VA Loans - You Earned The Benefit, So Use It!

VA loans are one of the most powerful home loan programs available, but also one of the most misunderstood. In this episode, Deb “The Mortgage Queen” breaks down how VA loans really work, including zero down payment, no monthly mortgage insurance, lower interest rates, and flexible credit guidelines. She also clears up major myths, like whether you can reuse your VA benefits, who actually pays closing costs, and why VA appraisals aren’t something to fear. Plus, a full breakdown of the VA funding fee, when it applies, and how some veterans can get it waived entirely. If you’re a veteran, active-duty service member, or a real estate professional, this is a must-watch to understand how to fully leverage VA home loan benefits.

Transcript

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Hey everyone. Welcome back to All Things Home Loan, Credit, and Real Estate. I'm your host, Deb, the Mortgage Queen. So let's start learning. Hey, it's the Mortgage Queen. And we have this really cool little tagline that we came up with that's uh where we turn confusion into clarity, sarcasm into strategy, and paperwork into keys. How cool is that? I'm not sure we're gonna stick with it, but you know, sounds good for a minute. Today we're gonna talk about VA loans. And VA loans are very near and dear to my heart. I come from a pretty small line of military people, but my grandpa served in World War II, my dad served in Vietnam, had some um uh in-laws. My uh my husband's grandpa on his mom's side uh was in the Navy and served in I want to say the Korean War, but I could be wrong because I don't really know him very well. Um his grandpa Critdle served in World War II. And uh I just I have a lot of pride. I have a lot of pride when it comes to veterans, but I actually um have my husband's uh grandpa's uh uniform from when he served in World War II, and he gave it to me before he passed away, and it's in this really cool um uh like I built something cool for it. Anyways, that's a side note and total tangent, but VA loans are awesome. They're my most favorite loan when it comes to the benefit that the borrower has, and also knowing why we have it. Our veterans serve our country, and our veterans do a lot of sacrificing that nobody knows unless you're a veteran and um, or a veteran's wife or a veteran's family. They obviously you're aware of that. But uh this is the one thing that I can say that our government has probably done right to say thank you to our veterans. I'm not saying that the government hasn't done other things, I'm just saying this is one they they have definitely done right. And I want to go through just a few things with this. Um, my favorite meme, which I'm gonna I'm gonna pop it in here, is uh the picture that floats around of a I want to say it's a a casket with a flag and maybe a serviceman standing behind it. I can't remember exactly what it is, but the caption on it is I've already paid my down payment. And that's right. Serving in the military and being a veteran, you've already served and deserve some major benefits for homeownership and and your family to be able to take advantage of that too. So let's tackle just a few things. Um, if you've served in the military, uh in National Guard, you have a certain amount of years you have to serve. If you've been deployed, it's like you've been deployed, you automatically are um eligible to do it. Um there are some point requirements, time requirements for you to qualify for the VA loan. Uh, and we can help with that with getting your certificate of eligibility and figuring that out. And if you're still currently serving, sometimes your certificate of eligibility uh doesn't come automated. We'll have to actually reach out to your commanding officer and get some information from them. But it's super easy, like it's just something that's super easy for us to be able to track down. But um high-level points of this, no down payment requirement, no monthly mortgage insurance, and it's uh usually actually I can say probably 99.9% of the time, the interest rate is the lowest in the market available. There really isn't uh usually a rate that's lower than a VA loan. The key to it though is you have to qualify because you have to be a veteran and you have to have served your required time to be able to qualify on that. Um so who qualifies is the veteran based off of the time. Now, um it's it's sad how many misunderstandings sit out there. Sometimes veterans are told they can't use their benefits anymore because they've already used it before. Now I'm gonna walk you through that path. I I'm gonna use my dad. We'll just use my dad because he's a veteran. He's used his VA benefits to purchase his home. He sold that home. There is a um uh reinstatement of those benefits, gives him the ability to go buy a new home with 100% financing. Now, here's where the little asterisk comes into that. If I use my VA loan to buy my home, and then I have a really good rate on it, I've got a really good equity position, I'd rather turn it into a rental. You have the ability to turn that loan into a rental or that home into a rental. But in order