VA & Texas Vet

VA Loans and the Texas Vet programs offer special low rates and down payment terms for veterans! We can finance up to 100% of the purchase price. VA loans never require private mortgage insurance.

The VA’s “Quick Guide” below is an excellent starting place to learn about VA loans. For further details, please link to www.va.gov

What is a VA Guaranteed Loan? These loans are made by a lender, such as a mortgage company, savings and loan, credit union, or bank. VA’s guaranty on the loan protects the lender against loss if the payments are not made, and is intended to encourage lenders to offer veterans loans with more favorable terms. The amount of guaranty on the loan depends on the loan amount and whether the veteran used some entitlement previously. With the current maximum guaranty, a veteran who hasn’t previously used the benefit may be able to obtain a VA loan up to $417,000 depending on the borrower’s income level and the appraised value of the property. The local VA office can provide more details on guaranty and entitlement amounts.

VA Financing: A good deal for veterans. More than 29 million veterans and service personnel are eligible for VA financing. Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement. Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of VA home loans. 1. Most important consideration, no down payment is required in most cases. 2. Loan maximum may be up to 100 percent of the VA-established reasonable value of the property. Due to secondary market requirements, however, loans generally may not exceed $417,000 (90% refinance maximum is $144,000; however, this amount may be exceeded depending on equity.). 3. Flexibility of negotiating interest rates with the lender. 4. No monthly mortgage insurance premium to pay. 5. Limitation on buyer’s closing costs. 6. An appraisal which informs the buyer of property value. 7. An assumable mortgage, subject to VA approval of the assumer’s credit. 8. Right to prepay loan without penalty. 9. VA performs personal loan servicing and offers financial counseling to help veterans avoid losing their homes during temporary financial difficulties.

Veterans with active duty service, that was not dishonorable, during World War II and later periods are eligible for VA loan benefits. World War II (September 16, 1940 to July 25, 1947), Korean conflict (June 27, 1950 to January 31, 1955), and Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90 days’ service. Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 days’ active service. Veterans of enlisted service which began after September 7, 1980, or officers with service beginning after October 16, 1981, must in most cases have served at least 2 years.

Persian Gulf Conflict. Basically, reservists and National Guard members who were activated on or after August 2, 1990, served at least 90 days and sere discharged honorably are eligible. VA regional office personnel may assist with eligibility questions.

Members of the Selected Reserve, including National Guard, who are not otherwise eligible and who have completed 6 years of service and have been honorably discharged or have completed 6 years of service and are still serving may be eligible. The expanded eligibility for Reserves and National Guard individuals will expire October 28, 1999. Contact the local VA office to find out what is needed to establish eligibility. Reservists will pay a slightly higher funding fee than regular veterans. (see paragraph entitled “Costs of Obtaining a VA Loan”).

Why a VA Loan? The more you know about our home loan program, the more you will realize how little “red tape” there really is in getting a VA loan. These loans are often made without any down payment at all, and frequently offer lower interest rates than ordinarily available with others kinds of loans. Aside from the veteran’s certificate of eligibility and the VA-assigned appraisal, the applications process is not much different than any other type of mortgage loan. And if the lender is approved for automatic processing, as more and more lenders are now, a buyer’s loan can be processed and closed by the lender without waiting for VA’s approval of the credit application.

What Can a VA Loan be Used For? 1. To buy a home, including townhouse or condominium unit in a VA-approved project. 2. To build a home. 3. To refinance an existing home loan u p to 90 percent of the VA-established reasonable value, up to a maximum of $144,000; however, this amount may be exceeded depending on equity, or to streamline refinance an existing VA loan to reduce the interest rate. 4. To buy a manufactured home and lot (must be on a permanent concrete slab foundation with no tie-downs. The hitch much be removed and be skirted.)

Remaining Entitlement: Veterans who had a VA loan before may still have “remaining entitlement” to use for another VA loan. The current amount of entitlement available to each eligible veteran is $36,000. This was much lower in years past and has been increased over time by changes in the law. For example, a veteran who obtained a $25,000 loan in 1974 would have used $12,500 guaranty entitlement, the maximum then available. Even if that loan is not paid off, the veteran could use the $23,500 difference between the $12,500 entitlement originally used and the current maximum of $36,000 to buy another home with VA financing. An additional $68,250, up to a maximum entitlement of $104,250 is available for loans above $144,000 to purchase or construct a home. Most lenders require that a combination of the guaranty entitlement and any cash down payment must equal at least 25 percent of the reasonable value or sales price of the property, whichever is less. Thus, in the example, the veteran’s $23,500 remaining entitlement would probably meet a lender’s minimum guaranty requirement for a no down payment loan to buy a property valued at and selling for $94,000. The veteran could also combine a down payment with the remaining entitlement for a larger loan amount.

