THE VA LOAN – Not Just a No Down-Payment Mortgage!

Most veterans are aware that VA loans require zero cash down-payment assuming the veteran has sufficient “eligibility.” This “no money down” option is subject to regional loan limits but is a powerful tool for cash strapped buyers.

The problem is that down-payment is just part of the typical cash required on a home purchase as closing costs can be thousands of dollars that the veteran may or may not have. For example.. settlement fees (attorney charges, title insurance, recordation fees, escrows for taxes and insurance, etc.) can add up to around $8,000 on a $400,000 purchase which is a significant amount of $$ and this is on top of the funds the borrower will need to move/re-locate.

The veteran may be able to negotiate a seller credit to be applied towards closing expenses but that assumes there is a willing seller involved. Many times it is up to the veteran to come up with the required closing funds and in those instances a Lender Credit may be the answer. The VA lender can slightly increase the interest rate which will result in a higher mortgage payment but this increase generates a yield that can be passed back to the veteran in the form of a lender credit towards closing costs. This credit can result in the veteran buying a home with very little (if any) cash out of pocket. Seller and lender credits can even be applied towards the reduction/payoff of consumer debt such as loans and credit cards.

Bottom line… VA loans allow zero down-payment but they can also provide a homeownership path for veterans with very little cash on hand.

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