to use your next VA, you can do the VA again, but you don't get full benefits. You can't use your full benefits if you don't sell that house. Uh, so that is kind of a little bit of a misunderstanding. People think they can't use it again, but they can. There's just certain little asterisk next to it. Um, along with that, uh the entitlement that you receive back, sometimes there's a little bit of a lag on that, but it's not anything to worry about. It's something that we work with our behind the scenes and take care of that after closing. Um and then on the uh reusing it, there's a fee behind your uh VA, your uh funding fee that goes into that. I'm gonna dive into that just a little bit more. So there's an extra fee if you have used it, first-time use, um, and then there's also the disability piece of that. So we'll we'll talk about that in just a minute. So high-level things, zero monthly payment, or excuse me, zero down payment, no monthly mortgage insurance, interest rates are just better. Um, conventional FHA and USDA loans all require some sort of a monthly um uh mortgage insurance. FHA, USDA, and VA rates usually hover pretty close to the same place with each other, but there's no monthly mortgage insurance on VA. That's where the benefit comes in. So the rate might be the same as FHA, but there's no monthly mortgage insurance. Um the credit behind the credit requirements behind VA loans are just a lot more lax. It's not that you can just be lazy and not pay your bills, it's it's more of a the underwriter is tasked with being more compassionate towards things that have happened. Uh, letters of explanation for late payments and um those things pretty much fix our problem. Obviously, if we have two or three pages of collections and payments not being made on time, and you just you have completely no care in the world about what your credit looks like, that is going to be a concern to the underwriter. But for the most part, if you just kind of had something bad happen, maybe you were deployed, maybe your your family had a divorce situation or a death, and you have this window of time that just it just looks terrible on credit. We can explain our way out of that. And so VA is a lot more lenient when it comes to credit requirements. Another cool thing is these loans are assumable and you don't have to be a veteran to assume the loan. So it's a it's definitely a little bit of a process for the loan to be assumed, but that's also a benefit, is somebody could take over that financing if you decide you want to move. Now remember, if you do that, there's definitely some stuff that we have to deal with on the entitlement side of things. So we got to work through that piece of it too. Um, but think about that for your family members. If you have a home that you have your VA loan on, you want your family members to assume your home, that's kind of a win-win there. Um, the biggest, this this is gonna cause some hate and discontent, but one of the biggest things that is uh inaccurate, it straight up is inaccurate, that sellers have to pay all the veterans' fees. That's not the case. Sellers don't have to pay the veterans' fees. That is not the terminology. It is veterans cannot pay certain fees. And so what happens in the lending world, which I'm sorry, this is just going to be the truth, is from a lender standpoint, we're like, hey, get the seller to pay all of the closing fees for these veterans because they have to. And then I don't have to get rid of my underwriting fee, I don't have to get rid of my processing fee, I don't have to get rid of some of the title fees. Instead of me as a lender having to pay those, I just show that the seller's paying them, the veterans not paying them, and all of a sudden, I don't have to cover all those junk fees in my um in my loan. Um, that is the piece that frustrates me about lenders. The veterans can't pay those fees, but it is not the seller's responsibility to pay them. We want them to, and if you're the seller out there, we want to adjust those purchase contracts so that we have the ability to have those fees paid for because there are third-party fees that are required. I still have to pay an underwriter, I still have to pay my processing, I still have to have the ability to keep my lights on. That that is the reality behind it. So if we can work it into the contract that the seller covers all of those fees, we want to. But please keep in mind it is not the seller having to, it is that we want them to because the veteran can't. That's the fun part of this. And I explained that to a realtor a couple of months ago, and uh it was funny because she went off on this whole tangent about how this contract needs to be adjusted and yada yada yada. And I said, Hold on just a second, I want to tell you something. And I explained that to her. The phone just went silent for like two seconds. She goes, I've never been told that before. I've been in real estate for 25 years and I have never been told that before. I said, Well, go to Chat GBT, look it up, you'll find out that it's true. And I I just thought it was kind of cool. Like being a lender, be honest. Like I straight up would tell the realtor, I want those in there because I don't want to pay for those junk fees. I want somebody to pay for them besides me losing them. I still have to pay these people. I just don't, yeah. Anyways, there's my little soapbox. Sorry, not sorry. That's really what it is. Sorry, not sorry. But um appraisals, appraisals, that's the next thing. Let's think about the VA appraisal. The appraiser goes out there and he says, hey, uh, same like FHA, hey, when the rain comes off the roof, it's not moving away from the house. It's gonna damage the foundation. Why is that a problem to be dealt with? It's not. Hey, uh, there's handrail needs because this there's four steps, and if somebody bails off the top of that thing, they're gonna really get hurt. We need to have a handrail safety thing. VA appraisers are tasked with making sure that that home is safe and sound for the veteran. And when it comes down to it, if you have a problem with an appraiser calling out safety and health issues in a home, shame on you as a realtor. And if you are not helping your client get those things fixed, or you as a seller's agent aren't helping your clients see that those things need to be fixed because it's a health and safety thing, shame on you. But I mean, I understand there are those situations where sellers don't have the money, and and and that's okay, that's all right, but it's it's different when there is enough equity in that home that they can spend a thousand bucks and fix some of those things. So don't get hung up on the VA appraisers. Now, with the value, they also are really scrutinizing to make sure that that veteran is not being taken care of. So have VA appraisals come in lower. Uh, yeah, I've seen them come in below purchase price and they call tide water. And basically what happens is the VA appraiser comes out and says, Okay, I've inspected the property, I'm not hitting value. Hey, realtors, put your heads together and get me some comparables that are going to help me hit the value. And both parties have the rights to be able to go back to the drawing board, go to the MLS and see if there are any comparables that justify the price that they're selling at. And if they can't, the price just comes in lower. So playing devil's advocate just a little bit, it's like, okay, if you don't have the comparables to prove the value based off of what you sold the home for, why would the appraiser be able to come in at purchase price? Just because the borrower was willing to pay it doesn't necessarily mean that's the value. So there's a little bit of a misunderstanding with VA appraisers, too. But I will tell you, this is a fun fact. I had the absolute worst VA appraiser years and years and years ago, and I was so mad. Oh, I was so mad, the realtor was mad, I was mad, and I mean it was just everybody was mad, and we were all mad at the appraiser. He he just needed to go away. He just needed to get off the appraisal board. So I called the Veterans Administration and I said, we got to get this guy out of here. He's crossed my desk a couple of times, and he has got to go. He is causing so many problems in our market. And uh they basically told me, and I don't know if this is the rule, but this is what they told me: VA appraisers don't get off the appraisal board unless they die. What? Okay, uh that's cool. So they could do a really shoddy job and really not be good for our veterans, and they're staying on the board. Anyways, he was old enough back then, he really did need to retire, and he's probably dead by now because that was long enough ago. So I guess there is some truth to that, but um be patient with the appraisers because we know they're trying to help with the health and safety issues, and then they're also making sure that the value is really there and that the um uh veterans are not getting taken advantage of in any aspect of it. We're also doing 100% financing. So if we get a veteran into a home at 100% financing and that value can't be supported, yet we force that to go higher, they're already upside down in the home. What kind of an what what what kind of that's not good? That's what I'm gonna say. What what kind of service are we giving these veterans? That's just not good. Um, it's as a listing agent, if you list on there on your FHA conventional USDA eligible, but nothing's on there with VA, uh, you're missing out. There are VA renovation options available. There are um, if you really look at the leniency of the credit, VA credit side of it for your borrower to qualify, is probably the most lenient. And I would be all over accepting a VA, all over, and don't get hung up on the 100% financing because maybe the veteran has the ability to put$80,000 down, but why? Why would they do that? Um, so let's talk about the funding fee. The funding fee is the fee that is paid by the veteran, and there's different sections of it, I'll explain that. Um, it's paid by the veteran by being financed into the loan. And I'll use an easy number. We know this isn't even real because this isn't the market that we're in at all, but let's just say we have a purchase price of$100,000. This is easy math for this poor girl who didn't write these notes down. So easy math of$100,000, and it's a veteran's first use. They're utilizing 100% financing, so they're not putting a down payment at all, and it's their first use. It's gonna be a fee of 2.15% to that veteran. So I'm gonna do a loan for$100,000 to give the seller, but I'm actually gonna do a loan for$102,000 to pay that funding fee in my loan amount. Um, subsequent use is 3.3%, and then it does reduce down if you have a greater than 10% down payment. It's 1.5%. Now that is required on all VA loans unless you are receiving at least a 10% disability from VA. I would dare say most people who have been deployed have the ability to get some sort of a VA disability, and I would tell you to check into that. If you've been deployed, there is going to be some mental things, there are going to be probably some physical ailments, and if you can get your benefits to show at least 10% disabled, that waives that funding fee. So that just makes VA that much better if you can waive your funding fee. Um, the uh nice thing about uh the funding fee is it it gives some funding to the VA, the veterans administration, um, to help with losses. There are gonna always be foreclosures. It doesn't matter what loan you're in. Uh perhaps the veteran was on the loan by themselves and they pass away and they don't have family. That's gonna be a foreclosure. So it could be that just not not the lack of making payments, it's just somebody just didn't outlive their loan and didn't have a family to take care of it. Maybe the estate couldn't pay off the home. Um the thing that we have to also remember is uh the VA funding fee can be quite expensive and it can add to the mortgage payment because it is financing in above and beyond that purchase price. But when you compare that to a higher conventional rate in mortgage insurance or the same rate on FHA with mortgage insurance, it's still gonna be cheaper to go VA. The only time that you kind of get into a, oh, maybe it's gonna be cheaper if we go conventional is if the veteran has a 20% down payment. So they get out of the mortgage insurance and they have a funding fee. Um, we actually have had quite a few scenarios that the borrowers had a sell of a home, they have a big chunk of a down payment just because they wanted to take this chunk of home, this chunk from the sell of their home, put it into the new home, and so they have 20 or 30% down and they're not exempt from the funding fee. Well, it could be that the rate is not that much better on a uh VA loan to offset that uh funding fee requirement. So we definitely have to run the numbers and make sure that we've got you lined up correctly. Even if VA loan is top dog and we want to make sure that everybody gets into the veteran's loan, we still have to make sure that we calculate the funding fee situation there. Um it's I guess for the sake of uh argument here, the the top things to remember is 100% financing, no mortgage insurance, better interest rates for the most part. I would, I would 99.9% of the time. Appraisals are done to protect the uh the veteran to not have any health and safety issues, to protect them that they're not gonna be upside down on their home at the time of purchase. It's it's a big way to say thank you. Thank you, veterans, for what you did. And we've got your back. America, we've got your back. Like, thanks for what you've done. Um, I'm sure there's probably some people listening to this thinking, oh my gosh, the America hasn't done anything for the veterans. Yeah, you're you're probably right in certain aspects. But when it comes to the VA funding or the VA financing, absolutely. Um, remember that it's not for just first-time homebuyers, it's actually um can be repeated, so that's a big misunderstanding. And just for fun, just to throw the dagger back in, veterans can't pay some of those fees, but sellers are not required. We just want them to. That's the biggest thing. Makes me giggle because I don't mind telling people what the truth is and and deal with it. That's what it is. Um, yeah, I think that's probably the big thing to remember. Oh, certificate of eligibility. Let's talk about that. So if we don't have the uh so we have a website we go to. Once we get the application, we go to this website, it's a VA website, type in the information, and we get this form that basically says, yes, here's your veteran information where, you know, which division that they served in, if they're exempt from the funding fee, if they've ever used their uh VA uh loan before, and if they're receiving disability benefits, it's right on that form. Sometimes they don't come back automated. Uh a couple cases that we've had that have not come back automated is because they had just recently got discharged, so they didn't have their DD214 or their NGB 22 loaded into the system yet. Uh, pretty simple. All we have to do is just put it into a manual review, and it usually pops out pretty quickly. The next thing is if they're in the National Guard, still considered National Guard, and have not been um uh discharged at all, they've hit their six-year mark, never been deployed. That comes down to getting a letter from the commander. We've