Benefits and Advantages of a VA Loan

Posted February 27, 2019

In General Real Estate Information, Real Estate Tips and Advice — Buyers

Benefits and Advantages of a VA Loan

First and most importantly I would like to start with a heartfelt thank you for your service. I do really appreciate it!

A VA (Veteran’s Affairs) loan offers a number of advantages and benefits over other loan types. These benefits can make it quite a bit easier to purchase a home by removing some hurdles that a typical buyer may encounter. If you are considering buying a home and are able to qualify for a VA loan, it is worth looking into the opportunity.

I live in FishHawk Ranch and service it and the rest of the Tampa Bay area. MacDill Air Force Base is very close to FishHawk Ranch so the community has a large military presence. Because of this presence, I would say about 40% of my buyer clients do get VA loans to buy their home.

How Do VA Loans Work

To get a VA direct or VA-backed home loan, you’ll need a Certificate of Eligibility (COE) to show your lender that you qualify for this benefit based on your service history and duty status. If you may be interested in a VA loan, you can go to the U.S. Department of Veterans Affairs VA Home Loans web page to establish that you are eligible for the loan. If you are eligible you can apply online at the bottom of the page. In addition to the eligibility, you will also need to meet your lender’s credit and income requirements to get a loan. Here are the criteria for who is eligible to get VA Mortgage financing to purchase a home. The VA offers these kinds of mortgages to four different types of veterans under the following circumstances. Below is a quick glance at the service requirements to qualify for the VA loan. For a more in-depth breakdown please visit the U.S. Department of Veterans Affairs website.

Active-duty servicemen and women– to get a VA loan, you must have served at least 90 days in the military during a time when the country is at war.
Active duty during peace– in order to get a VA loan you must have served at least 181 days as full-time military personnel during a time the country was at peace.
National Guard or Reserves service– you must have served at least six years in either the Reserves or the National Guard.
Surviving spouse– you can also be a surviving spouse of a person that either (a) perished while serving in the line of duty or (b) died due to a disability-related to their service.

What Are the Benefits and Advantages of a VA Loan?

Lower Requirements

One of the most significant benefits of going with a VA loan is the more relaxed financial qualifications. Every VA lender sets their own minimum credit requirements, typically that score is 620 or higher. There maybe are some situations in which someone can qualify for a VA loan with a credit score below 620. This score requirement is generally lower than qualifying for an FHA or Conforming loan. The standards for the ratio of debt to income are also more relaxed. These more lenient requirements mean that veterans can often get a loan even when their credit is not ideal

No Down Payment

One of the more challenging aspects of buying a home is saving enough money for a down payment and the closing costs that go along with purchasing a home. With a VA loan, there is no requirement for a down payment which means you need less money saved to get started.

Not needing a down payment is one of the top reasons that borrowers choose a VA loan. However, no down payment does not mean that you will not need any money for upfront costs. You still need money for an Earnest Money Deposit (EMD), closing costs, and prepaid items. You will need to account for these costs when you are ready to buy. These costs vary based on a number of factors but usually run between 2.5% to 5% of the purchase price of the home. When we make an offer on a home for you, we may be able to ask for the seller to contribute some funds toward your closing costs and prepaid items. This could reduce your upfront expenses by up to 3%. If we are able to get closing cost contributions the closing costs should be minimal. Closing costs are really a different subject so feel free to reach out to me for additional information on them and how I go about asking the seller to contribute toward your closing costs.

Note: For FishHawk Ranch real estate and real estate in the Tampa Bay area the EMD tends to be between $1000 – $4000 unless it is new construction which will be more.

Reduced Closing Costs

I touched on real quick above, but buying a home does involve a variety of fees that are classified into the term closing costs. One of the benefits of a VA loan is that some of these costs are limited. The costs for closing with a VA loan include:

Credit report
Survey
Appraisal
Title insurance
Origination fee
Recording fee

Even with the required fees, there are additional protections afforded by the VA—including a cap on the cost for underwriting and originating the loan.

No Private Mortgage Insurance (PMI)

Coming up with a down payment is hard enough but coming up with a 20% down payment to avoid mortgage insurance is even harder. That is why most people today who buy homes wind up paying for private mortgage insurance. Lenders require that buyers pay for this insurance if they do not meet the 20% down payment standard. PMI can cost up to hundreds of dollars a month until the buyer hits the 20% threshold over the course of paying off the loan. One of the best benefits of a VA loan is that PMI is not required.

Types of Homes

The VA does require the borrower to occupy the home as a primary residence. The property can be a single-family home, condo, townhome, manufactured home, or a unit in a multi-family building of four or fewer units. A condo unit must be in a VA-approved project.

Minimum Property Requirements (MPRs)

Be safe, structurally sound, and sanitary with adequate capacity and quality.
Comply with the standards considered acceptable for a permanent home in its locality.
Have mechanical systems that are safe to operate and protected from destructive elements.
Have reasonable future utility, durability, and economic life.

A manufactured home must have the following:

Be classified and taxed as real property.
Meet VA minimum property requirements.
Conform to applicable building code and zoning requirements for real estate.
Be properly affixed to a permanent foundation.

Disadvantages of a VA Loan

There is a funding fee associated with every VA loan. This fee helps cover the cost of running the VA loan program. The funding fee can be paid upfront, or it can be rolled into the loan and included in the monthly payment. Please speak with your accountant regarding this but at this time and for most borrowers the funding fee may be tax-deductible. There are some exceptions to this fee, your mortgage professional can guide you further.
The VA loan guaranty program does not impose a maximum amount that an eligible veteran may borrow using a VA loan but it does cap the guaranty amount. In 2019 in FishHawk Ranch and the rest of the Tampa Bay area, this amount is $484,350. This limit affects the amount a bank is willing to lend without requiring a down payment.
VA loans may take a little longer to complete than other loans. It is not significant but VA loans seem to take about a week or so longer than some of the other loans.
Some sellers like to see that a buyer has a down payment.

My Heroes Rebate

As a truly heartfelt thanks to my Military, Veterans, Police, Fire Fighters, and School Teacher heroes, I will rebate 5% of my commission to you at closing. (We must show this rebate on the contract and it must be permitted by your lender. I have not ever had a lender deny it).

No rebate form is needed for this bonus. Just please remind me that you are a hero prior to me writing up an offer for you.

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About the author

The above real estate article Benefits and Advantages of a VA Loan was written and posted by Jeffrey Gould.

Jeff is a top-selling, nationally recognized REALTOR ®, real estate Broker, and your local FishHawk Ranch real estate expert. You will find him selling homes in Tampa Bay, Florida, and surrounding areas. Some of those areas include FishHawk, Lithia, Riverview, Valrico, Apollo Beach, Brandon, and Tampa.

If you are looking to sell or buy a home anywhere in the Tampa Bay area, Jeff is your local and trusted professional.