Tips for veterans considering a VA mortgage

November 07th, 2011

If you have served in the US Armed Forces, you may be eligible for a VA (Veteran's Administration) home loan. To be eligible, you must typically have served at least 181 days of current regular duty, previously completed your full term of active assignment, or been discharged other than dishonorably following at least six years duty or a service-related disability. In addition, some spouses of veterans are also eligible. Check with the Veteran's Administration if you are unsure of your eligibility.

Benefits of a VA mortgage

VA mortgages can finance 100% of your home purchase; no down payment is required of you. In addition, VA mortgages do not require any monthly mortgage insurance, with can save you hundreds each month. For example, on a $250,000 FHA purchase with 3.5% down, your monthly mortgage insurance is $231.20. That's money you won't have to pay with a VA loan.

What is a VA funding fee?

Every VA mortgage requires calculation and payment of a VA funding fee. The funding fee is the VA's version of what is otherwise known as mortgage insurance, and can be added to your purchase loan amount so you don't have to pay it up front. For refinances, the VA funding fee may be included in the mortgage amount so long as the total mortgage balance without the VA funding fee does not exceed the value of the property.

Your actual VA funding fee depends on factors such as whether you will make a down payment or have equity in your home, and whether you have used your VA home loan eligibility before. If you are not a first time user with no down payment, you will want to check the VA Funding Fee table to determine your funding fee. For a first-time user purchasing a home with no down payment, the funding fee is 2.15 percent for a veteran of active duty and 2.4 percent for persons qualifying solely on Reserve or Guard duty. This fee is waived for certain disabled veterans.

Mortgage calculation with a VA funding fee

Calculating your VA funding fee for use with a mortgage calculator is fairly simple. Just add your VA funding fee to your base loan amount to determine the total VA loan amount. In an example with a $300,000 base loan amount and a 2.15% VA funding fee, $300,000 x 0.0215 = $6,450 VA funding fee. Then, $300,000 + $6,450 = $306,450 total loan amount. Simply input this total loan amount to your mortgage payment calculator to estimate your monthly mortgage payment.

If you think you may be eligible for a VA home loan, be sure to inform your mortgage professional so appropriate mortgage rate quotes will be included as you consider purchasing or refinancing your home. If you are eligible, thank you for your service to our nation, and good luck on your exciting journey of home ownership.

Posted By :

Dennis is co-owner and broker of record for Stratis Financial in Southern California. With over twenty years experience in the mortgage industry he has helped thousands families purchase homes. His Weekly Rate and Market Update keeps his clients and real estate professionals educated and informed on the mortgage industry and the economy. Dennis has a degree in Economics and Political Studies from Pitzer College and is married with two children.

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