Luckily, the US Department of Veterans Affairs established VA loans targeting veterans. The loan program requires zero down payment and no private mortgage insurance fees. Provided you qualify, you can even use it multiple times.
These perks make VA mortgages look attractive to veterans and active military members. But what exactly does the loan payment entail? And what requirements are you supposed to meet to get the zero down payment loan in Palm Beach, Florida?
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Palm Beach County, Florida.
What is a VA Loan
The VA loan is available to eligible service members, veterans, and military spouses as a mortgage with a zero down payment requirement. They are disbursed by private mortgage lenders such as banks or mortgage companies with backing from the VA.
Since 1944, the VA mortgage program has enabled returning service members to buy homes without mandating them to have good credit or make a down payment. It has backed over 25 million VA mortgages, helping active-duty military members, veterans, and their select families buy or refinance homes.
Decades later, VA loans continue to change the lives of eligible Americans across the country. They prove that the federal government has the best interests of those who served their country in a time of need. You won't have to be subjected to the harsh eligibility requirements that conventional home loan programs have.
Since VA mortgages have federal government backing, they boast reasonably low-interest rates compared to conventional mortgages. These interest rates are set by participating lenders rather than the VA and depend on factors such as:
- Current mortgage market conditions
- Your credit score
- Loan duration
- Loan type (Jumbo, cash-out, IRRRL, or purchase, among others)
Types of VA loans
To understand how VA loans work, you need to know the various available options. Each offers excellent home financing assistance in your journey to become a homeowner. Here's a breakdown of the four types of VA mortgages:
VA Purchase Loan
A VA purchase loan is a convenient solution if you want to buy a new or existing property with zero down payments. It allows you to purchase multi-unit properties (like duplexes), manufactured homes, condominiums, and single-family homes, provided they meet VA's property guidelines. While you can use the loan to purchase a new construction home, the policies and guidelines for financing vary with the lender.
VA Cash-Out Refinance
With a VA cash-out refinance loan, you can refinance your home loan and take out money from your home's equity. Once you qualify, the refinance applies to up to 90 percent of your property's value. Even more, private lenders consider you for this type of loan when you have or don't have an existing VA loan.
The VA Interest Rate Reduction Refinance Loan (known as VA IRRRL) is the most common VA refinance loan, other than the VA cash-out refinance loan. It is sometimes referred to as VA Streamline since it's a simple, low-cost refinancing option. Lenders may consider you for this mortgage without income verification, credit underwriting, or property appraisal.
One good thing about the VA IRRRL is that it affords you a lower interest rate than the one you had on your other VA loan. It also has a cap on the time lenders recoup the loan fees and costs.
VA Energy Efficient Mortgage
If you would like to take an extra loan to cover energy efficiency improvements done to your property, the VA energy efficient mortgage is an excellent option. The catch is that you can qualify for up to $6,000 for the improvements.
These energy-efficient improvements include cooling systems, solar heating, heat pumps, and storm/thermal window installations. Non-permanent additions like window air conditioning units are excluded from this financing.
Are You Eligible for a VA Home Loan?
The eligibility requirements for VA loans are pretty straightforward compared to those of conventional home loans. You or your military spouse must have an up-to-date Certificate of Eligibility (COE).
It's also important to satisfy private lenders' credit and income requirements. Besides this, you have to meet one or more of these requirements:
181-day active-duty service during peacetime
90-day active duty service in a war
6-year military service in the Reserves or National Guard
- Be a surviving spouse of an eligible service member who passed on while on active duty or due to a military service-related disability.
Your VA loan eligibility will depend on the discharge type if you are a veteran. You qualify for the loan if you were discharged for the following reasons:
Applying for a VA Loan
Unlike other government-backed loans, you don't need to know whether you qualify for a VA mortgage to begin the loan process. The first pre-approval step will outline everything you need to know about your eligibility.
It takes a 30 to 45-day period to complete the VA loan process. The timeline may differ with your situation.
Note that you won't be obligated to stick to a particular lender when looking to buy a home with a VA loan. Either way, the loan process goes through three basic steps:
Do VA Loans Have Limits?
One attractive feature of VA loans is that they allow you to borrow as much as a private mortgage lender will extend, provided you are within your VA loan entitlement. You get to enjoy this incentive without making a down payment.
However, you need to understand how the VA loan entitlement works to know the maximum amount the VA can guarantee on your loan. The entitlement is usually either 25 percent of the loan amount up to the conforming mortgage limit of $36,000. Participating lenders refer to this entitlement to determine how much you can borrow before requiring you to make a down payment.
Note that VA loans don't have a cap on the maximum amount you can borrow. Instead, they have an entitlement to ensure that you maintain a specific discipline when repaying the loan while still getting to own a home.
Can You Use a VA Loan More Than Once?
As a qualifying active-duty service member, veteran, or surviving spouse, you can take and use a VA mortgage as many times as you like in your lifetime. Even better, you can take more than one loan simultaneously. You only have to be eligible for the loan and satisfy the lender's conditions to enjoy this benefit.
Understanding the VA Funding Fee
Have you ever wondered how the US Department of Veterans Affairs still manages to back VA loans after all these years? It relies on the VA funding fee, which helps ensure that the VA home loan program continues to help military and veteran home buyers afford a chance at homeownership.
The VA funding fee is charged depending on your circumstances. Expect a 2.3 percent fee of your property's purchase price if you take a VA loan for the first time. A 3.6 percent funding fee will apply to a subsequent loan, while a 0.5 percent fee will apply to an IRRRL loan.
