Veterans buying a home shouldn’t buy into these myths

by Joe Tarlo Special to The Review

Veterans looking to purchase a home may not realize they have an advantage over other homebuyers.

The Federal VA Home Loan Program provides numerous benefits for both the homebuyer and real estate agents. With favorable terms and conditions, the VA Loan Program has granted more than 21 million loans nationwide since its inception in 1944.

As a veteran, don’t miss the chance to see if you’re eligible.

In 2014 in the state of Wisconsin, there were a total of 4,760 purchase and refinance VA loans—down nearly 30 percent from 2013.

Here’s a look at some of the misconceptions and facts:

Myth: You can borrow only once.

Fact: After you purchase a home with a VA loan, your eligibility can be restored for a subsequent home purchase, with proof you sold the first home and paid that loan in full.

Myth: It’s a loan from the federal government.

Fact: A VA loan is actually issued by an approved lender, often your local bank, but is guaranteed by the U.S. Department of Veterans Affairs.

Myth: You must be a first-time homebuyer.

Fact: Although some loan programs are designated for a firsthome purchase, VA loans are not (also see first bullet above).

Myth: You need mortgage insurance.

Fact: No, you won’t. In some areas of the state, the savings could be as high as $200 per month.

Myth: There are income restrictions.

Fact: There are no restrictions on income. The program is open to any eligible veteran. Eligibility is confirmed by a certificate obtained through the VA. Generally, a veteran with an honorable discharge will qualify after serving 181 days during peacetime (Active Duty); 90 days during war time (Active Duty); or six years in the Reserves or National Guard. A spouse of a service member who died in the line of duty or because of a service-connected disability also may qualify.

Myth: Prohibits accessing other state or local government loan assistance.

Fact: In some circumstances, income-eligible veterans can combine a VA loan with the Wisconsin Housing and Economic Development Authority (WHEDA) Tax Advantage Program to receive a Federal income tax credit. Other state and local assistance programs may also be available.

Myth: VA loans are not for buyers who have a down payment.

Fact: Having a down payment actually reduces the fees attached to a VA loan. For example, with no down payment, the VA funding fee would be 2.15 percent. With 5 percent down, that fee decreases to 1.5 percent and to 1.25 percent with a down payment of 10 percent or more.

Myth: VA loans always carry upfront funding fees.

Fact: The fees are waived for veterans who have a service-related disability. The funding fee exemption is noted on the certificate of eligibility for the loan, meaning the veteran does not have to draw attention to what often can be a sensitive matter. When funding fees are required, they can be paid as part of closing costs, paid with a credit from the seller as part of the Offer to Purchase, or financed into the loan.

The experience of a borrower from Waupun, Wisconsin illustrates why it’s important to find out as much as possible about available benefits through the VA Loan Program.

This veteran was interested in purchasing a house for $122,500. The first lender he visited did not offer VA loans. He then went to a mortgage broker, who offered a high-interest rate. A friend referred him to Wisconsin Bank & Trust, which was able to offer a VA loan with a lower interest rate than the mortgage broker.

The vet’s loan was for 100 percent financing and no down payment. The VA loan did not require mortgage insurance and the funding fee was waived because he had a service-related disability.

He also obtained a Federal income tax credit through the WHEDA Tax Advantage program, which lowered his taxes by about $2,000 annually.

In addition to learning about the VA loan benefits, another critical strategy is to find out in advance how the loan will be serviced after approval.

Some lenders sell VA loans to a bigger financial institution, which could require a higher credit rating. Other lenders deal directly with the government and service all VA loans until they are paid, which can yield a lower interest rate.

Information about VA loans may be found at http://www.benefits.

Joe Tarlo is a Mortgage Loan Originator, Sheboygan Market, Wisconsin Bank & Trust

Member FDIC and Equal Housing Lender. NMLS#553208

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