VA Loans
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The purpose of the VA home loan program is to assist veterans with financing the purchase of a home with favorable loan terms at an interest rate usually lower than those charged by other mortgage loans. The term “veteran” includes certain members of the Selected Reserve, Active Duty service personnel, and certain categories of spouses.
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Six Steps to Obtaining a VA Loan
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1. Find the property that suites your needs.
2. Contact a lender and apply for the loan. Our team provides VA Loan specialists.
3. Present your discharge or separation papers and/or a Certificate of Eligibility.
4. Property is appraised by an approved VA appraiser.
5. Estimate of property’s reasonable value is determined.
6. If application is approved, you get the loan.
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What the VA Loan Can DoSPACE
VA loans offer the following important features:
• Ensures that all veterans are given an equal opportunity to buy homes with VA assistance without regard to their race, color, religion, sex, handicap, familial status, or national origin
• No downpayment (unless required by the lender, the purchase price is considered a reasonable value of the property as determined by the VA or the loan is made with graduated payment features)
• A freely negotiable fixed interest rate competitive with conventional mortgage interest rates
• The buyer is informed of the estimated reasonable value of the property
• Limitations on closing costs
• Long amortization (repayment) terms
• Right to prepay without penalty (lenders may require that any partial prepayments be in the amount of at least one monthly installment of principal or $100, whichever is less)
• For houses inspected by the VA during construction, a warranty from the builder; the VA assists with obtaining the builder’s cooperation in correcting any justified construction complaint
• Forbearance extended to VA homeowners experiencing temporary financial difficulty
What the VA Loan Can’t Do
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• GUARANTEE THAT THE HOUSE YOU BUY, WHETHER IT IS NEW OR PREVIOUSLY
OCCUPIED, WILL BE FREE OF DEFECTS. The VA appraisal is NOT intended to be an
“inspection” of the property. It is in your best interest to seek expert advice BEFORE you
legally commit yourself to a purchase agreement, particularly if you have any doubts about
the condition of the property. Most sellers will permit you, at your expense, to arrange for an inspection by a qualified residential inspection service and negotiate with you concerning repairs to be included in the purchase agreement. Such action can prevent later problems, disagreements, and disappointments.
Note: The VA guarantees only the loan, NOT the condition of the property. It is the responsibility of the buyer to be informed and assure that what is being purchased is satisfactory to you in all respects.
• If you have a home built, VA cannot compel the builder to correct construction defects or otherwise live up to the contract. The VA’s authority is limited to suspension of the builder from participation in the VA Loan Guaranty program.
• The VA CANNOT guarantee that you are making a good investment or that you can resell the house at the price you paid.
• The VA does not have the authority to provide you with legal services.
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What is the Maximum VA Loan?
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There is no maximum VA loan, except that the loan cannot exceed the lesser of the appraised value or purchase price, plus VA funding fee and energy efficient improvements, if applicable. However, lenders usually won’t make a no-down payment loan larger than $537,500. If you want a home that exceeds this price the home buyer is required to put 25% of the difference down. For example, if the home you desire is $637,500 you are required to put down 25% of the difference between $637,500 and $537,500. $637,500-$537,500 = $100,000. 25% of $100,000 is $25,000. The buyer would be required to deposit $25,000 as a down payment.
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How Can a VA Loan Be Used?
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You may use VA-guaranteed financing:
• To buy a home
• To buy a townhouse or condominium unit in a project that has been approved by the VA
• To build a home
• To repair, alter, or improve a home
• To simultaneously purchase and improve a home
• To improve a home through installment of a solar heating and/or cooling system or other
energy efficient improvements
• To buy a manufactured (mobile) home and/or lot
• To buy and improve a lot on which to place a manufactured home which you already
own and occupy
• To refinance a manufactured home loan to acquire a lot
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VA Loan Interest Rates
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The interest rate on VA loans can be negotiated based upon prevailing rates in the mortgage market. Once a loan is made, the interest rate set in the note will stay the same for the life of the loan.
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However, if interest rates go down, and you still own and occupy (or previously occupied) the property secured by aVA loan, you may apply for a new VA loan to refinance at a lower interest rate without using any additional entitlement.
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Closing Costs
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The cost of obtaining any mortgage can be costly. The VA regulates closing costs. No commission or brokerage fees may be charged to you for obtaining a VA loan. However, you may pay reasonable closing costs to the lender in connection with a VA guaranteed loan.
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Although some additional costs are unique to certain localities, the closing costs generally include: VA appraisal, credit report, survey, title evidence, recording fees, a 1% loan origination fee, and discount points. The closing costs and origination charge may not be included in the loan, except in VA refinancing loans.
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In addition to negotiating the interest rate with the lender, veterans may negotiate the payment of discount points and other closing costs with the seller.
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Often, sellers will consider paying some or all of the discount points required by the lender to complete the sale. This can have a big impact on the amount of cash you must pay out of pocket. If the seller will not consider paying points, the veteran may be able to negotiate an interest rate with the lender which is sufficient to avoid the need to include any discount points in the transaction.
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VA Funding Fee
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Veterans must also pay a VA funding fee at the time of loan closing. The fee may be included in the loan and paid from loan proceeds. The fee is not required for those veterans in receipt of a service-connected compensation, or for those in receipt of military retired pay, or surviving spouses of veterans who died in service or from a service-connected causes.
VA loans have helped tens of thousands of San Diego residents to obtain homes. For more information on VA loan options, call us today at 858.997.6993.
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Lindbergh Field, CA
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