Military service brings enough challenges to life. Buying your home in Georgia or any other state shouldn’t be one of them.
Whether you’re a veteran or active-duty military, an experienced loan professional and Realtor can help make it faster, easier and more suitable for you to purchase a home. Regardless of your situation – whether you’re rushing to respond to PCS orders or seeking to establish roots near your current station – this article will provide an overview of the homebuying process for Veterans and Active-Duty Military Personnel.
So Where Do I Start?
Georgia is one of the nations hot spots for both veterans and active-duty military to live and own a home. That means I get numerous questions regarding VA loans from consumers. Accordingly, I always recommend whomever they are working with that they begin by asking the following key questions:
What does my mortgage payment include?
How do I qualify for a mortgage?
How much home can I buy?
How large of a loan can I be approved for?
How important is my credit history?
What if my credit is “less than perfect?”
How much do I need for a down payment?
What about closing costs?
What kinds of mortgages are available?
Would a VA mortgage be best for me?
What if I’m responding to PCS orders?
What are my possible financing choices?
Which loan is right for me?
Are there any tips to consider when loan shopping?
How important is pre-approval?
Who will approve my application?
What happens after I apply?
What Kinds of Mortgages Are Available?
It’s a good idea to gain a basic understanding of the kinds of available home mortgages. As you review the list, keep in mind that these categories widely overlap – for example, I provide VA, FHA, adjustable-rate and fixed-rate mortgages. As your partner through the mortgage process, I can help you determine the best loan to fit your needs and design a custom financing solution for you.
Qualified veterans, reservists, active-duty personnel, and their spouses can purchase a home up to a specified amount with little or no down payment.
VA loans feature:
Low or no down payment requirements
A wide range of rate, term, and cost options
Flexible qualifying guidelines
Use of gift funds for closing costs
More flexible requirements in comparison to FHA or conventional home loans enable easy qualification with regard to credit and income.VA loans are assumable, offer a no-down payment option and enable out-of-pocket expenses to come from a gift.
The Federal Housing Administration (FHA) insures a wide variety of mortgages provided FHA approved lenders.These loans are designed to meet the needs of homebuyers with low or moderate incomes and feature:
Low down payment requirements
Loan limits based on geographic locations
Generally more liberal qualifying guidelines
Use of gift funds for down payment and/or closing costs.
The interest rate remains fixed for the life of the loan.These loans:
- Offer predictable monthly principal and interest payments throughout the life of the loan.
Provide protection from rising rates. No matter how high market rates go, your interest rate stays the same.
Generally are well-suited to borrowers who plan to stay in their homes for a long period of time, have a fixed or slowly-increasing income, and have a lower tolerance for financial risk.
Adjustable-rate mortgages (ARM)
The interest rate adjusts periodically to reflect market conditions on pre-determined dates.These loans:
May be more appropriate for borrowers who may want to sell or refinance early, are able to make larger monthly payments after the rate adjusts, or are looking to buy a home when interest rates are relatively high
Have an initial introductory period that usually offers a lower rate (relative to fixed-rate mortgages), after which the rate adjusts periodically, based on a market index.
Protect borrowers from steep increases in rates through annual and lifetime adjustment caps.
The initial rate can be locked in for different periods. Most lenders offer introductory periods of one, three, five, seven, or 10 years.Typically, the rate readjusts annually after the introductory period.
Because of the introductory period’s lower rate, some borrowers may be eligible for a larger loan amount with an ARM than with a fixed-rate mortgage.
These are loans that exceed a specified size (conforming loan amounts).
- Jumbo loans on single-family homes exceed $417,000 ($625,500 in Alaska and Hawaii).
Rates are generally higher on jumbo loans that on smaller comparable loans.
These programs are designed for borrowers with less-than-perfect credit histories, excessive debt, previous bankruptcy, foreclosure or tax delinquency.
No Documentation Loans
Designed for borrowers who are self-employed, on commission or whose financial situation may be difficult to document.These loans allow borrowers to apply for a loan based on their credit history and stated income.
Would a VA Loan Be Right for Me?
A VA loan can be a good choice for qualified veterans, active-duty military personnel and their spouses. Backed by the Department of Veterans Affairs, they offer low to no down-payment requirements, flexible qualifying guidelines, no private mortgage insurance (PMI) requirements, and permit out-of-pocket expenses to come from a gift.
Everyone is required to obtain a Certificate of Eligibility. If you do not have this Certificate, you will need to apply using VA Form 26-1880 and this will require a copy of DD-214 (Certificate of Release or Discharge from Active Duty) showing character of service. Along with the Certificate of Eligibility, loan applicants will need to document their credit, savings and employment information.
If you are unable to meet VA requirements or want to exceed certain limits, contact me to discuss how to tailor a program to your specific needs.
In the following situations, a VA loan may not be appropriate:
- When buying a home that exceeds the maximum loan amount and down-payment funds are limited:
- The VA doesn’t loan funds or set a maximum loan amount; they only guarantee loans. You’ll work with a lender to obtain your mortgage.
- Lenders typically limit loans to what’s known as the “conforming loan limit,” which is $417,000. If the home you want exceeds that limit, you’ll need a down payment to cover the difference.
- For Alaska, Hawaii, Guam, and U.S. Virgin Islands’ residents, note that maximum original loan amounts have now been increased 50 percent higher for first mortgages
- You do not meet service eligibility requirements:
- If you’re a veteran, you must be able to demonstrate wartime or peacetime service with a Certificate of Eligibility, discharge or separation papers.
- Active duty personnel are eligible after 181 days of service (90 days during the Gulf War)
- Reservists or National Guard members not otherwise eligible must have a total of six years of service
- To purchase an investment property: VA loans are only provided for owner-occupied properties.
- You want an adjustable-rate mortgage or a term that’s shorter than 30 years: VA typically offers 30-year, fixed-rate mortgages.
- The property you want to purchase exceeds the VA’s reasonable value for the property: The VA uses an appraisal to value your property. The loan amount will be limited to what the VA calls the property’s “reasonable value,” which is derived from the appraisal.
Tony Gallegos – Serving the mortgage needs of Kennesaw, Marietta, Roswell, Smyrna, Powder Springs, Dallas, Acworth, Woodstock, Douglasville, Hiram, Austell and Atlanta. Subscribe to The Mortgage Cicerone: