Mortgage 101 – VA Mortgage Loans

Mortgage 101 – VA Mortgage Loans

This week we wanted to highlight some of the advantages and disadvantages of VA mortgage loans and explain some of the factors that come into play when Marquee Mortgage works with you or your buyers to find the best program for their specific situation(s). Department of Veteran Affairs loans, or VA for short, are excellent options for those borrowers who qualify for them. VA loans are generally available for some veterans, active service members, reservists, and other members of the Public Health Service. Every buyer is different – Marquee Mortgage takes pride in ensuring that every borrower/buyer is matched up to the right loan program for their specific situation.

VA Mortgage Loans – Advantages

  • No down payment requirement in most cases – The single biggest advantage of a VA loan is the fact that home buyers can finance 100% of the purchase price of their home. The majority of VA borrowers take advantage of this and skip the down payment entirely.
  • No mortgage insurance requirement – For every VA loan, the Department of Veterans Affairs guarantees a portion of the mortgage. Because of this guarantee, no additional mortgage insurance is required. Contrast this with conventional loans with MI required at LTV’s greater than 80% and FHA mortgage loans, which can require mortgage insurance for the lifetime of the loan.
  • Limited closing costs – Because VA mortgage loans are guaranteed by the United States Government, the amount of closing costs and origination fees that lenders can charge are more limited for a VA loan than a conventional/FHA loan. The maximum appraisal fee that may be charged on a VA loan is also less than what is typically charged for other types of financing.
  • DTI – VA Loans allow a debt-to-income ratio of as high as 55%. This is about 10% higher than your average conventional loan DTI threshold.
  • Maximum loan amount – $417,000 is the current maximum loan amount for VA loans in Maricopa County. This limit is the same as the maximum amount allowed on conventional loans, but considerably higher than the maximum allowed on FHA mortgage loans.

VA Mortgage Loans – Disadvantages

  • Mandatory VA funding fee – For most VA borrowers, there is a funding fee associated with all VA loans. This funding fee can vary from borrower to borrower and generally ranges from 1.25% to 3.3% depending on the veteran’s service. In some cases, such as veterans who were honorably discharged and disabled during active duty, this fee is waived entirely. The VA funding fee can be financed into the final loan amount if the borrower chooses to do so.
  • Limited availability – VA loans are only available to those individuals who are serving or who have served in the United States military and some select members of the Public Health Service. In addition, for individuals who have served in the military there is a Minimum Active Service Duty Requirement in order to be considered eligible.