Do You Need PMI for a VA Loan?

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private mortgage insuranceInterested veterans may be concerned about private mortgage insurance (PMI) and if it’s required with a VA loan. The following information will help you to better understand VA loans and PMI.

What is a VA Loan?

Potential homeowners have many loan options available when they’re getting ready to buy a home. The VA (Veteran’s Administration) loan is a very popular choice for eligible individuals.

A VA loan helps veterans purchase a home without many of the requirements of conventional home mortgage loans. VA loans are guaranteed by the government. So many lenders are more willing to provide financing to potential buyers. Home buyers are typically required to provide a down payment of up to 25%. However, this is not the case with VA loans because of the government guarantee.

If the veteran cannot pay for the loan, the bank is not stuck with the loss. The VA will pay the balance. Because of this guarantee, VA loans generally come with lower interest rates and better terms. This makes them very popular options for eligible individuals

The maximum loan amount for a VA loan is $424,100. Of this amount, the VA will guarantee up to $104,250, which is 25%. The following list of individuals are eligible for VA loans:

• Veterans
• Reserve members
• Active-duty personnel
• National Guard members
• Spouses of veterans


Dependent children are not considered eligible.

What About Private Mortgage Insurance or PMI?

PMI or private mortgage insurance is a type of insurance homebuyers must purchase for conventional home mortgage loans. The purpose of PMI is to guarantee the lender that they will get their money even if the homeowner should default. It may be required up front at the time of the loan signing. It also may be added onto the loan. This can really increase the amount of the monthly mortgage payment. PMI can become very costly to the homeowner.

One of the great things about VA loans is that PMI is not required. The loans are already guaranteed by the government. This benefit is equally as important to potential homebuyers as the no-down payment benefit.

How Do I Get a VA Loan?

Obtaining a VA loan can be easier than one might think. Although homebuyers still need to be approved, the process is relatively simple and uncomplicated. Below are the steps potential homebuyers must take.

• Determine your eligibility to obtain a VA loan
• Find a home to buy
• Find a lender and show them your VA loan Certificate of Eligibility (COE)
• Provide the lender with income and employment information for credit approval
• Fill out an application

Your VA loan may be approved on the same day. Once it is, the lender will arrange for an appraisal to be done on the property. You will not have to do anything until the day you come in for closing.


Discount Points – Do VA Loans Include Them?

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discount pointsWhen deciding to buy a home you want to get the best mortgage possible for your circumstances. Veterans and service men and women have an advantage in the financing step because they are exclusively eligible for discount points VA Home Loan. The loans are offered by mortgage companies and banks. But the VA guarantees a part of the loan, enabling you to get a loan with better terms than a typical mortgage.

About Discount Points

Eligibility

VA loans require you to have adequate income, suitable credit, and a completed valid Certificate of Eligibility to establish that you qualify for the benefits of a VA home loan. Lenders ideally prefer that you have a credit score of at least 620. But exceptions can be made with additional stipulations in certain circumstances. You must also intend to live in the home as your primary residence. The funds can be used to buy a home, buy and improve a home, purchase a manufactured home or to build a house. You do not qualify if you have received a dishonorable discharge. The service requirements vary based on dates of service and minimum days of active duty required. Specific information regarding eligibility can be found here.

Benefits of a VA Home Loan

  • No down Payment – Conventional mortgage companies require buyers to put down at least 20% of the purchase price to avoid having to obtain private mortgage insurance or PMI. For example, if you are looking at a home for $100,000, you would be required to have $20,000 up front on top of other fees.
  • No Private Mortgage Insurance – PMI ranges from .3 to 1.15% of the total amount of the loan which can add thousands of dollars to the overall cost of the loan. It is paid for the duration of the mortgage. Its purpose is to protect the lender from loss, but since the VA guarantees a portion of the loan, borrowers are exempt from the requirement. You’ll build equity in your home much faster without this fee.

Additional Benefits of a VA Home Loan

  • Competitive Interest Rates – Interest rates are primarily focused on the risk the lender takes by loaning you the money. A lower interest rate is always favorable because it requires a lower monthly payment, while an interest rate that has a reduction of as little as .5 or 1% saves thousands of dollars over the life of the loan. VA home loans also have discount points, which reduce the interest rate of the loan by making an upfront payment equal to a percentage of the loan’s value. This is typically a .25% interest reduction for each point, costing 1% of the overall loan. Points are beneficial if you intend to remain in the home for a while, otherwise, they can be a waste of money and not worth the investment.
  • No early payment penalties – A VA home loan ensures that you cannot be penalized if you decide to pay off the loan earlier than the term of the mortgage.
  • Closing costs are regulated. They include things such as appraisals, credit report checks, application fees, property taxes, homeowner’s insurance and a VA funding fee, which varies based on your initial down payment, type of service and whether this is your first time getting a VA loan. These also can be paid by the seller if decided during negotiations.

