Scott Schaefer: Army veteran Richard Kuri, 81, used his VA loan benefits to purchase a home this summer with $0 down.
Richard Kuri had a beacon guiding him along the homebuying journey. Consider it one of the benefits of buying down the road from a lighthouse. The 81-year-old Army veteran closed this summer on his dream home, just three blocks from the Lake Michigan shoreline. Two years removed from a bankruptcy discharge, Kuri was able to land a loan using his VA mortgage benefit.
The Michigan resident worked hard to repair his credit following the bankruptcy. He also had something too many veterans and military members still lack: Awareness of the homebuying benefits
VA loan volume has skyrocketed since the housing crash. Veterans and military families have flocked in record numbers to this $0 down mortgage in a time of tight credit. But millions upon millions of veterans are still missing out.
About 10 percent of the country’s 22 million veterans currently have a VA-backed loan. A whopping 1 in 3 homebuying veterans aren’t even aware they have a home loan benefit, according to survey data from the Department of Veterans Affairs. To be sure, VA loans aren’t the best fit for every military buyer. But they should at least know it’s an option. Scores of veterans and service members have an incomplete home financing picture.
Simply making sure they’re aware of the home loan benefits earned by their service can help ensure veterans get the best deal possible.
Big-Time Benefits: The government created the VA loan program as part of the original GI Bill. Envisioned as a short-term benefit, the program aimed to boost the postwar economy and broaden access to homeownership for returning veterans.
Seventy years later, VA loans are still fulfilling that original mission. Rather than make home loans, the VA basically insures a portion on behalf of eligible veterans and service members. That fiscal guaranty helps gives lenders the flexibility to extend financing with some significant benefits, chiefly the ability to purchase with $0 down.
These loans also tend to be more forgiving when it comes to things like credit score benchmarks or a previous foreclosure or bankruptcy. It is, after all, a benefit program. But it’s also a powerful loan product in the marketplace.
The no-down payment benefit allows qualified borrowers to purchase up to $417,000 in most parts of the country before having to factor in a down payment. That ceiling can be significantly higher in costlier areas.
Unlike FHA loans, VA financing doesn’t carry any recurring mortgage insurance. The annual mortgage insurance premium for FHA loans has made that government-backed option increasingly expensive. On a typical $200,000 mortgage, FHA buyers will pay about $200 more per month because of that premium.
Conventional buyers who can’t put down at least 20 percent of the purchase price have to contend with private mortgage insurance. VA loans do come with an upfront fee that most buyers finance. Veterans with a disability rating of 10 percent or higher are exempt.
VA borrowers have also emerged as a safe bet. These zero-down loans have had the lowest foreclosure rate of any mortgage on the market for most of the last six years.
Not for Every Veteran: These loans also have their limitations. Veterans wanting to purchase a vacation home or purely investment property will need to look elsewhere. Fixer-uppers can also be tough given the VA’s minimum property requirements.
Some sellers and listing agents remain skeptical of VA offers. A relative few won’t even accept them. Much of the resistance is rooted in lingering misconceptions about the program.
For veterans and service members, just knowing VA loans are an option is critical. Being able to compare rates, costs and terms across different loan types helps ensure buyers get the most from their dollar.
A VA loan isn’t going to be right for every veteran. Buyers with great credit and enough cash on hand to put down 20 percent will want to take a long, hard look at conventional loans.
But that relatively rosy financial picture isn’t the norm for many veterans and military families.
That’s a big reason why the VA loan program is just as important today as it was in 1944, if not more so.
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