Everyone needs somewhere to live. Buyers can be doing so for the first time, moving to a new residence or remortgaging. Whatever the reason, finance has to be gained from somewhere. There are those who are fortunate enough to buy outright, or the majority who need a mortgage from a lender.
There are many types of home loans, but this article is all about ones designed specifically for people connected to the military.
What is a VA loan?
Actually, such loans have several different names: they are also called VA home loans or VA mortgages. They are exclusively available to military personnel on active duty, and their spouses. Veterans, reserve and national guard members may also apply.
The length of service will define eligibility, however. In times of war, a military person will have had to have had at least 90 days' active service. During peacetime the number of days is higher, needing a minimum of 181 days. Members of the national guard or reserve staff will need to have been working for at least six years. Military spouses can also apply for VA loans, and those whose spouses died whilst serving or who received service-connected disabilities.
The actual loan will be made by a private loan company, but the VA (the Department of Veteran Affairs) will back the money. The two types are Purchase Loans and Interest Rate Reduction Refinance Loans (IRRRL).
Where do people look?
Potential borrowers can ask friends or colleagues for VA loan recommendations. Alternatively, there are a number of websites that can assist. It was interesting to learn from Jake Taylor VA Home Loans that some online companies show top VA lenders side by side, for easy comparison. People can then read reviews, compare rates and get the best deals for them. It was also helpful to learn that the professionals recommend obtaining not just financial information, but ethical guidance.
What are the benefits?
First and foremost, some people may be able to obtain a loan when others can't. No downpayment is required. It is possible to purchase a residence using up to 100% financing. Additionally, no PMI (Private Mortgage Insurance) premiums are required to be paid.
The interest rates will be very competitive. VA rules put a cap on exit costs, making them potentially lower than standard lenders. In some instances, the sellers pay these costs. No penalties are levied if someone prepays their mortgage either.
If the home is a new build, it can be inspected by the VA whilst it is being made. The VA would obtain the builder's warranty and secure their help and cooperation.
If things get hard...
Sometimes mortgage borrowers experience financial difficulties. They could sadly arise through divorce or bereavement. If it is only a temporary issue, the VA may be able to help by securing a different repayment plan. In the event that the occupier cannot afford to make mortgage payments long term, they would have to sell. This would be to avoid foreclosure. It would be relevant at this stage to say that loan service representatives at the VA offer counselling services.
What are the eligibility requirements?
We have already discussed qualifying personnel, length of service and military spouses. When applying for a VA loan it is essential to first obtain a COE (Certificate Of Eligibility) to prove this. There are a number of different Certificates, depending on the different types of service. If in a hurry, it's worth asking the lender to obtain this on your behalf. It's the quickest way to get one, because they can download it within minutes using their lender portal.
Only a VA approved lender should be approached. This means that the lender deals with the VA home loan programme. If the potential borrower is to be successful in their application, they will have to be living in the house in question. Any application will be declined if it is merely an additional one that has been bought for investment purposes, or a second home.
Potential borrowers will need to provide their address and two years' residence history, including ownership and rental costs. Two years' employment history will also be required, with a W2 for all jobs.
Things like income and credit have to be looked at by the lender. Two years' filed tax returns have to be submitted, alongside the two most recent bank statements. The same goes for any other accounts, including investment ones.
The person's credit history will need to be researched, including the use of Transunion, Experion and Equifax. A person's credit score will usually have to be 620 or over in order to qualify. The rating has a direct implication on the repayment amounts. The better the credit score, the lower the interest rate. This is because there is a lower element of risk for the lender.
Questions will also be asked about asset history and any debt. Bankruptcy may not be an issue if it was over two years ago. Some lenders have different policies on this, and may even allow borrowing within the two year period.
Home owners always have to budget for two things: the home and all additional bills. With VA loans it is usually necessary that the total of these doesn't go over 41% of the monthly salary.
Sometimes people ask if they can have a co-signatory to the mortgage deed. This would mean the second person will also become a borrower. This will only work if the additional person is a qualifying military individual or spouse. If this is not the first VA loan for the person applying, it will not be a problem if they meet the usual criteria.
It is unwise to start searching for homes until one has heard from the loan company. The waiting time is expected to be three days maximum. If one successfully receives a loan offer from the lender's underwriting team, this will include written documentation providing rates and quotes. It will then be time to choose a real estate agent.
This will now be the exciting stage of looking for a home and writing offers. Within a matter of time, there could be a new residence and all finance put in place. The hard work will have paid off, and now it will be time to enjoy life in the new home.
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Help! My Friend Is a No Show
Dear Armchair Psychologist,
I have a friend who doesn't reply to my messages about meeting for dinner, etc. Although, last week I ran into her at a local restaurant of mine, it has always been awkward to be friends with her. Should I continue our friendship or discontinue it? We've been friends for a total four years and nothing has changed. I don't feel as comfortable with her as my other close friends, and I don't think I'll ever be able to reach that comfort zone in pure friendship.
Dear Sadsies,I am sorry to hear you've been neglected by your friend. You may already have the answer to your question, since you're evaluating the non-existing bond between yourself and your friend. However, I'll gladly affirm to you that a friendship that isn't reciprocated is not a good friendship.
I have had a similar situation with a friend whom I'd grown up with but who was also consistently a very negative person, a true Debby Downer. One day, I just had enough of her criticism and vitriol. I stopped making excuses for her and dumped her. It was a great decision and I haven't looked back. With that in mind, it could be possible that something has changed in your friend's life, but it's insignificant if she isn't responding to you. It's time to dump her and spend your energy where it's appreciated. Don't dwell on this friend. History is not enough to create a lasting bond, it only means just that—you and your friend have history—so let her be history!
- The Armchair Psychologist