Changes to the VA Loan

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Misconceptions about the VA loan program have often discouraged home sellers and buyers from taking advantage of the benefits of a VA mortgage loan. (Daniel Bendjy, Getty Images)

The Chicago Tribune writes “Some home sellers don’t want to deal with would-be buyers who plan to get a loan guaranteed by the Department of Veterans Affairs. But those sellers could be shooting themselves in the foot.

At the same time, vets who fail to look into add-on programs offered by their states, and sometimes by their local governments, could be leaving money on the table.

How popular is the Veteran’s Administration mortgage loan? The New York Times said in early 2014 that the VA department guaranteed a new high in mortgages, nearly 630,000 mortgage loans in fiscal year 2013.

Several factors account for the VA Loan’s popularity:

The tough lending climate of the last six years has made a V.A. loan the most viable option for many service members. “It’s become so much more difficult for military personnel and veterans to qualify for conventional financing,” said Chris Birk, the executive editor at Veterans United Home Loans. “This is the only path to homeownership for many.”

One big advantage for first-time buyers is that the loans do not require a down payment. About 90 percent of all V.A.-guaranteed purchase loans are made without any money down. “Our average borrower has about $7,000 in liquid assets at the time they close the loan,” Mike Frueh, the director of the V.A.’s Loan Guaranty Program, said. “That’s not enough to make a significant down payment.”

Another benefit is that V.A.-backed loans do not require private mortgage insurance, which adds to a borrower’s monthly payment. According to Mr. Frueh, for the loans made last year, borrowers will save $35 billion they might otherwise have paid out in mortgage insurance premiums over the life of their loans.

Now the changes. “Federal law passed in 2008 temporarily boosted the VA’s limits to help spur economic recovery.” Now lending limits are being reduced. Every county in the country has new lending limits. Here in Maryland, the lending limits, without a down payment, range from $417,000 to $625,500.

A qualified VA borrower is one who shows enough monthly income, after paying monthly payments to all of his credit accounts, personal debts and housing costs, to meet “residual income” levels set by the department. The levels vary by region and household size. In the Northeast region, which includes Maryland, for example, on loans exceeding $80,000, a two-person household must show at least $755 in leftover income, while a family of five must show $1,062.

Here’s another advantage for Maryland vets: The Old Line State exempts permanently and totally disabled vets from paying property taxes. And retired service members are exempt from paying state income taxes on the first $5,000 of their retirement income.

Trusted Home Buyers is part of a nationwide group of thousands of investors who are helping tens of thousands of homeowners every year.  We may not be the “traditional” route, but we CAN help and we can do it quickly.

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