What are VA loans?

Veterans Administration Loans

We have thousands of military veterans in this country. These veterans receive benefits as a partial thanks for their service. And the one I will talk about today is the Veterans Administration loan program.

A veteran who is qualified for Veterans Administration benefits can apply for a mortgage with no cash down payment. In a typical mortgage loan, the buyer needs to put some cash as a down payment. The banks will not loan the entire purchase price of the property. I guess they want the buyer to have some skin in the game, and rightfully so. The down payment is typically 20% of the purchase price. There are other programs available to qualified buyers. The most popular beyond the conventional loan is the FHA (Federal Housing Authority) loan. This requires as little as 3.5% down payment. All variations that require less than 20% down also need to pay some type of mortgage insurance. This insures that the banks will not lose money in case the buyer defaults on the loan. After all, we wouldn’t want a bank to lose money, would we? To read previous posts about mortgage insurance, please visit www.55plusinmonmouth.com/blog/.

But a VA loan is, with very few exceptions, the only way to purchase a home without putting cash down. The VA guarantees the loan, mortgage insurance is not required. The buyer pays an upfront funding fee.

Closing Costs

In some circumstances, it is possible for the buyer to have the seller pay some, or all of the closing costs. Since closing costs can easily be $8000 or more, this can allow our veterans to get a home even if they don’t have the necessary money saved up. The way this works is that the buyer and seller agree on a price. They then add the closing costs on to the purchase price and the seller pays those costs. This allows the closing costs to be added to the mortgage balance. The drawback to this is that should the appraisal not meet the purchase price and the closing costs, the mortgage will not be granted.

The seller is required to pay a few minor expenses that the buyer usually pays. Among others, the seller has to pay for the wood destroying insect inspection, as well as any necessary treatment.

If you are the seller, don’t reject an offer simply because it’s a VA mortgage. Closing for VA mortgages go smoothly and are as quick as any other mortgage. And it is the right thing to do.

Questions? Call me.

Art Reiman – Realtor
732-598-7700