Is It True That Closing Costs And Down Payments Are Zero For VA Loans

In 1944, the U.S. Government created the VA Home Loan Program in accordance with the GI Bill. The program’s concept is to enable veterans of the United States military to establish homeownership upon discharge from the service.

In 2015, there were $427 billion worth of outstanding loans, cites Inside Mortgage Finance. However, many veterans today do not understand how the program works and some are not even aware that they qualify for home loans through the VA.

Therefore, it is very important to outline some of the basic guidelines and requirements for VA home loans.

THE FINANCING QUESTION

Many veterans who are unaware of how home loans through the VA work believe the financing comes directly from the VA. This is not the case.

The Department of Veterans Affairs only guarantees the loan, and mortgage finance companies provide the actual dollars for the loan.

A home loan through the VA is similar to an insurance policy.

If a veteran goes into default status on a mortgage, the VA guarantees it will pay a certain amount of the loan.

DOWN PAYMENT REQUIREMENTS

Most mortgage lenders require potential borrowers to pay money upfront before they consider financing home purchases.

This tidy little sum a borrower pays upfront provides lenders with a safety net in the event the loan goes into default. However, a loan through the VA does not require a down payment.

Many veterans question how a no down payment requirement is possible or if it is true. The answer is simple.

Since the VA guarantees to pay a significant portion of the loan in the event of default, there is no need for an additional down payment.

So, yes, it is true that the VA does NOT require a down payment for qualified veterans.

NO CLOSING COSTS?

Unfortunately, veterans are required to pay some closing costs before finalizing the loan.

However, the amount of money to be paid is limited by the VA.

Following is a list of closing costs that the VA does not allow a veteran to pay for:  Lender Document Fees.  Recording Fee Above $17.  Notary Fees.  Transaction Fees.  Mortgage Broker Fees.

The fees listed are common among traditional mortgage financing and often cost the borrower thousands of dollars at the closing table.

Veterans do pay what is known as a funding fee on no down payment loans.

The fee is 2.15 percent of the loan amount for first-time use and 3.3 percent for veterans using the VA loan program for the second time.

The VA does allow veterans to roll the fee into the principal balance of the loan.

HOW TO APPLY

FOR A VA HOME LOAN

Veterans who wish to purchase a home using the VA Home Loan Program must first obtain a Certificate of Eligibility, known as a COE, from the VA.

Veterans with a COE in hand can then shop around for a mortgage just like any other person.

The VA does outline specific service requirements before issuing a COE.

The VA also requires veterans to have sufficient income, and the home must be used as a primary residence.

The VA does not allow veterans to use the loans for second homes or investment properties.

Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage.

Learn more about the types of loans for veterans here: https://www.valoansforvets.com/types-of-loans/ For more details call 480-351-5904.

Jimmy Vercellino, NMLS 184169 Mortgage Originator Specializing in VA Loans

The views expressed here are those of the individual author and do not necessarily represent those of First Choice Bank (NMLS #: 177877) and First Choice Loan Services Inc. (NMLS #: 210764), 7702 E. Doubletree Ranch Road, Scottsdale AZ 85258. Equal Housing Lender. www.fcloans.com/disclaimer/ www.fcbhomeloans.com/privacy

VA Loans for Vets 7702 E. Doubletree Ranch Road, Suite 220 Scottsdale, AZ 85258 Phone: (480) 351-5904 Email: jimmyv@fcbmtg.com