By Terry Savage
Veterans can get a very special deal on mortgages through the VA loan program.
If they meet the qualifications, a vet can get a home mortgage with ZERO down payment — a rarity in this day of extreme bank scrutiny of mortgage applications.
And the current fixed rate on a 30-year mortgage is 3.625 percent (3.713 percent APR), also a very good deal.
The VA does not “make” the loans. Instead it guarantees the loan, up to 100 percent of the appraised value of the property. And there is no mortgage insurance payment. In essence, the VA is guaranteeing the loan payments to the lender on your behalf, as a reward for serving your country. A VA loan can only be used for a personal residence, not an investment property.
So if you know someone who served a minimum of 90 days service active duty in wartime, or 181 continuous days of service during peacetime, and was honorably discharged, you should encourage them to look into getting a VA loan — either for a purchase or a refinance. (There is a two-year requirement for enlisted vets who began service after Sept. 7, 1980, or for officers who began service after Oct. 16, 1981. And there is a six-year requirement for National Guard and reservists.)
There are some other key criteria:
– Credit Score above 640
– Demonstrate steady income, or a two-year history of self-employment, or a stream of retirement benefits.
– Spousal income can help qualify, and some spouses of deceased vets can qualify if the spouse died of a service-related disability.
– Total debt payments cannot be more than 43 percent of total income.
– No unpaid liens or judgments.
– Must wait two years after a bankruptcy to apply.
Since there is no age limit to apply, even older vets can use this program. And if you have previously used this benefit, there may be some remaining eligibility left.
A VA loan can also be used to take cash out of your home. Since the mortgage is guaranteed up to 100 percent of the home’s value, many vets choose to refinance even non-VA loans into a new VA loan in order to withdraw much needed cash from home equity.
To get started on a VA loan for either a new purchase or a refinance, you need a Certificate of Eligibility (COE). This certificate may be used to purchase a property with no down payment, refinance an existing conventional loan up to 100 percent of the home’s value or streamline refinance an existing VA loan into a lower rate. Once you have that certificate, most lenders work with the VA to get the loan guarantee and process your mortgage.
The place to start is at the Veterans Affairs website, in the section that explains the home loan guaranty program. Or go directly to the VA eBenefits portal. Or you can call the eBenefits Help Desk at 800-983-0937, Monday-Friday, 8 a.m. to 8 p.m. Eastern.
If you’re already registered with the VA, your lender may be able to get you an immediate certificate of eligibility (COE) through this online portal. Many lenders specialize in VA loans.
Even if it takes a little extra effort, it’s a shame to lose out on this special opportunity to finance (or refinance) your home.
The VA guarantees an average of 2,400 home loans every working day of the year. In fact, there were 20 times as many refinances in 2012 than in 2007. And with increasing numbers of vets returning from worldwide conflicts, the number of VA home loans is expected to continue rising. The benefit is justified: Vets have a superior record of repayments on their home loans.
Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange. She is the author of the new book, “The New Savage Number: How Much Money Do You Really Need to Retire?” — CNS