The VA home loan has been available since 1944, and it has been expanded over the years, and presently, it is as crucial as ever, providing a lifeline for veterans and active members of the military.
They are not required to have excellent credit scores or save for a down payment which, even with the past global recession and the COVID-19 pandemic, ensures they can afford homes. The program has guaranteed over 25 million VA loans.
While it is a specialty loan, it is not so different or more challenging to get than other types of loans. This guide will point veterans seeking to get VA loans and purchase a house in Lee County in the right direction.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Lee County, Florida.
Types of VA Loans
There are four different kinds of VA loans which are;
VA Purchase Loan - A loan enables veterans and service members to buy new and existing homes with no down payment. It covers single homes, multi-unit properties, new construction, condos, and manufactured homes.
VA IRRL stands for VA Interest Rate Reduction Refinance Loan (IRRL) - It is one of the two options for veterans seeking refinancing. It is a simple, low-cost refinancing loan that often does not need underwriting, appraisal, or even income verification. It is only for veterans who have a VA loan currently and helps them have a lower new rate. It also comes with a time limit or when costs and fees can be recouped. It is where it gets its name VA Streamlines.
VA cash-out Refinance - A loan enables qualifying homeowners to refinance their mortgage and take cash from their home's equity. You can use the loan to refinance up to 90% of your home's value. Veterans with or without a current VA loan can apply for this loan.
- VA energy-efficient mortgage - It is a loan that allows veterans to borrow extra money to cover the cost of energy-efficient improvements, whether as a refinance or as part of a home purchase. You can borrow up to $6,000 to meet qualified improvements like solar heating, cooling systems, and thermal windows. You, however, cannot use this option to purchase appliances or non-permanent additions.
Technical terms of VA Loans Explained
Some terms are unique to VA loans, which helps one understand how VA loans work.
VA guaranty - The guaranty from the Department of Veterans Affairs to private lenders protects them from total loss if the lender defaults on payment. The security incentivizes the lenders to offer the loan at competitive terms.
VA loan limits - Usually, veterans can borrow as much as the lender is willing to offer them with no down payment. VA loan limits only come in when you have lost your full entitlement either because you have a couple of VA loans or you lost one to foreclosure.
- VA funding fee - This loan fee goes directly to the VA department to ensure the program keeps running for the future without an extra burden on taxpayers. The amount charged depends on the circumstances. If you are a first-time applicant, the fee is 2.3% of the house's purchase price, while subsequent applicants face a fee of 3.6% of the house purchasing price. Specific buyers qualify for exemptions at the discretion of the VA department.
Advantages of VA Loans in Lee County, Florida
VA loans contain a unique blend of attributes, making them one of the most powerful mortgage options in the market.
No down payment
Veterans can become homeowners without having to save for a down payment with zero down payment. This is the single most significant benefit of VA loans. Standard mortgages like the FHA loan have minimum down payment requirements which could quickly rise depending on your financial position at the time of application. For instance, the FHA requires a 3.5% down payment, while conventional loans usually start from 5%.
For instance, if the mortgage is $250,000, you would be required to have a down payment of at least $8,700 in an FHA loan or $12,500 in a commercial loan. You can save that amount with a VA loan, and the zero down payment offers other advantages.
For instance, instead of spending years saving for the down payment, you can immediately get the house you want as the zero down payment cuts down the process.
Further, with no down payment, you can retain your savings, which come in handy for further house developments, emergencies, or investment opportunities. There is also little risk of losing the house and the deposit should you not make the payment as the government bears the risk as your guarantor.
Finally, a zero-down payment arrangement means you can get the house at a price you can afford instead of being priced out of your dream home by appreciation and inflation. You cannot save as fast as property prices rise; thus, by using a no down payment option, appreciation works for you and not against you.
You save on private mortgage insurance
Almost all mortgages, from conventional ones to FHA and USDA ones, have a form of insurance for which you pay monthly in addition to the mortgage payments. As a result, it adds to the overall cost of your mortgage.
