan is one of the few loans out there that is assumable. Another Veteran can purchase your home and assume or takeover your VA loan as long as they meet the lending requirements. This can be a great benefit as a seller and a competitive advantage in a market environment where rates are higher than your current VA loan rate making it attractive to potential buyers.
3. Your benefit never expires
Once you have earned eligibility for the VA home loan, it never goes away. Veteran eligibility is based on the length of time served, and the period in which you served. For specific information regarding eligibility, please click HERE. If you are active duty, you are eligible after 90 days of service. If you are a Reservist, you are eligible after six creditable years.
Surviving spouses may also be eligible. In 2015 there were more than 3,000 surviving spouses who purchased a home with their fallen partner’s VA benefit. Un-remarried spouses of Servicepersons who were killed in action can buy a home with zero down payment and no mortgage insurance. The VA funding fee is also waived.
4. VA Loan Rates Are Lower and available from local lenders
VA loan rates are typically about 0.25% lower than those of conventional loans. The VA backs the mortgages making them a lower risk for lenders. Those savings are passed on to Veterans.
The VA home loan is unlike most other VA benefits. This benefit is available from private companies, not the government. The Department of Veterans Affairs does not take applications, approve the loans, or issue funds; private banks, credit unions, and mortgage companies do that.
The VA provides insurance to lenders. It’s officially called the VA guaranty. The VA assures the lender that it will be repaid if the Veteran can no longer make payments. In turn, lenders issue loans at superior terms. In short, a VA loan gives you the best of both worlds. You enjoy your benefit, but have the convenience and speed of working with your chosen lender.
5. Buy, refinance, or tap into home equity
The VA home loan benefit is not just for buying homes. You can also use it to refinance your existing mortgage, whether it’s a VA loan or not.
Homeowners with a VA loan can use the Interest Rate Reduction Refinancing Loan, or IRRRL, to easily drop their rate and payment without an appraisal.
Homeowners without a VA loan can use a VA refinance. The VA cash-out loan is available to eligible Veterans who don’t have a VA loan currently. A VA cash-out refinance can be used to turn your home’s equity into cash. You take out a bigger loan than what you currently owe. The difference is issued to you at closing. The VA cash-out loan amount can be up to 100 percent of your home’s value in many cases.
If you are looking to take advantage of this awesome opportunity to refinance your current home, please check out this interview the Scoop did with rock star lender Matt Tenney of SWBC Mortgage. He can be reached at (303) 709-7501 or e-mail firstname.lastname@example.org. Matt is also very familiar with the VA loan – he was our personal lender when we bought our home in Denver.
If you, or anyone you know – veteran or not, are interested in learning what your potential options are when buying or selling your home, I would love the opportunity to help. Please call/text me at (720) 799-6376 or shoot me an e-mail at email@example.com.