As of September 30th, 2013 over 225,000 veterans live in Nevada, a group of men and women I hold in high regard for their commitment, service and sacrifice to our country. Perhaps the least I can offer in return is guidance on the VA home loan guarantee, a mortgage product available only for veterans.
The VA home loan guarantee offers flexible credit standards and low-to-no down payment for eligible veterans, but more importantly, it offers accommodating loan limit options.
Other mortgage products available to the general public are limited by loan size. For example, FHA recently reduced the loan limit in Clark County to $287,500. Fannie Mae and Freddie Mac offer loans up to $417,000 but any higher and they become a jumbo loan product which requires considerable down payment, increased credit, increased interest rates and property criteria and can be hard to find. The VA home loan guarantee, however, will accommodate large loans for zero or substantially less down.
Veterans should consider this:
- The veterans' entitlement allows loans up to $417,000 with no down payment,
- Loan amounts greater than $417,000 have smaller down payment requirements than most jumbo products, and
- Any applicable guarantee fee – the equivalent of mortgage insurance – can be financed into the loan further reducing your cash investment.
Let's look at an example:
As a veteran, you decide to purchase your beautiful dream home, but the purchase price of $550,000 reduces your financing options since it's over the benchmark of $417,000:
- You apply for a jumbo loan product which probably requires a 20% down payment of $110,000. At best, your lender might require 10% ($55,000) but with the addition of costly mortgage insurance, or
- You utilize your VA eligibility, finance the required guarantee fee and only put down $33,250.
Here is how it works:
The required guarantee on any VA loan is 25% of the purchase price. So long as your loan amount is greater than $144,000 the VA guarantees up to 25% of the conventional conforming loan limit of $417,000, an amount equal to $104,250. Let me further explain.
In the event of a foreclosure, the VA guarantees your lender up to $104,250 which provides them with considerable security should the loan go bad. In our example, your dream home is $550,000 and because the VA requirement is 25% your lender wants $137,500 in coverage. Remember, the VA's max guarantee is $104,250 so you must come in with the difference which is $33,250 ($137,500 - $104,250).
The bottom line remains that those eligible for the home loan guarantee are entitled to a mortgage product that requires a low-to-no down payment and no imposing loan limits. And remember, even if you've used your entitlement on a previous home loan you might be able to restore your eligibility and utilize the home loan guarantee again. Consult your lender for more information on restoring eligibility.
Contact me for more information
on restoring eligibility
Casey Moseman, CMPS