- May 2, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Benefits of Using Your COE from the VA for Homeownership
Did you know that having your Certificate of Eligibility (COE) from the VA can provide you with numerous benefits when it comes to purchasing a home? With your 6 years of experience in the Army Guard, you have earned this valuable document that can help make the process of becoming a homeowner much smoother.
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The major benefit is no down payment (some might argue it’s more curse than blessing). Another benefit is the VA guaranteeing 25% of loan, so banks will give you the prime interest rate with lower credit scores. If you have a disability of 10% or more you will also have the funding fee waived. One other benefit off the top of my head is VA loans are assumable.
The biggest benefit is $0 out of pocket up front. You’ll have to pay something for a down payment, but that can be credited to you when you close.
Option to go with $0 down – HUGE benefit when a lot of people can’t save enough money fast enough to keep up with inflation/appreciation). Lower interest rate than most conventional loan options – even if you have a less than perfect score (VA loans usually have better rates even with a 640 score than conventional at 720). More flexible underwriting guidelines than conventional loans. No monthly Private Mortgage Insurance, even with a down payment under 20% (The VA Funding Fee takes the place of this, and is rolled into your loan as a lump sum at the start). If you have a 10% disability rating, you’re exempt from the VA Funding Fee (having that exemption boosts the VA loan from being a great deal to an unbeatable deal). Ability for the seller to provide concessions to pay off a buyer’s debt (to help them qualify for the loan). Streamline refinances where no appraisal, no income, and no asset qualification is required. Escape Clause is built into your purchase contract (you can walk away if the appraisal comes in low, and the seller has to give you your deposit back).
100% financing. Rates are very competitive and usually lower than conventional. More flexible than most other loans because the VA wants veterans to get approved for home loans.
If you ever want to refinance it for a lower rate if rates drop in next couple years, it’s super easy with the VA IRRRL product. That product requires no income qualification and no appraisal needed. It’s a quick and easy refinance. That’s a huge benefit if your income situation changes or value were to decline on your home. Less headache.
What rates have people gotten lately with VA? I’m locked in for 6% right now
1. No Down Payment Required: VA loans are one of the few mortgage options that often do not require a down payment, making it easier for veterans to purchase a home without needing to save for years for a down payment.
2. No Private Mortgage Insurance (PMI): Unlike conventional loans that require PMI when the down payment is less than 20%, VA loans do not require PMI. This can save borrowers hundreds of dollars in monthly payments.
3. Competitive Interest Rates: VA loans typically offer interest rates that are competitive with, and sometimes lower than, conventional loan rates. This is because the VA guarantee reduces the risk for lenders.
4. Limited Closing Costs: The VA limits the closing costs lenders can charge to VA loan applicants, making the home buying process more affordable. The VA also allows sellers to pay closing costs, which can further reduce the amount veterans need to bring to closing.
5. No Prepayment Penalty: VA loans do not have penalties for paying off the loan early. This allows borrowers to refinance or pay off their home loan without incurring extra fees.
6. VA Funding Fee Flexibility: While VA loans require a funding fee, this fee can be financed into the loan amount or paid at closing. Some veterans may even be exempt from the fee, such as those receiving VA disability compensation.
7. Assistance with Payment Difficulties: If a VA loan borrower experiences financial difficulty, the VA has programs in place to assist with loan modifications, forbearance, and other strategies to avoid foreclosure.
8. Reusable: Eligibility for a VA loan is not a one-time benefit. You can use the benefit multiple times, although certain conditions apply.
9. No Loan Limits for Qualified Borrowers: As of recent changes, there are no loan limits for VA loans for qualified borrowers with full VA loan entitlement. This means borrowers can finance more expensive homes without needing a down payment, though lenders will still consider income and credit when determining how much they will lend.
10. Variety of Loan Types Available: VA loans can be used for buying a home, building a new home, or refinancing an existing mortgage, providing flexibility depending on the borrower’s needs.
You do not have to pay PMI, no down payment. If you have a VA percentage you do not have to pay the VA Funding Fee
The U.S. Department of Veterans Affairs (VA) offers several types of loans to help military service members, veterans, and their eligible surviving spouses become homeowners or address other financial needs. Here are the primary types of VA loans available:
1. **VA Purchase Loans:** These loans help veterans buy, build, or improve a home with favorable loan terms such as no down payment, no private mortgage insurance, competitive interest rates, and limited closing costs. Eligibility requirements include satisfactory credit, sufficient income, and a valid Certificate of Eligibility (COE).
2. **VA Cash-Out Refinance Loans:** This type allows veterans to refinance their current mortgage and take out cash from the home’s equity. This can be used to pay off debt, fund school, or make home improvements. This type of loan can also be used to refinance a non-VA loan into a VA loan.
3. **VA Interest Rate Reduction Refinance Loan (IRRRL):** Also known as the VA Streamline Refinance Loan, this is used to help veterans obtain a lower interest rate by refinancing an existing VA loan. This process is typically faster and less complicated than a standard refinance and requires no appraisal or credit underwriting package.
4. **VA Renovation Loan:** This loan combines the purchase or refinance of a home with the costs of renovation or repairs into a single loan. It’s a convenient option for veterans looking to make home improvements.
5. **VA Energy Efficient Mortgage (EEM):** This allows veterans to finance the cost of adding energy-efficiency features to new or existing housing as part of their VA purchase or refinancing loan.
6. **VA Adapted Housing Grants:** While not a loan, these grants help veterans with permanent and total service-connected disabilities to build an adapted home or modify an existing home to accommodate their disability.
These loan types are designed to offer financial benefits that are not typically available through non-VA loans, such as more favorable terms for the borrower, which make home ownership more accessible and affordable for those who have served their country.
They are largely for people with poor credit and/or no money for a down payment and it makes home ownership achievable by getting you a loan.
If you’re putting money down and have good credit, it’s worth shopping around and I have usually gotten better deals on the open market. All depends on your individual financial situation
So it’s not as much of a benefit now but when interest rates were 4% or less you didn’t have to make a down payment and could invest any spare cash you had at a much higher rate of return.
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