VA loans are a great opportunity for those qualified. Loans guaranteed by the U.S. Department of Veteran’s Affairs are available to veterans and those currently serving who meet certain criteria, including an honorable or medical discharge, time served and some simple credit qualifications. Qualifications may be easier than for many types of loans, and there is no down payment required in most instances. While this is a great financing option for those who qualify, some home buyers may find that they need additional financing for their home or want to take advantage of beneficial local or state programs for first time homebuyers and others.
How do these loans work? It’s really quite simple. You can work with a local lender who handles these loans, and the application process looks much like applying for any other mortgage. The Department of Veteran’s Affairs will guarantee a portion of the loan, allowing you to avoid a down payment and mortgage insurance. Lending limits have been increased, particularly in specific markets with a higher than average cost of living. Refinancing terms are also excellent. Legal limits keep closing costs and other fees under control.
One of the most common reasons to combine financing options is to secure the best deal on your home. Many local areas have programs in place to help first time homeowners or lower income homeowners and these can help you save thousands on your new home. Tax incentives, grants and other benefits can be combined with your GI Bill benefits in some instances. Keep in mind that the VA offers no down payment loans with the exception of jumbo loans, so you likely have no need for down payment assistance. Gifted funds from down payment assistance programs are allowed, and may be used alongside your loan.
You might also already have a conventional loan on your property, but be eligible for a VA guaranteed loan. You can use your loan eligibility to refinance up to 90% of the value of your property, allowing you better loan terms than you might previously have had available.
Some homebuyers with existing VA financing may be concerned about taking out a second mortgage; thereby combining both a Veterans’ Affairs guaranteed loan and conventional financing on a single property. While this is allowed, you should be aware that regardless of refinancing and other issues, the loan guaranteed by the U.S. Department of Veterans’ Affairs must always be the first mortgage on the property.
In some markets, home prices are high enough to routinely exceed the typical lending limits for these loans. In this case, a down payment will not be required on the amount under the lending cap of $417,000; however, a 25% down payment is required on the loan amount exceeding that figure.
Good planning and management has made it so that few homebuyers will ever need or want to combine their VA loans with conventional financing. You may want to explore homebuyer incentives in your area, as these can be used if available. In the case of jumbo loans, these can still be secured with a down payment on the amount in excess of the current generous lending limits.