If you’re eligible for the VA home loan benefit you can use it to buy a home in Charleston, or anywhere in South Carolina as long as you intend to live in the property as your primary residence. This special no money down program was first introduced toward the end of WWII as a way to help veterans return to civilian life and part of several benefits listed in the original Serviceman’s Readjustment Act of 1944 or what we refer to today as the G.I. Bill. For those past and present military who do qualify, there really is no better option in today’s mortgage market for 100% financing.
The VA loan is only available to a select few. For veterans of the armed forces, the VA home loan is an option. So too are active-duty soldiers with at least 181 days of service, individuals with at least six years of service in the National Guard or Armed Forces Reserves and surviving spouses of those who have died while in service or as a result of a service-related injury.
Approved VA lenders like Coast 2 Coast Lending can validate a borrower’s VA eligibility by making a direct request to the Department of Veteran’s Affairs for a copy of the Certificate of Eligibility. This certificate is the only document the VA will accept when lenders process a VA home loan to determine if the borrower is indeed eligible for the mortgage program.
The VA home loan does not require a down payment whatsoever and is one of three government-backed mortgage programs in today’s marketplace. Beyond not requiring a down payment, the VA prohibits the veteran from paying certain types of closing costs.
Attorney or escrow fees, for example, are considered “non-allowable.” The borrower is only allowed to pay for an appraisal report, credit inquiry, title insurance, origination fees, recording and a property survey. All other fees must be paid for by the seller or the lender. The lender can also adjust the interest rate on the loan then issue a lender credit at the settlement table.
The VA home loan also carries a guarantee to the lender. Should the loan ever go into foreclosure, the VA will pay the lender 25% of the loss on the loan. This guarantee is financed by what is referred to as the Funding Fee and is calculated as a percentage of the loan amount. This funding fee can vary based upon a few factors but for a first-time home buyer putting $0 down on a 30-year VA home loan, the funding fee is 2.3% of the sales price of the home.
The funding fee increases to 3.6% for borrowers who have previously used the VA loan program, but can be reduced by putting at least 5% down at closing. See the complete funding fee chart below.
Consider a home in Charleston listed at $250,000. The buyer and seller agree on the price and the lender proceeds with the loan application. The funding fee in this example at 2.3% of the sales price is $5,750 but does not have to be paid for out of pocket and is most often rolled into the loan amount, keeping the cash to close even lower.
VA home loans do not require a monthly mortgage insurance payment (PMI) like other FHA and USDA government loans. The interest rates on VA loans are extremely competitive, in fact, some of the lowest available today. Both of these features result in a lower overall monthly payment compared to other types of home loans.
The VA program also requires the homebuyer to occupy the residence and cannot use the VA loan to buy a rental property or a second home. The VA loan can also be used to finance single-family homes, approved condos and townhomes that will be owner-occupied.
The VA loan limits for 100% financing are $726,300 in SC and most of the country except high-cost locations. These limits can be exceeded, however, the home buyer may have to put money down.
Learn more about VA mortgage eligibility in South Carolina here.
For existing homeowners that might be considering a refinance, VA offers interest rate reduction and even 100% cash-out refinance programs for homeowners with equity. Interest rates are near all-time lows and home equity is near all-time highs. Now might be a great time to tap into your home equity to help consolidate higher-interest debt to start an important home remodel project, etc.
Zero down payment, lower closing costs and competitive interest rates make a compelling case for those wanting to come to the closing table with as little cash as possible. Call us today for more information at Ph: 904-810-2293 or just submit the Quick Request Form on this page.