Process to get a VA Loan

  • Contact a VA-approved lender to begin the paperwork and eligibility screening
  • Bring your preapproval letter with you as you look for homes or use a real estate agent who specializes in VA loans
  • Make an offer on the home
  • Complete the closing process with appraisals and inspections. The final process involves signing the paperwork, paying the fees and getting your new keys

Why You Need A San Diego VA Loan Specialist

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va loan specialistIf you are a qualifying active duty, military veteran or a surviving military spouse, you may be eligible for a VA loan. There are many great advantages to getting a VA loan as opposed to getting a conventional loan. Most active members of the military, veterans and surviving spouses qualify for VA loans. However, navigating through the process of applying for a loan can be difficult to do on your own. A VA loan specialist knows the process and can assist in providing all the information you’ll need on your path to home ownership. Here are some things a VA loan specialist can help you with:

No Down Payments

As with many traditional loans there usually is a down payment required. A VA loan doesn’t always require a down payment. A San Diego VA Loan Specialist can help you to see if you qualify for this feature.

Credit

Most conventional loans do require a minimum credit score of at least 620 to qualify for a loan. However, a VA loan does not require a minimum credit score to qualify.

Insurance

Another advantage of a VA loan is that it doesn’t require mortgage insurance. With conventional loans, insurance is usually required with a down payment that is typically less than 20 percent.

Fees

There will always be a fee when applying for a loan, whether a conventional or VA loan. However, with a VA loan the fees with a low down payment are considerably lower.

Late Payments

Sometimes people may have trouble making their payments. So, if you find that you are struggling to make payments on your loan, a VA loan specialist can help assist you. The VA will negotiate with their lenders for you on your behalf. They can help borrowers with repayments, modifications to your loan or reach some agreement to avoid foreclosure.

Reusable

As long as you pay off your loans, a VA loan is, in fact, reusable. You can use your entitlement over and over again. Your San Diego VA loan specialist can assist you with all of this.

Bankruptcy or Foreclosure?

As with traditional loans, you need to wait at least two years before you can apply for another loan after filing for bankruptcy. With a VA loan you may apply after only 12 months. Even if a veteran or active duty member has a previous bankruptcy or foreclosure with the VA, they are still eligible to apply with the VA.

Contact A VA Loan Specialist

Opening the door to owning a home and saving you time and money are only two reasons you need the help of a VA loan specialist. The Department of Veteran Affairs has made the dream of home ownership a reality for its service members and their families with great programs available. If you are ready to experience all of the benefits and features of a VA loan, contact a VA loan specialist to see whether or not you qualify. They will provide all of the necessary information, and answer any questions you may have, in order to assist you on your journey to owning a home.


How Much of A VA Loan Can I Get in San Diego?

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san diego va loanOne of the best financing instruments for purchasing a home in the San Diego area is a Veterans Administration loan. There are four different ways you can qualify for a VA loan:

  • Served 90 consecutive days of active service during wartime.
  • Served 181 days of active service during peacetime.
  • If you have more than 6 years of service in the National Guard or Reserves.
  • You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.

If you qualify, here are some of the benefits of securing a VA Home loan:

  1. No Down Payment Required

With the VA Loan, qualified borrowers can finance 100 percent of the home’s value without putting down a single dollar.

  1. No Private Mortgage Insurance Required

Unlike conventional bank loans where the buyer puts down less than 20%, VA loans do not require insurance payments (PMI) to be added to the mortgage payment each month.

  1. Better Interest Rates

VA loans are guaranteed by the Federal Government. Banks, therefore, have less risk and can offer slightly lower interest rates than on conventional loans.

Securing A VA Loan in the San Diego Area

Houses in San Diego are expensive. The area remains a hot spot in the national real estate market with an average listing price for homes of $599,000 and an average selling price of $475,000.

The latest maximum VA loan limit is $580,750. That places the loan limit below the average listing price for homes in the San Diego area but above the average selling price.

Real estate transactions can be tricky for anyone, especially for first-time buyers or buyers trying to secure a VA loan for the first time. Because of this, it is strongly recommended that buyers secure the services of a qualified VA loan expert.

Before you start shopping for that expert, however, you should check your income level to see if you qualify for a home loan of any kind. Current figures show that to secure a home mortgage of $554,300, the buyer needs a yearly income of $104,486.

 
The need for that level of income can be reduced by purchasing a home at the lower end of the listing scale, of course, especially if you can secure a VA loan at a minimum interest rate and zero down payment.

If your income meets the criteria needed to secure a maximum VA loan in the San Diego area, you can begin looking at houses in the $550,000 range with your agent.

Since San Diego appears to still be in somewhat of a seller’s market, your chances of low-balling a VA offer are probably slim to none. Many sellers don’t want to deal with VA offers because of the most stringent home inspections required and extra closing costs the seller must absorb.

On the other hand, VA buyers come in pre-qualified with a maximum loan number already guaranteed. And with an experienced agent who deals in VA transactions presenting the offer for you, chances are you should be able to find that perfect San Diego home using a VA loan.