The mortgage insurance safeguards the lender's money if you default on your payment, and you have to either pay it until you build up a 20 % equity or, in other cases like USDA loans, for the duration of the loan. VA loans have no such payment giving you further savings on your mortgage cost.
You enjoy competitive interest rates
VA loans are also known for their low-interest rates, and data shows they have had the lowest average for 30-year fixed rates. They usually have about 1% lower interest rates than conventional loans. The competitive rates guarantee veterans monthly savings, freeing up their income.
Lower closing costs
Closing costs are also another area where veterans can make significant savings. While all mortgages come with associated fees and costs, the VA limits the expenses veterans can pay.
Lower closing costs make homeownership more affordable to qualifying house buyers. Further, some of the closing costs are usually already paid for by other parties. Some sellers, for instance, cover some of the costs upon request by the veterans.
It is a lifetime benefit
The VA loan is not a one-time offer, contrary to common misconceptions. It is a lifetime offer that one can use time and time again. There is even an allowance to use several VA loans simultaneously using the second-tier entitlement.
There are no prepayment penalties
Some mortgage loans have prepayment penalties whenever you pay them off before the term. The penalties allow the lenders to recover some of the income they lose when you repay your loan earlier. VA loans do not have prepayment penalties; you can refinance or plan for future home purchases without a prepayment penalty.
Eligibility for VA Loans in Lee County, Florida
Eligibility for VA loans requires one to meet the Department of Veterans Affairs' minimum requirements, have a valid Certificate of Eligibility, and satisfy the lender's credit and income requirements. The basic VA loan requirements from the Department of Veteran Affairs are;
If you served 90 consecutive days of active service during wartime.
If you served 181 days of active service during peacetime.
You have six years of service in the Reserves or National Guard.
- You are a spouse of a service member who died in the line of duty or whose death resulted from a service-related duty.
If you do not meet these requirements, you could still be eligible, depending on your type of discharge. People with a discharge falling in any of the categories below can still qualify for VA loans.
Your discharge was because of a hardship, force reduction, or at the government's convenience.
Your discharge was because of a service-related disability or a medical condition.
- You had an early-out discharge and served a minimum of 21 months of a two-year enlistment.
Lenders require a Certificate of Eligibility to verify if you meet the minimum requirements for a VA loan. This is an easy step as your lender usually can get your COE with only a security number and date of birth. Getting a COE is often a matter of minutes when you do it electronically.
According to the VA, about two-thirds of COE requests submitted this way are issued immediately. You will be notified of any document that may be needed to help with the application for the COE. The three ways you can get your COE are;
- Applying using a VA loan-approved lender
- Using the VA's e-Benefits portal online
- Applying by mail using VA form 26-1880
Verification for spouses' VA loan eligibility
Spouses will also need a COE to access their VA loan benefits. For surviving spouses, their application process depends on whether they are recipients of Dependency and Indemnity Compensation or not.
If you receive Dependency and Indemnity Compensation, you should fill out VA Form 26-1817 and get a copy of the veteran's separation paperwork, like the DD Form 214. The VA form 26-1817 is a request to determine loan guaranty eligibility for unmarried surviving spouses.
If you are not receiving the compensation, you will apply using the VA Form 21P-534EZ and submit it to your state's VA Pension Management Center. You will also provide the veteran's separation paperwork, a copy of your marriage certificate, and the veteran's death certificate or the DD Form 1300 – Report of Casualty.
You can request the veteran's separation paperwork from the US National Archives and Records Administration.
Lender requirements for VA loans
VA lenders have fewer requirements than other loans, thanks to the government's loan guarantee. There is zero down payment to be made and fewer rates. Still, the lender will need to satisfy that;
The VA department does not set minimum credit score requirements, but private lenders do, and their minimum credit score may vary, so it helps to look around. Typically, they look for a credit score of 620 and above.
They also consider the income left after paying all major expenses known as the residual income. The VA requires that veterans have a residual income sufficient to meet specific family needs like food, medical care, and transportation. It also acts as a cushion in the event of an emergency.
