Certain fees must be paid by sellers. The same cannot be said for a VA loan. The financing scheme forbids purchasers from paying certain closing fees. This will often include the loan underwriting charge as well as the closing fee. Those costs aren't going away. In fact, they may even be increased because lenders have more money at their disposal thanks to the government bailout.
Lenders can also increase the interest rate on VA loans during periods of market volatility. This is not possible for other types of loans and it gives buyers more time to find a better deal. It also ensures that lenders receive their money back from the government if the borrower defaults.
Finally, sellers who use VA loans to cut down on transaction costs or who prefer not to deal with private lenders can benefit financially. They can apply directly with the Department of Veterans Affairs (VA) and there are no commissions involved when they purchase a home.
The downside to this type of loan is that it requires good credit and a valid military ID. Also, there is no guarantee that you will get into anywhere near an actual VA property. Most veterans who need help buying a house rely on what we call "straw buyers" to make their deals work. These are individuals who don't necessarily need help buying a house but who act as go-betweens for veterans and lenders willing to work with them.
One of the most significant advantages of VA loans is that the seller can pay all of your loan-related closing charges. Again, they are not obligated to pay any of them, thus this will always be a product of bargaining between buyer and seller. However, the VA does require that they cover your mortgage insurance premiums if you qualify for that benefit.
This advantage cannot be used with other loan products so check with your agent or lender before you sign up for this type of transaction to make sure you aren't leaving money on the table.
Other expenses that the VA forbids purchasers from incurring include: Fees for notaries public Fees for recording (if $17 or more) Buyer broker commissions (if any) Mortgage insurance premiums Taxes Related Questions: What are the requirements for being a notary public? Can I be a notary public without being a citizen of the United States? Notaries public in Florida must be at least 18 years old. You cannot be a notary public if you are within three years of becoming eligible to vote.
The VA also prohibits purchasers from assuming other debts in addition to the mortgage debt. The VA requires its loans to be paid in full with interest during the purchaser's lifetime or until the loan is transferred to the Veterans Administration, respectively. If the borrower stops making payments, the VA may require the sale of the home to recover its loss.
In general, veterans who want to purchase a house can do so without running into problems by contacting their local VA office and asking about available loans. Some offices may have special programs for veterans while others may have flexible guidelines that allow certain borrowers to qualify for a VA loan.
Many veterans benefit from using a VA loan because they have less expensive monthly payments than conventional mortgages.
The VA claims the higher costs are necessary since the loans do not need down deposits or private mortgage insurance, however the fees may be rolled into the monthly mortgage payment like any other loan. The VA also requires a house inspection, known as the Minimum Property Requirements, or MPR. If your property does not meet these requirements, it can cost you money.
There are two types of VA loans: Conforming and Non-Conforming. Both require that the home be valued at less than $750,000 and either be in VA-approved communities or be located on VA property. However, non-conforming loans have larger funding limits - up to $1 million for single family homes and $750,000 for condos/townhouses. In addition, non-conforming loans must comply with certain conditions regarding quality of construction and environmental issues. These requirements reduce the number of available funds that can be used for this type of loan - increasing its price.
Conforming loans must be in "good" or better condition and should not have serious defects such as major damage or major code violations. If they do, the loan may not be conforming and could cause delays in processing or even disqualification.
Environmental issues include problems related to air quality, water quality, hazardous materials, and noise pollution. Loans that violate environmental laws may not be conforming and may also cause delays in processing.