It’s a slogan on a T-shirt, and no one has taken credit for it, but it sums up well how we feel.
And since Veterans Day – the day we celebrate the heroes who wear dog tags – is Nov. 11, we’d like to take this opportunity to remind current and former service members in Southern Maryland about the amazing VA loan that is part of their benefits.
Of the 21.8 million veterans in the United States, just 6 percent use their VA benefits to purchase a home! That number is staggering – especially because we think that the VA loan might just be the best mortgage out there today.
You won’t be required to make a down payment, and there’s also no mortgage insurance requirements, making this loan even less expensive. Then, there is the fact that veterans who use this loan guarantee often get lower interest rates than they would with a conventional loan.
It does this not by directly lending money buy by guaranteeing conventional lenders that a portion of the loan will be repaid if the buyer defaults. Since lenders are assured, they are able to offer Southern Maryland veterans more attractive rates and terms.
The Many Uses of the VA Home Loan
Purchasing a home is the most common use of a VA loan, but the administration also offers programs for veterans to build homes, purchase and improve a home at the same time, and improve a home’s energy efficiency.
How do you know if you’re eligible for a VA-backed loan? Many of the eligibility requirements for the VA loan are similar to conventional loans. Others are less stringent:
- The VA wants you to have “suitable credit.”
- Your income must be enough to cover both your mortgage payment and your monthly bills.
- The VA loan is only for borrowers who intend on occupying the home as their primary residence.
- The borrower must obtain a valid Certificate of Eligibility, or COE for short. Many lenders can use the online ACE system and can provide the certificate almost instantly.
The borrower must also have a certain amount of residual income left after paying monthly credit debt. The amount is determined by region and family size.
For example, in Minnesota, a family of five must have $1,039 left every month after paying their debt payments. If this family’s debt-to-income ratio (DTI), however, is higher than the maximum allowed, they will need more residual income to qualify.
These are the VA’s eligibility requirements. Since the loan will be granted by a lender, you may face other requirements.
How Much You Can Borrow?
The VA does not set a maximum on the amount of money an eligible veteran can borrow, but it does limit how much of the borrowed amount it will guarantee.
“In 2017, a qualified borrower generally can buy a home with a value of up to $424,100 with no down payment, though the actual amount varies by county,” says Hal M. Bundrick, CFP at nerdwallet.com.
This doesn’t mean you’ll automatically qualify for the maximum. The amount you’ll qualify for depends on a number of factors, including your debt ratio.
Determine your ratio by adding up your monthly debt payments (exclude items such as phone bills, utility bills, and groceries) including your mortgage or rent, and dividing the sum by your gross monthly income. The maximum acceptable debt ratio is 41.
There’s a lot more to know and love about the VA-backed loan, so feel free to contact us. We’re happy to point you to a VA loan specialist who will walk you through the process.
La Plata MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309
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