Besides the residual income, the lenders also consider your debt-to-income ratio, which helps them evaluate your purchasing power and the amount of loan you can afford.
How to Apply for VA Loans
Once you are under contract, the loan process takes anywhere from 30 to 45 days. You should be aware that even after applying, you are under no obligation to go through with the home buying processor to any lender. There are three basic steps for applying for a VA loan.
Find and contact a lender - Look for a lender offering VA loans to kickstart your application process.
Verify your eligibility - Obtain your Certificate of Eligibility by yourself or through your lender.
- Complete the Application - You finalize your loan application by providing all necessary documents, including tax returns, W-2s, and other information.
Top Five Things to do in Lee County, Florida
Lee County is full of outdoor options regardless of your preferences or age. Blessed with sunshine all year, excellent beaches, and plenty of parks and recreation facilities, the outdoors are where the fun is in Lee County.
For those looking for dining experiences, there are top-class restaurants all over the town. It has an excellent mix of urban and suburban vibes and great communities to live in. Here are five of the top things you can enjoy in Lee County.
If you are a baseball fan, you are in luck as you can always enjoy baseball spring training from two Major League Baseball teams; the Boston Red Sox and the Minnesota Twins. The two teams are always in Fort Myers for their spring training giving you a chance for an up-close sporting experience.
During this period, the Boston Red Sox play their games at JetBlue Park while the Minnesota Twins play in the Hammond Stadium at the CenturyLink Sports Complex.
You can also expect to see teams like the Mets, Pirates, Tigers, Cardinals, Blue Jays, Rays, Tigers, Phillies, Astros, Braves, and Yankees during the competitions. The game schedule and ticket prices are out in mid-November, while the tickets are available from December to January.
Go kayaking and canoeing
If you are an adventurer and love the water, canoeing or kayaking will give you an exciting opportunity to explore the wildlife in Lee County. These two activities are also low impact, so they will not put your joints under too much strain while you will reap the additional benefit of increased flexibility and muscle strength.
They are also great for getting your cardio going, and you can do it alone or in a group of friends or family. Like other activities on this list, there are plenty of spots for canoeing or kayaking, including most parks. Some of the best ones are;
- The Estero River
- Lovers Key
- The Caloosahatchee River
- Pine Island Sound-Matlacha Pass
- Lakes Regional Park
Biking is a staple outdoor activity in Lee County, thanks to the landscape that provides numerous biking trails. Biking also happens to be the best way to explore Lee County. One of the best riding spots is Sanibel Island, with the most extended riding stretch on the Sanibel-Captive Road on the Island's western side. It also allows you to picnic on the beach or take a dip to cool off in the ocean.
You also do not need to have your bike or worry about carrying it. There are plenty of rentals, the big ones being Finnimore's Bike and Beach Rentals and Billy's Bike Rental on Periwinkle Way.
Visit the parks
If you want to keep an active lifestyle while indulging in nature, you can consider the numerous parks around the county. They offer a wide range of activities, including playgrounds, biking trails, hiking, canoeing, guided wildlife tours, paddle boating, kids' water parks, camping, and exercise stations. Some of the top parks you should consider are;
- Lakes Regional Park on 7330 Gladiolus Drive, Fort Myers
- Lovers Key State Park on 8700 Estero Blvd, Fort Myers Beach
- Caloosahatchee Regional Park on 19130 N. River Road, Alva
- Cayo Costa State Park on Captiva
- Koreshan State Historic Site on 3800 Corkscrew Road, Estero
Sun Splash Waterpark
The Sun Splash Waterpark has over fourteen acres of water slides and pools. There are speed slides and a five-and-a-half story free-fall drop. There is only one full-service waterpark in Lee County, and it is worth a visit for all-around family fun.
If you are not one for such adrenaline-pumping action, you can leave it to your children and choose to bob on a float on the Main Stream River Ride peacefully. There is a Tot Spot for little children and numerous chairs for parents to lounge. The park also has concessions and food available.