Joint Base Charleston - What is a VA Loan? And is it for Me?

What is a VA Loan?

VA Loan vs. Traditional Mortgages

Military homebuyers have access to one of the best loan programs ever created ~ Here’s how the VA Loan compares to a traditional home mortgage:

VA Loans		Conventional Loans
0% Down (for qualified borrowers) VA Loans are among the last 0% down home loans available on the market today.		Up to 20% Down Conventional loans generally require down payments that can reach up to 20% to secure a home loan, pushing them out of reach for many homebuyers.
No PMI Since VA Loans are government backed, banks do not require you to buy Private Mortgage Insurance.		PMI Required Private Mortgage Insurance is a requirement for borrowers who finance more than 80% of their home's value, tacking on additional monthly expenses.
Competitive Interest Rates The VA guaranty gives lenders a greater degree of safety and flexibility, which typically means a more competitive rate than non-VA loans.		Increased Risk for Lenders Without government backing, banks are taking on more risk which, in turn, can result in a less-competitive interest rate on your home loan.

VA Loan Eligibility:

• You have served 90 consecutive days of service during wartime OR
• You have served 181 days of services during peacetime OR
• You have more than 6 years of service in the National Guard or Reserves OR
• You are the spouse of a service member who died in the line of duty or as a result of a service-related disability

VA loans require no down payment or private mortgage insurance. They feature competitive rates and terms and allow buyers to purchase a home with little to no money out of pocket.

1. No Down Payment

Saving money and building credit can be difficult for service members who are constantly on the move. With the VA Loan, qualified borrowers can finance 100 percent of the home's value without putting down any money. Take a look at the chart below to see how much you can save through the no-money-down benefit of the VA Loan.

VA Loan Savings at Closing:

Loan Amount	0% Down	5% Down	10% Down	20% Down
$150,000	$0	$7,500	$15,000	$30,000
$250,000	$0	$12,500	$25,000	$50,000
$350,000	$0	$17,500	$35,000	$70,000
$450,000	$0	$22,500	$45,000	$90,000

2. No Private Mortgage Insurance

Many conventional lenders require borrowers to pay private monthly mortgage insurance (PMI) unless they're able to put down at least 20%, which can be difficult.

With a VA Loan, however, there is no PMI. This VA Loan advantage saves you thousands of dollars over the life of your mortgage.

PMI Savings per Month:

Loan Amount	Monthly Savings
$150,000	Save $115/mo
$250,000	Save $191/mo
$350,000	Save $268/mo
$450,000	Save $345/mo

3. Competitive Interest Rates

Because the VA backs each VA Loan with a guaranty, financial institutions carry less risk and can offer interest rates that are typically 0.5 to 1 % lower than conventional interest rates.

Lower Interest = More Savings

Loan Amount	$150k	$250k	$350k	$450k
Savings from a 0.5% reduction in interest	$14,760	$24,480	$34,200	$43,920
Savings from a 1% reduction in interest	$28,800	$48,240	$67,320	$86,400

Additional Benefits

Basic Allowance for Housing
Basic Allowance for Housing (BAH) is a significant benefit for qualified active military members. Lenders can count your Basic Allowance for Housing as effective income, which means you can use BAH to pay some or all of your monthly mortgage costs.

No Pre-Payment Penalty
The VA Loan allows borrowers to pay off their home loan at any point without having to worry about a pre-payment penalty. With the absence of a pre-payment penalty, borrowers are free to consider future home purchases and refinancing options.

Common Misconceptions

Myth 1: I only can utilize my VA benefit for my initial house.

There are multiple situations where you might reuse your VA entitlement in order to secure a housing loan, according to VA guidelines:

Entitlement that was previously utilized in conjunction with a VA housing loan might be restored underneath specific circumstances. When restored, it could be utilized again for additional VA Loans. Restoration of previously utilized entitlement is probable if:

• The property that secured the VA guaranteed loan was sold, and the loan was paid in full.

-OR-

• A qualified veteran-transferee agreed to assume the outstanding balance upon the VA loan and substitute her or his entitlement for the same quantity initially utilized upon the loan. The assuming veteran has to additionally meet occupancy, credit and income requirements of the law.

-OR-

• The previous VA loan was paid in full and a veteran has made application for the loan to be secured by the exact same property that secured the previous VA loan.

-OR-

• The previous VA loan was paid in full, yet the veteran hasn’t disposed of the property that secured the loan.
  

Myth 2: I have a foreclosure or bankruptcy upon my credit history, and thus am not qualified for a VA loan.

A bankruptcy within an applicant’s (or a spouse’s) credit history doesn’t in itself disqualify a loan, according to VA guidelines.  A good credit history especially after the bankruptcy and length of time since the bankruptcy can be contributing positive factors towards still qualifying.

Myth 3: I do not have a full 2 years of service, therefore I am not qualified.

This isn’t necessarily the truth across the board. As a general rule of thumb for eligibility, the Veteran handbook reports that a veteran is qualified for VA housing loan benefits if she or he served on active duty within the Coast Guard, Marine Corps, Air Force, Navy, or Army was discharged underneath conditions other than dishonorable following either: ninety days or more, any portion of which happened within wartime.

-OR-

• 181 continual days or above (peacetime).

Two-Year Requirement: A longer length of service requirement has to be met by veterans who:

• Enlisted (then service began) following September 7th, 1980

-OR-

• Was an officer, plus service started following October 16th, 1981

Those veterans have to have either completed:

• Twenty-four continual months or beyond

-OR-

• The complete span for which ordered to active duty, yet not less than ninety days (any portion within wartime) or 181 continual days (peacetime).

Call us today for more information on how the VA loan may be a great option for you!

Military Homes Charleston
We specialize in helping military families enjoy a smooth PCS in and out of Joint Base Charleston, South Carolina. Buying and selling your home is one of the biggest events of your life. As your trusted Charleston Real Estate Professional, we are 100% committed to helping you the best way we can when you buy or sell your home. We have a passion for helping people, and we love what we do – call 843-410-8014 or email today!