While it may worry that the VA funding fee will increase the overall loan costs, there's a way around this issue. You can roll this fee over to your total loan amount and pay it with monthly loan payments.
Depending on your situation, the VA may mandate the seller to pay for the loan expenses, closing costs included. You may also be lucky to be excluded from paying the funding fee if you are getting compensated for a service-related disability. Though eligible surviving spouses are exempt from the fee, the VA is the only body that can determine these exemptions.
Benefits of Taking a VA Loan
VA loans hold so much power since they offer a couple of financial benefits that you can't find in other types of home loans. These advantages are undeniably part of why the VA mortgage program is still relevant decades after it was first established. Here's a deep dive into these benefits:
No Down Payment
The zero down payment requirement on VA mortgages has to be the single-largest benefit you can enjoy. You won't have to spend several years saving for a lump-sum payment to buy a home. As a result, you get to enjoy significant cost savings.
As part of its commitment to veterans and service members, the VA understands how difficult it can be to save money and build credit while you are constantly on the move. The VA loan offers up to 100 percent financing to the property's value without requiring you to put down a dime.
Competitive Interest Rates
The affordability of a home loan is primarily based on the interest rates charged by the lender. VA mortgages are affordable since they boast the lowest average fixed rates on the current mortgage market.
These loans have maintained the lowest average 30-year fixed rate for the past six years. The rates range from 0.5 to 1 percent lower than the interest rates charged on conventional loans. You can save every month and throughout your loan at a lower rate.
No Private Mortgage Insurance
Expect a private mortgage insurance requirement when taking a conventional loan, not a VA loan. The PMI is a requirement for loans that need a 20 percent down payment.
Unlike conventional loans, VA mortgages don't have a mortgage insurance requirement. You won't have to pay the mortgage insurance premiums over the loan duration.
Relaxed Credit Requirements
Instead of enforcing credit score requirements on VA loans, the VA only guarantees the loans giving private lenders the freedom to do so. The credit score conditions help look into your risk of default when taking a VA mortgage. Though they vary, they are usually lower than what conventional mortgage lenders expect from you.
Closing Cost Limits
While all home loans require you to pay specific fees and closing costs, the VA has a cap on the maximum amount lenders can charge you. These caps can make homeownership affordable, provided you are eligible. It allows you to rely on other parties in the transaction to pay for the fees and costs.
You can ask the seller to cater for the loan closing costs and 4 percent worth of concessions. The costs can cover judgments, paying off collections, insurance, and prepaid taxes.
No Prepayment Penalties
Most loans attract prepayment penalties if you pay them off before they mature. The penalties help lenders recover part of the interest payments they would have collected when you stuck to the initial payment schedule.
But with a VA loan, you can comfortably pay off your mortgage at any point without incurring a prepayment penalty. You even have the freedom to look into refinancing options and future home purchases.
Things to do in Palm Beach County, Florida as a Veteran
Stretching from the Sunshine State's Atlantic Coast into the rural areas, Palm Beach County, Florida, boasts a coastline with numerous sandy beaches and golf courses. It is home to thousands of animals and offers many recreational opportunities for families and friends. If you are a veteran who is considering moving to Palm Beach County, here are suggestions on how to spend your time there:
Explore the Beautiful Beaches
Make your first stop at Boca Raton and explore some of the most beautiful beaches the Sunshine State has to offer. You can also peep at the city-owned beach parks or have a great time at showers, grills, and playgrounds across the city.
Palm beaches situated in Palm Beach County, F lorida, offer plenty of opportunities for golfing, snorkeling and paddling. You even have the chance to enjoy the idyllic sights around the sandy beaches.
Rent a Kayak and Paddle at the Loxahatchee River
Flowing more than 7.5 miles, the Loxahatchee River is a freshwater habitat for paddling and kayaking enthusiasts. Loxahatchee river is also full of bass, mullet, turtles, river otters, and alligators and is surrounded by cypress trees, egrets, ospreys, and owls. Surfing along the coffee-colored waters of the river will give you a brand new perspective on what the county has to offer.
Take a Bike at Jeaga Wildways
Jeaga Wildways connects over 160,000 acres of land as a system comprising four multi-use trails. You can take your passion for cycling, equestrianism, and hiking to the trail and traverse the area's picturesque sceneries.
Watch Birds at Pine Glades Natural Area
Pine Glades Natural Area is a 6,651-acre birding hotspot set up to protect freshwater marshes, cypress swamps, and slash pine woods. It attracts a large variety of wildlife, including ospreys, snail kites, Florida sandhill cranes, herons, egrets, and roseate spoonbills. If you're into birdwatching, Pine Glades Natural Area has over 6 miles of trail you can explore.
Explore Grassy Waters Preserve
If nature walks are your thing, check out Grassy Waters Preserve, a large wetland tract that acts as the main water reservoir for West Palm Beach city. It surprisingly occupies 50 percent of West Palm Beach's entire geography.
As you explore the preserve, you'll encounter a 1-mile loop (the Cypress Boardwalk) that accommodates strollers and wheelchairs). The loop offers a great way to immerse yourself into the surrounding wetlands without getting wet.
And if you feel more adventurous, sign up for the Grassy Waters Swamp Tromp tours for a wet hiking experience. During the hike, you enjoy the scenic swamp water that magnificently reflects ferns and cypress trees.
The Bottom Line
VA loans are convenient for your situation if you are a veteran, active-duty military member, or surviving spouse who meets the VA eligibility requirements and lender's conditions. You can use the mortgage to purchase a new property or even refinance your current VA mortgage. Either way, you can enjoy perks such as zero down payment, no mortgage insurance, and competitive interest rates.