Many of our current and former military servicemen are not aware of the fact that the VA provides home loans. They turn to traditional mortgages, which in the long term, make it harder to pay off these mortgages on time. VA Home Loans are easier to get than traditional mortgages, and you can get a lot more money out of a VA Home Loan. This is because VA Mortgages cut a lot of the "red tape" associated with traditional mortgages.
What is a VA Home Loan? A VA Home Loan is a type of mortgage loan that is insured by the US Department of Veterans Affairs. It is provided to both US military personnel, and their surviving spouses (under the condition that spouses cannot remarry.) This is a special type of loan designed to make home financing more accessible to qualifying veterans and their spouses.
Unlike a standard mortgage, a VA Home Loan does not require a down payment. Eligible areas are declared by the VA as "Housing Credit Shortage Areas." They may include areas where average housing prices are likely to be lower (for instance, rural areas, small cities and towns not located near metropolitan areas or areas of high commute.) There are many types of VA Home Loans, including purchase and construction loans, and cash-out refinance loans, among others.
To qualify for a Veterans Administration Loan, applicants must meet one or more of the following criteria:
1. You are an active-duty or retired soldier with at least 90 consecutive days of active military service during wartime, or 181 consecutive days of active military service during peacetime.
2. You are the spouse of someone who meets the requirements specified above and have not remarried.
3. You are the spouse of someone who meets the requirements specified above, and has died as a result of a service-connected disability.
Refinancing with a VA Home Loan has several advantages as well. For an example, VA Home Loans have relaxed credit requirements. This means you do not need to have as high of a credit score compared to traditional mortgages. Unlike conventional mortgages request higher rates to qualify for a larger amount. The fact stands that there are no monthly PMI (Private Mortgage Insurance) payments with this structure of mortgages.
Private mortgage insurance is insurance on various securities that may be required for approval of the loan. Since there's no PMI payments, the Veterans Administration can afford to approve you for more money, without raising your monthly mortgage payments. The maximum amount you can get depends on the county in which you live. The average ranges from as high as 103% of the selling price.
So how can this affect you? Let's take a look at one regional area - Philadelphia, Pennsylvania.
According to Zillow.com, the average home price in Philadelphia, PA is $117,800. Also, this is projected to increase by 2.3% in one year. Typically, a VA Home Loan will be approved within the range for 103% of the sale price of the house. Alternatively, you can be accepted within a reasonable value of the home, whichever is less.
You may be approved for more or less. 103% is the average range value of housing in Philadelphia, which is is about $121,334. This will give you a profit of $3,534, plus the $6,000 for energy-efficient improvements. With all said and done, you can make a net profit of $9,534! This additional money can help in the process of making upgrades to the property.
By increasing the value of your property with any upgrades from the net profit, you will can pay off your mortgage faster. By adding additional square footage, energy efficient appliances or usage and curb appeal adds value to the property. With all these upgrades you will could resell the property later for more than what you originally paid for it.