Get the Lowdown on Uncle Sam's Programs

Take advantage of the many federal home-buying programs out there.

Veterans Affairs Loans

If you've ever been in the military and you're in the market for a mortgage, it's time to cash in on one of the perks: Veterans Affairs (VA) loans. People who are currently serving active duty, honorably discharged veterans, or six-year members of the National Guard or Army Reserve are eligible. You also must obtain a Certificate of Eligibility, which you can apply for on the VA Web site or through the Automated Certificate of Eligibility available through most lenders. Like the FHA options, the VA insures loans so lenders know they will get back their investments -- either from the buyer or from the VA.

The biggest advantage to these loans? No down payment is required, and you can finance up to 100 percent of your new home's value. Instead, the VA charges a basic "funding fee" of 2.15 percent that can be included in the loan. If buyers choose to make a down payment, the percentage paid as a funding fee decreases. If your loan exceeds $417,000 ($625,500 for Hawaii, Alaska, Guam and the Virgin Islands), you must make a down payment.

More pros of a VA loan:

  • Lenders often offer a more favorable interest rate -- 0.5 percent to 1 percent lower than average -- because of the VA guaranty
  • No mortgage insurance is required
  • Sellers can pay closing costs
  • No penalties if you prepay the loan

Possible Con:

  • Some sellers might balk at working with a VA loan because they used to have a reputation for taking a long time -- no surprise if you've ever been in the military. The process still takes a little longer than a conventional loan, but it's much more streamlined.

To find the VA Regional Loan center closest to you, visit homeloans.va.gov.

NOTE: If you choose to go with a VA or FHA loan, you must include this information in your offer. Both agencies have rules to prevent buyers from paying certain types of fees charged by lenders, escrow companies, settlement agencies and title companies, called "nonallowable fees." As the buyer, you are "not allowed" to pay them, but they are still charged -- often leaving the seller to foot the bill. Sellers paying these fees might be less apt to negotiate other costs.

Loan Comparison

Down payment %

  • Conventional Loans: 20
  • VA Loans: 0
  • FHA Loans: 3-5

Mortgage insurance required?

  • Conventional Loans: No
  • VA Loans: No
  • FHA Loans: Yes

Funding fee%

  • Conventional Loans: 0
  • VA Loans: 1.25-2
  • FHA Loans: 0

Credit score considered?

  • Conventional Loans: Yes
  • VA Loans: No
  • FHA Loans: No
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