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36 Scotsman Guide Residential Edition | ScotsmanGuide.com | July 2017
Making veterans aware of and educating them about the ben- efits of the VA home-loan program should be a priority for all mortgage originators. The simple question, “Are you a Veteran?” asked during initial screening and qualification processes will tell you if you should, at the very least, suggest that the borrowers
look into a VA mortgage.
Of course, it will be even more impressive if you can articulate some of the
VA loan benefits to them. This will go a long way toward building trust with
these veteran borrowers, which not only will help you retain them as clients,
but could even bring in referrals to other veterans looking for mortgages.
So, if you want to open the door to veteran borrowers, you should familiarize
yourself with a few basic highlights of the VA loan program. At the very least,
you can dispel some of the myths you may have heard about the program.
For one thing, technically, the VA guidelines do not have a minimum credit
score requirement, which can make it easier to get your veteran borrowers approved for a loan. Most mortgage lenders likely will have a minimum
credit-score requirement, however. These requirements vary from lender
to lender, but the requirements are likely to be lower with a VA loan and
have less, if any, impact on the loan pricing compared with a typical conventional loan.
Fees versus insurance premiums
One big benefit of VA loans is that they do not require monthly private
mortgage-insurance payments, even though most VA loans do not require
any downpayment. There is only an upfront VA funding fee that can be either financed into the loan or paid outside the loan.
The amount of the funding fee depends on a few factors, including military status, downpayment size and prior use of the VA loan benefit. A regular military veteran who makes no downpayment on a home purchase,
for example, will pay 2.15 percent of the purchase price the first time the
benefit is used, and 3. 3 percent subsequently. If that same veteran makes
a 5 percent downpayment, the fee is 1.5 percent of the purchase price no
matter how many times the veteran has used the benefit.
In addition, veterans with a minimum disability rating of 10 percent or
more are exempt from the funding fee. They don’t have to pay it at all, so it
becomes a moot point, saving them thousands of dollars over just about any
other loan program. For specifics about fee levels, check out the funding-fee
table at the va.gov website, which can help you determine the funding fee
based on your veteran borrower’s individual circumstances.
Downpayments and closing costs
As mentioned earlier, there is no downpayment required on a VA loan, most
of the time. This benefit helps veteran borrowers get into a home earlier
than they might with other loan programs because they don’t need to save
up for the downpayment. It also allows some veterans to save money for
closing costs or other expenses.
Veterans will need a “high balance” (or Jumbo VA Loan), if they want to
finance amounts greater than the conventional loan limit for the county
where they are purchasing a home. In that case, a downpayment would be
required. Additionally, in circumstances where veterans only have partial
entitlement to their VA loan benefits — perhaps because they have already
accessed a portion of their benefits on another loan — a downpayment
may be required. In both these circumstances, the downpayment will likely
be less than required for a conventional loan.
When it comes to closing costs, in many cases, it is possible for a veteran homebuyer to close on a home with very little or even no funds out of
pocket. The VA loan guidelines allow for sellers to pay for all of a veteran
homebuyer’s loan-related closing costs.