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Everything Buyers & Sellers Must Know About VA Loans
Carl Thulin, Mortgage AdvisorJune 28, 2021 — 5 min read
VA home loans are an excellent benefit available to many veterans. Still, only 12% of eligible veterans take advantage of these loans. Let's explore some misconceptions about VA loans and set the record straight so you can get the best-possible deal on your mortgage.
This flexibility may come with limits in some cases, so make sure to talk to your Mortgage Advisor about your plans to ensure they're consistent with VA rules and regulations.
One of the biggest benefits of a VA backed loan is the reduction of closing costs for the buyer. As a result, the seller is responsible for the following closing costs:
Now that we've busted some myths, let's get down to brass tacks and talk about the benefits of a VA home loan. This loan program is a great reward for our servicemembers' hard work and includes such perks as:
Common VA Loan Myths
Myth #1: Very few veterans are eligible for VA loans.
Given that only 12% of eligible veterans take advantage of VA loans, eligibility extends further than you might think. VA home loans are available to active-duty servicemembers and veterans in a variety of different situations. Buyers are eligible for a VA loan if they- Served for 90 consecutive days in wartime
- Served for 181 consecutive days in peacetime
- Have 6 years of service in the National Guard or Reserves
- Are the spouse of a service member
Myth #2: You can only use your loan to purchase a pre-built, single-family home.
VA loans provide qualifying veterans with flexibility. With these loans, you can- Purchase several different property types:
- Single-family homes
- Multi-family homes (up to 4 units)
- Manufactured homes
- Lots and land
- Finance construction for a custom-built home
- Refinance your existing mortgage
- Access equity to make energy-efficient upgrades to your current home
Myth #3: VA loans are small, and you can only use this benefit once.
VA loans aren't just for starter homes. Qualified veterans with a full entitlement can borrow as much as their lender is willing to extend. When it comes time to buy a newer or larger home, you can apply for a VA loan again. Veterans often use these loans to invest in property and build their personal wealth, so don't discount that as an option for your family!Myth #4: VA Loans involve a lot of red tape, making them difficult to work with & unappealing to sellers.
There's no truth to the idea that sellers don't like working with VA buyers. In fact, VA loans often signify a high degree of trust and security for sellers. Evidence shows that VA buyers are just as likely to make it to closing day as any other buyer. VA loan requirements for sellers are no more stringent than other loan types, and these loans close just as quickly, too.Closing Costs & Funding Fees
If you're considering a VA loan, there are a few other things to be aware of. Information about closing costs and funding fees can be misconstrued in ways that make these loans sound less appealing than they actually are.Closing Cost Restrictions
- Commission for real estate agents
- Brokerage fee
- Buyer broker fee
- A termite report
VA Funding Fee
The VA funding fee is a one-time payment that the buyer makes at the beginning of their loan. Instead of a down payment or PMI, buyers pay this fee to help offset the cost of the VA home loan program. For the typical first-time home buyer with no down payment, this fee is 2.3% of the loan amount. This fee can be paid all at once at closing or folded in with your monthly payments. However, not all veterans, service members or survivors need to pay this fee. You may be exempt if you are:- Being compensated for a service-related disability
- A surviving spouse currently receiving Dependency and Indemnity Compensation
- An active-duty servicemember who has received a Purple Heart
More VA Loan Benefits
- No down payment
- No private mortgage insurance (PMI) or mortgage insurance premiums (MIP)
- Fewer closing costs
- Great terms and low-interest rates
- No penalty fees for paying off your loan early
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