VA Disability Benefits and Funding Rates: The Basics You Need to Know

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First of all, let’s start with the fact that if you’re trying to qualify for a home purchase and you’re a vet, here are some of the most important factors you need to know… 100% Financing. VA loan limits are now unlimited, however if you want to buy a home “no down payment” your limitations are like Jumbo Loans which are $417,000.00. That’s not a bad number considering you don’t put anything in a house.

You, the homebuyer, would receive an “entitlement” of $36,000.00 on loans of $144,000 or less. If a home is larger than that, you are in what is called a “bonus entitlement,” which basically takes the conforming loan limits of $417,000.00 and multiplies it by 25%, which is the amount guaranteed by the VA. Your bonus eligibility begins for loans above the $144,000.00 mark. Law can be very confusing, so suffice it to say that you can use your law repeatedly… you just need to know what your law entitles you to. Confused?

It is not too bad. Let’s say you currently own a home and want to purchase a larger home, which, according to VA guidelines, is allowed. You need to know what right you have left. In other words, how much house can you buy using 100% financing if that’s the path you want to go?

Let’s say your right is attached to another property. You sold it, but when your COE (Certificate of Eligibility) is executed and it still shows that your entitlement is still being used, you or your lender need to clear that up first. The COE’s division of rights is housed at the VA in Winston-Salem, NC. A good piece of evidence to have is the HUD closing statement you received when you sold your home. If you lose it or can’t find it for any reason, call the title company or attorney’s office where you closed and ask them to print a copy for you. When you arrive at the COE center in Winston-Salem, tell them you have proof of the sale of your home and would like to fax it to them. It usually takes a few days to clear that property, but once it is cleared, they will provide you and your lender with a new COE showing your total entitlement of $36,000.

FINANCING RATES

This is not as confusing as the right. The law requires a “financing fee” that lenders put on your loan. For first time VA loan users, it is 2.15% of the loan amount. So if you buy a home priced at $225,000.00, the financing fee for this loan would be $4,837.50. (225,000 x 2.15%) The finance fee would be “wrapped” into the loan, making your financed amount $229,837.50. (225,000 + 4,837.50 = 229,837.50) What is a financing commission that you ask for? It’s a calculated fee on “no down payment” loans and contributes to down payment costs, helping to reduce costs that taxpayers normally pay. Your financing fee increases to 3.3% if you use it again. This is called the reuse fee. The reuse fee is based on the fact that you have already used your benefits once before and normally should have had the opportunity to build up some equity from the previous home you resided in.

DISABILITY FEES AND FINANCING

Guess what? Take all the fees I just talked about in the illustration above and throw them in the trash! There are several extenuating circumstances that do not allow a veterinarian to pay a financing fee “if” the following conditions are met;

o Had a service-connected disability of 10% or more
oVeterans receiving service-connected disabilities if not
receive retirement pay
o Surviving spouses of veterans who died in the service of our country or from a service-connected disability, even if the surviving spouses are veterans and do not use their own interest in the loan.

An interesting thing about the financing fee is that no matter how long you use your VA benefits, you will never pay a financing fee with the aforementioned disability. Another point about VA loans is that you never, ever have mortgage insurance on a VA loan. There are two things to keep in mind with VA loans. If you ever see your lender put a financing fee on your loan and the VA has declared you 10% or more disabled, ask them to remove it. They will ask for proof of your disability which will be included in your loan documentation that you provided to the lender. The second is that if you ever see mortgage insurance on a VA loan, it should be removed as well. In either case, be sure to get a good faith estimate from them.

I hope this gives you at least the basic information you need to know…some confusing and some not so bad. A good lender will be able to point out these and other points in your initial consultation with them.