Friday, March 26, 2010

V.A. Benefits Extend to Home Ownership

Yesterday we celebrated my office celebrated our move to a new office on South Broadway in Edmond, by cutting a ribbon and having quite a few friends over for a cook-out and prize drawings. Our guest of honor was U.S. Army Veteran Major Ed Pulido. During his presentation, the Major highlighted several of the many benefits available to veterans, including the V.A. benefit for home ownership.

This valuable benefit has helped tens of thousands of veterans own their own home. Because of their sacrificial service to their country, veterans have the opportunity to move into a new home aided by several special financing arrangements.

100% financing. This is one of the most distinctive features of V.A. home financing. Any approved veteran can find a home, make an offer and move into that home with no down payment. For many this is the only way they can ever afford to move into a home. Until a couple of years ago, conventional financing also offered 100% financing for qualified buyers, but now only V.A. and the Rural Development loans provide no down payment options.

4% seller concessions. Regardless of whether a home is purchased through a home mortgage or the buyer pays cash, all home transactions have closing costs. There are appraisals, title work, filing fees and in some cases actual surveys are required. In most cases these costs range from $3,200 to $5,700 depending on the price of the home being purchased. In Oklahoma county, the average home sells for about $150,000. Seller concessions are actual dollars the sellers agree to apply from the proceeds of their home to the buyers closing costs; in effect, they “concede” these monies to cover the costs of the buyer closing on the purchase of their home. 4% of that $150,000 home is $6,000, more than enough to cover even excessive closing costs.

No monthly Mortgage Insurance. This feature of a veteran’s home financing is another huge feature. Mortgage insurance is a fee charged by the lender for loans that exceed the 80% loan to value threshold. This means that home loans exceeding 80% of the home’s value are typically charged a monthly fee to cover the lender’s perceived exposure to higher risk for extending the mortgage beyond what is considered “prudent” in the industry. This monthly fee is based on the amount of the loan combined with several other factors. V.A. home mortgage financing has no such monthly fee and saves the veteran between $40 and $150 a month.

Low interest rates. Most qualifying veterans can move into a new home with no money down, paying little to no closing costs, have no monthly mortgage insurance and have their mortgage fixed at a low 30 year rate. In most cases interest rates on V.A. loans are at or near low conforming rates.

Certificate of Eligibility (C.O.E.). This is the verification the veteran must obtain from the V.A. in order to qualify for this type of home financing. The V.A. issues this certificate when requested by the veteran or the veteran’s approved lender. Interest veterans can find an informative booklet about how to obtain your certificate of eligibility at:

DD-214. This is a form all discharged veterans are familiar with. It is their discharge paper. In order to obtain your COE through your lender, you will need a copy of your DD-214.

Credit score and verifiable income. Like all other home mortgages, lenders have minimum thresholds of requirements that must be met for their approval of your home mortgage. Minimum credit score requirements are a 580 and the maximum debt to income ratio is around 42%. The debt to income ratio is obtained by dividing the minimum monthly payments appearing on a credit report (including the new mortgage, home owners insurance and taxes) and dividing that number by the monthly gross income. Other types of financing will allow for higher debt to income ratios, but they also require a higher minimum credit score and a minimum down payment of at least 3.5% of the purchase price.

There is a short laundry list of other features, benefits and requirements that can be discussed with your lender of choice. If you are considering a V.A. home mortgage, please discuss all of these items with your lender before signing any paperwork.