got to figure out we got we got to get the information that we need so that we've got the term of service in there, and that's more of a manual thing. And um really not hard. It really isn't hard, it's just a couple little extra documents if we don't get those automated. But those certificate of eligibilities are instantly, so we can get those pretty quickly. Um it's not slower, it's not slower. Uh, as a lending institution, we have uh the program down path. Like we know what we've got to do. Do we have to have a water test? Do we have to have an engineer if it's a manufactured home? Um, there's all kinds of just little things you just have to have special disclosures that have to go out. We'll get them. We can close those loans as fast as every other loan. The appraisers uh usually take a little bit longer, and there's not really a rush process with the appraisers, so that kind of takes up a little bit. of extra time. But in the event that we were in a huge hurry, the we know who the appraiser is that is notified, we're notified of that on the lending side. And the real estate agent on the um the buyer side can call and say, hey, we're kind of in a a pinch. We if there's any way you can go fast go faster, they still have the right to take their time to get it done, but we can always make those phone calls and ask if they can do it faster. Um and then uh the um I I don't know that it's fair to say all real estate agents shy people away from the VA loans. But I've done mortgage loans for 30 years and I can count on one hand, one hand, five fingers maybe even less than my five fingers the amount of times that I've had conversations with real estate agents that were excited about a VA loan and shame on that. I hope that there can be a a change a shift in the mindset because um we as citizens of the United States owe our veterans more than you than than we can even imagine. And um just as a quick story my grandpa Cooper um he was he he saw some horrendous things in the war of World War II and we never we never heard anything from him. It was he served and he was home and he did his time and that was it. There was not many conversations and when he was alive we were always hounding him all of his grandkids will you let us interview you you know for our government classes or our history classes and he just there there's a few things that we have on record but not really and when you have people around you that have served in the military um there's there's a somberness to them um we owe them this it is that we owe them this we owe them being willing to do the extra paperwork uh we owe them uh dealing with the appraiser and how they handle things we owe them that um another perk really quick uh manufactured homes manufactured homes on a permanent foundation that have been moved twice are allowed to be done on 100% financing with VA so if you're listening to this and you're wondering uh if you could take anything special out of this you absolutely can if you are a real estate agent who has a home consideration twice moved start marketing it to veterans it's 100% financing for them I think that's pretty cool. In fact just kind of as a side note I think that we should all take note that if an engineer goes out there and says yep the house is good the foundation's good we shouldn't care if the house has been twice moved. We shouldn't care. So FHA conventional USDA need to get their crap together so that we can actually get everybody okay with twice moved homes as long as we have a couple inspections to make sure everything's good. I've actually done financing on eight homes I know for a fact eight homes that were moved from their original location to a new foundation regular single family residents homes can move but manufactured homes can't well single family homes weren't built to be moved manufactured homes were built to be moved. So I just anyways there's a little tangent I'm I'm gonna have to stop there. We're gonna have a whole 20 more minutes about me and my tangents but um end result 100% financing VA loans are awesome. Yes there's funding fees there's ways to get around it um please be patient with the appraisers please be patient with the um things they call out and let us work together to be able to get those things fixed if there are things that need to be fixed and the sellers don't have room in their numbers. But yeah with that I will leave you with uh we love veterans we love veterans loans uh we love 100% financing we can do construction loans for VA uh loans and uh buy land build a house buy land put a new manufactured buy land put a new modular buy land put a single wide I mean there's some options out there that are just awesome so don't discredit what VA loans can be they are awesome they're very misunderstood misused and definitely underappreciated and we want to make sure that we take advantage of those at all costs that is just an amazing program so I leave that with you the Mortgage Queen signing out let's get you into home thank you veterans we appreciate everything that you do for us thanks so much for listening I really appreciate it so stay tuned we are gonna learn some more next time