Restoration of Entitlement: Veterans can have previously-used entitlement “restored” to purchase another home with a VA loan if: the property purchased with the prior VA loan has been sold and the loan paid in full, or A qualified veteran-transferee (buyer) agrees to assume the VA loan and substitute his or her entitlement for the same amount of entitlement originally used by the veteran seller. Remaining entitlement and restoration of entitlement can be requested through the nearest VA office by completing VA Form 26-1880.The entitlement may also be restored one time only if the veteran has repaid the prior VA loan in full but has not disposed of the property purchased with the prior VA loan.

Application: The application process for VA financing is no different from any other type of loan. In fact, the VA application form is the same as that used for HUD/FHA and conventional loans. The mortgage lender verifies the applicant’s income and assets, and obtains a credit report to see that other obligations are being paid on time. If all is well and the appraised value of the property is enough to cover the loan needed, the lender, in most instances, can then close the loan under VA’s automatic procedure. Only about 10 percent of VA loan applications have to be submitted to a VA office for approval before closing.

To obtain a VA loan, the law requires that: 1. The applicant must be an eligible veteran who has available entitlement. 2. The loan must be for an eligible purpose. 3. The veteran must occupy or intend to occupy the property as a home within a reasonable period of time after closing the loan. 4. The veteran must be a satisfactory credit risk. 5.The income of the veteran and spouse, if any, must be shown to be stable and sufficient to meet the mortgage payments, cover the costs of owning a home, take care of other obligations and expenses, and have enough left over for family support. An experienced mortgage lender will be able to discuss specific income and other qualifying requirements.

Funding Fee A basic funding fee of 2.15 percent must be paid to VA by all but certain exempt veterans. A down payment of 5 percent or more will reduce the fee to 1.5 percent and a 10 percent down payment will reduce it to 1.25 percent. A funding fee of 2.4 percent must be paid by all eligible Reserve/National Guard individuals. A down payment of 5 percent or more will reduce the fee to 1.75 percent and a 10 percent down payment will reduce it to 1.5 percent. The funding fee for loans to refinance an existing VA home loan with a new VA home loan to lower the existing interest rate is 0.5 percent. Except in certain cases, veterans who are using entitlement for the second and subsequent times will pay increased funding fees. The funding fee for interest rate reduction refinancing loans will be charged as stated above. NOTE: For all VA home loans, the funding fee may be paid in cash or it may be included in the loan.

Other Closing Costs Reasonable closing costs may be charged by the lender. These costs may not be included in the loan. The following items may be paid by the veteran purchaser, the seller, or shared. Closing costs may vary among lenders and also throughout the nation because of differing local laws and customs. VA appraisal, Credit Report, Loan origination fee (usually 1 percent of the loan), Discount Points,Title search and title insurance, Recording fees, State and/or local transfer taxes, if applicable, Survey. No commissions, brokerage fees or “buyer broker” fees may be charged to the veteran buyer. Veterans seeking more detailed information concerning the VA home loan program may request VA Pamphlet 26-4, VA-Guaranteed Home Loans for Veterans, or VA Pamphlet 26-6, To the Home-Buying Veteran, from the nearest VA office. Loan Guaranty personnel at that office will also be pleased to answer specific questions and provide any other assistance they can. Remember, VA-guaranteed financing is a benefit which Congress intended eligible veterans should have. If you are a veteran homebuyer or know of one, it makes sense to look into the VA loan program as a good way to finance a home purchase.

Texas Veterans Program Veterans and current military personnel may apply in Texas ONLY for a special loan program from the Texas Veteran’s Land Board called the Texas Veteran’s Housing Assistance program. This is not necessarily a loan unto itself, but an opportunity to have a discounted rate on any traditional mortgage loan (Conventional with 5% down, FHA or VA.) The Texas Veteran’s Housing Assistance program cannot be combined with a Conventional 100% flex loan or any type or Alternate or Subprime loan. All standard application and approval underwriting guidelines apply depending on type of loan you choose. The available Texas Vet rates change on a weekly basis. To be eligible, you must CURRENTLY have your home of record be listed as Texas on y our permanent military records or have been residing in Texas for at least one year prior to closing on your home loan. Newly transferred active military personnel can have their home of record immediately changed to be Texas and immediately be eligible for the Texas Vet loan program. The interest rate reduction on Texas Vet loans is typically .25 - .5% lower than the standard Conventional, FHA or VA loan although you MAY pay a participation fee to obtain this type of loan program depending on the lender and servicing investor. Other interest rate reductions can be significant if you were in the military in the Vietnam Era, have a VA related disability or began teaching in the schools after leaving the military. See your lender or the Texas Veteran’s Land Board website for more information. www.glo.state.tx.us/vib/ Applying for the Texas Veteran’s Housing Assistance program is simple and your lender can provide you the forms. You will need to provide y our DD214 or current Statement of Service from your commanding officer. Proof of level of disability may also be required.

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Understanding VA and Texas Vet Programs by Melinda Hipp