Jim and Jane are at it once more. Today we’re diving into the topic of VA loans. If you’ve served, are currently serving, or are the spouse of someone who has, this is a must-see for you. These loans are super impactful, and we’re totally here for them! Be sure to check out the entire video for more insights, or reach out to us today to explore your options.

Today we are talking about VA Loans. They are awesome loans, we love doing them. One thing that we get a lot is from Real Estate Agents that their buyers are directly going through the VA services for their loans.

That is not true. The Veterans Affairs (VA) does not do home loans. Banks, credit unions, mortgage brokers, mortgage bankers they do the home loans. VA only insures them. So myself and Jane work for a Mortgage Banker, but if we were veterans and we wanted to do a VA Loan we can’t go to VA for the loan. There is no such thing.

VA actually insures the bank up to 25% of whatever the loan amount is. For example, if you do a $400K VA Loan, the bank gets insured through VA to cover 25% of that loan. So if that loan was to default, then the VA would cover the bank for $100K which is 25% of the loan. But there is no way to go through VA (Veterans Affairs) to get a home loan.

There are companies that might not correct their buyers / borrowers when they mention they are going through VA. Veterans United is a huge one. We have customers all the time telling us that they are going directly through VA, and that they feel safer going through VA, but of course they are going through “Veterans United”. “Veterans United” is not in any way associated with the Veterans Affairs at all. They have “Veterans” in their name, but that is it.

New Day USA, is another one, that is not VA. You can go online and type in “VA Home Loans” and find all kinds of companies that use the word “VA Loans or veterans” in them, but have no affiliation to Veterans Affairs. We are not VA but we do a great job with VA loans. We understand the differences in the VA products.

ADVANTAGES:
1) NO MONEY DOWN. What is the Number 1 advantage of applying for a VA loan if you are a veteran? Zero money down. That is huge.

2) NO MONTHLY PMI INSURANCE. Another huge advantage of applying for a VA loan, on other loans if you don’t put down 20%, or on a VA loan if you put down 20%, there is something called PMI (Private Mortgage Insurance) and in our industry we just call it MI (Mortgage Insurance). There is NO monthly PMI insurance on a VA Loan.

3) LOWER RATES. The Rates are even lower than FHA Home rates, 100% with no monthly insurance.

The one thing that they charge for, is their “funding fee”. They roll it into the loan amount, it is nothing out of pocket, but you are financing it. Not everyone pays this “funding fee”. If you have a service related disability, you are exempt from this “funding fee” and we can see if you qualify by ordering the “Certificate of Disability”

If you are first-time user of this VA loan, it is a 2.15% funding fee. IF you put money down on the VA loan, the funding fee does decrease.

MISCONCEPTIONS OF A VA LOAN. You don’t have to be a first-time buyer. As a matter of fact, you can have a VA loan, and you can actually apply for another VA loan, and have 2 VA loans at the same time. There are somethings you need to apply for like “subsequent financing” which is no big deal, but to think that you can’t have 2 VA loans at the same time, that is not true.

WHO QUALIFIES FOR A VA LOAN. Who else qualifies for a VA loan besides a veteran, or active service member? Surviving spouses also qualify for VA loans, if you didn’t already know that. Spouses are usually not aware of these types of services that are available.

WHAT OTHER ADVANTAGES OF BEING A VETERAN:
Other advantages of being a veteran are also when apply for a Convention loan, they go to a 50% debt ratio, FHA loans goes to 56.9% debt ratio. VA Loans does something different for “Residual income”. So, instead of basing everything off the GROSS income, which is what we originally do, they take off the Federal Taxes, the State Taxes, Social Security, Medicare, and they come up with a lower amount. They also then have us subtract and estimated utility bill, the mortgage payment, which then leaves a “Residual income” amount left over. And as long as you are meeting the “residual income” amount according to the chart for you and your family a lot times those debt-ratios can far surpass the 50-56%.

Another thing you might now know about VA loans, but you can use “seller concessions” to not only pay for your closing costs, but you can use that money to pay down debt to help qualify for a loan.

It is so important to go to someone that is familiar with VA loans, and that have a team for when it comes to getting the best options for your VA Loan. It’s amazing of all the stuff that you can learn when you have the right team behind you. It’s a program that doesn’t get talked to about much.

We have seen some pretty low credit scores go through the VA automated system, but the one thing that I can mention for sure, is that VA doesn’t like “recent derogatory credit”, so a late car or credit card payment for the last 12 months, can definitely penalize you with going through the automated system. You can have a 620 Credit score because of old problems, and that loan goes through, and you can have a 720 credit score, with new credit problems with a late credit card, or a late car payment, and that loan may not go through. It’s very important when you get pre-approved, to have your credit run through the automated system.

One more thing to mention, that it is important to understand that Veterans are “eligible” for a VA Loan. They’re not approved or qualify for a VA loan. You have to still meet the qualifications to get any type of loan.

If you’re not ready, we will get you Ready. If you have any questions about VA Loans or any other loans give us a call.

*** Residual income is money that continues to flow after initial work or investment, like royalties or rental income, or it’s the disposable income left after essential expenses and debts, used by lenders to assess loan risk. In corporate finance, it’s profit exceeding the cost of capital, while in personal finance, it’s cash left over after bills, helping with budgeting and loan approval.

*** Seller concessions are funds or credits a home seller provides to a buyer at closing to cover specific expenses, like closing costs, prepaids, or rate buydowns, reducing the buyer’s upfront cash needed, common in buyer’s markets or for specific loan types (FHA, VA, Conventional) with set limits (e.g., up to 6% of purchase price). They help sweeten a deal, making homes more affordable and accessible by reducing out-of-pocket costs, but are subject to lender rules and loan types, with limits depending on down payment size for conventional loans.

*** A recent derogatory credit mark is a new entry on your credit report, typically within the last couple of years, indicating you did not pay a loan or debt as agreed. These marks, such as late payments, collections, or bankruptcies, signal high risk to lenders and have the most severe impact on your credit score when they are recent.