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With a VA loan you can:
-Put ZERO down payment on your home
-Get a better interest rate than ANY civilian
-Use the VA guarantee so any lender feels secure in loaning you money
-Pass the VA loan benefit down to your spouse
-Get preferential appraisal treatment
-Get a mortgage regardless of what the mortgage market for civilians is doing – with the VA guarantee, lenders lend to you when they stop lending to civilians
-Get a mortgage with NO CREDIT SCORE requirements
-Expanded DTI ratios
-The right MLO will fight to get your loan approved
1) ZERO down payment – Your VA loan will allow zero down payment. This is a huge advantage, as you can simply pay your usual closing costs, which are appraisal, title, and homeowner’s insurance, and you do not need a down payment. Civilians don’t get this option, but Veterans 100% do get this!
The only catch is you still have to pay normal and customary closing costs, for the area you are located. For example – here in Florida, for a VA mortgage I closed in December 2021, the purchase prices was $360,000, and the total out-of-pocket cost to the Veteran (This is for you, Keith P.!) was only about $3500, as the Veteran had a 10% disability rating, so the VA Funding Fee was waived.
Another VA mortgage I closed for $490,000, had around $5900 in closing costs – but in this case, the Funding Fee was waived, but the seller didn’t pay anything towards the buyer’s closing costs.
Sounds a little confusing? It can be, and we’ll get more into the numbers in the next Chapter, VA Mortgage math.
2) Get a Better interest rate than ANY civilian – your VA mortgage will be better than ANY mortgage for mere civilians, period.
Right now, July 18, 2022 the rate for a 30 year VA mortgage is 4.875%
A Conventional 30 year fixed “Civilian” mortgage is currently at 6.5% with 5% down ! (There is NO civilian mortgage with $0 down as of this writing) The conventional mortgage also has PMI – Private Mortgage Insurance – that can run $100 to $200/monthly
Now how does your VA Mortgage Benefit look? Pretty amazing, right?
3) You can use the VA Guarantee to make the lenders want to loan you money – Let's face it, banks can be a pain in the neck to deal with. The saying that “A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain” is true.
But not for Veterans! You will be welcomed with open arms, because of your VA Loan guarantee.
Your VA Loan Guarantee is something you’ve earned, so don’t be shy about using it. And the banks love the guarantee, and will give you a mortgage when no one else will.
4) You can pass the VA Loan benefit to your surviving spouse
This is just another way your VA benefit is there for you.
Face it – your job can be dangerous, and if something happens to you, your spouse can still use your VA loan benefit. You can’t get this with any “civilian” loan program.
“Surviving military spouses may be eligible for a VA home loan if they have not remarried and: Their spouse died in the service or from a service-related disability. Their spouse was missing in action (MIA) or a prisoner of war (POW) for at least 90 days”
5) You get Preferential Appraisal treatment – this is a VA benefit that is also only available for Veterans. Basically, if your appraisal comes up short, you can appeal the appraisal.
When would you want to appeal an appraisal? Well, sometimes the appraisal can come in lower than your purchase price you agreed to with the Seller.
And if you are buying a home that is nicer than the surrounding homes, you may be paying a fair price, but the other homes around it are cheaper. Think about it – someone has to own the nicest home in the neighborhood, might be the home your buying!
For example, the home your buying might have a double lot, or an updated kitchen, or even have a pool. None of these items will add very much to the “appraised value” but if you live in Florida, for example, you will enjoy your home 10x as much in the summer, if you have a pool.
Pools can easily cost $50,000, and I’ve seen some for over $100,000. But appraisers rarely give more than $10,000 to $20,000 for a pool vs. no pool (their logic is that some people don’t want a pool, and some people give it little to no value. Same thing for a double lot – you may love it, and someone else may see it as just more lawn to cut)
VA allows you to appeal your appraisal using the Tidewater Act. So, you can challenge the appraisal value and save your deal! Can’t do that with a regular mortgage.
“The Tidewater process is an extra step that sometimes occurs with VA home appraisals. It is used in cases where the property appraises below the contract purchase price. Tidewater gives the VA-approved appraiser a way to request additional information that might support the sale price”
6) You can get a mortgage regardless of what the mortgage market for civilians is doing – this became very clear in 2007-2009 during the subprime mortgage meltdown!
VA loans were completely unaffected, while conventional loans became ridiculously hard to get.
Banks love the VA mortgage guarantee, and will keep on doing VA loans, regardless of the civilian loan market or whatever Wall Street is up to this year. Your VA Mortgage will be there when you need it!
7) You can get a mortgage with NO CREDIT SCORE requirements – your FICO score is important, but the VA loan program is NOT credit score driven
Lenders that loan the money for your loan may have their own internal requirements, but VA does not.
What this means for you is that if one VA lender turns you down, you can go to another, and another, and another, until you find one that approves you. (This is one example of when using a mortgage broker is a better option – I am a mortgage broker, and it’s basically like an independent insurance agent – we are approved with a number of “wholesale” lenders that use brokers for their business model. So, I can normally know in advance which lenders are stricter, and who’s more flexible)
Typically, the FICO score requirements are 580 at the minimum, and 620 gets you approved at most lenders. Once you cross 640 pretty much any lender will take your loan.
Under 580 gets sent for a “manual underwrite” which simply means your file gets looked at by an actual human, and CAN get approved! So don’t sit there with a 540 FICO and give up – apply and then just do whatever the lender needs to make it happen (this is another instance where I’d recommend a mortgage broker, over a mortgage lender)
Practically speaking – for the BEST interest rate on your VA mortgage, you want to keep your FICO score up over 640.
7) Expanded DTI ratios – your Debt-to-income ratio should ideally be around 41%, but VA makes exceptions all the time, and I’ve seen debt ratios as high as 75%!
The way to look at is, the VA wants your loan to succeed, as no one wins in a foreclosure. If you have great credit, good time on the job, or are putting some money down, you can overcome a high debt-to-income ratio.
Don’t assume you can’t qualify, find someone local who knows VA and get your application in! (I’ve got loan files on my desk from December 2021, and I’m writing this in late July 2022, if Veterans need to work on their credit or DTI, I’m more than happy to patiently wait for it all to come together)
8) The right MLO will fight to get your loan approved - if you get an MLO from a Veteran family, or who is a Veteran themselves, you’ll be in good shape. We stick together, and that helps tremendously. (My personal policy is that “I will crawl over broken glass to get your VA loan done, as long as I can count on you crawling right alongside me”)
My family has plenty of military members and a of couple Purple Hearts, so I’m all in for helping Veterans).
But if I commit to your loan, and you commit yourself to getting all the documents together promptly, you will get you mortgage, PERIOD.
Find the right MLO who knows VA, and is committed to helping Veterans, and you’ll get your VA mortgage approved and closed!
