VA Home Loan

[T-Rex]

Hey, I am looking for advice from veterans who have used a VA home loan. I am a disabled vet hoping to buy a home for under $300K in southern CA wherever my fiancé can find work. I have disability compensation and I am wondering how that would be handled as income. Also, any tips or warnings? How do I begin, and what should I do to prepare?

[Villanelle]

Do you have any money to put down?  VA loans often do not have the best interest rates and there are fees (which vary based on many factors) so while you are saving on PMI, you may end up spending nearly as much (or more) on fees.  That's what our research turned up at least.  We ended up going with a conventional loan. 

So I guess my tip is to do your research and consider non-VA options as well.

Also, you may be hard pressed to find much in SoCal for $300k, unless you live waaaay far out.  There are probably some exceptions, but that's definitely well below the average norm, even for non-McMansions.  Maybe you've already done the research, but if not, start managing those expectations now. Many areas of SoCal appear on lists of least affordable housing, even sometimes when compared to places like NYC or SF. Houses are super expenses, and wages not super high.  Since you aren't heading there for a great job, can you perhaps consider another area?

[T-Rex]

I was planning to move to a cheap area that is close to family, I browsed the area with real estate websites and there are some small houses.

I think I’d get some fees waived. What are the pros and cons of your conventional loan?

[epps]

I am closing on my second VA loan currently so I have a little experience with the process. Your disability compensation will count as income for mortgage purposes, and you will have the funding fee (usually 0.5% for your first loan, up to 3.3% for second use) waived.

The biggest advice I can give is to shop around hard for rates (within the same time period). In this most recent home search (February/early March), with a credit score in the top range I received quotes varying from 3.4% to 4.8% based on the very same input data (wages, property value) in the same two week period. I also saw a big difference amongst lenders on origination and other fees (capped at 1% of the loan value for all VA loans), including several that waive origination fees on VA loans. As a spoiler- all the lenders with "VA" in their name that specialize in VA loans, including one with a slick marketing campaign that claims to originate more VA loans than any other, had some of the least desirable rates and highest fees. I would also recommend staying away from USAA as their rates and fees have never been competitive on mortgages. Penfed and Navy Federal can be okay, but I have always found better rates elsewhere in both cases.

[CptJack83]

If you receive disability income from the VA you will not have a funding fee, you are exempt.

Your disability income does count as income to help you qualify towards a mortgage.  Lenders will actually give you credit for income over the gross amount you receive as the income is tax free.  Most lenders use 115%.  So if you get $2,000/mn in disability income, a lender would consider that as $2,300.

A VA loan is BY FAR your best option as a disabled veteran.  You are exempt the funding fee.  The interest rate is lower than a conventional and many lenders waive their origination fee on VA loans.  Also VA loans are eligible for a streamlined refinance (no appraisal, no asset documentation, low costs) so if rates ever drop enough to warrant a refinance having a VA loan is a huge advantage.

Talk to a few lenders and they can do a quick review of your situation and let you know about what you'd qualify for. 

Rates are lower for VA rates, but many lenders mark the up higher.. the difference in quotes you'll get on rates will be a much wider range than on a conventional loan, so shop around.

[ematicic]

Same here, I love the VA loan. You can also have multiple houses on VA loan as long as you stay under the cap for your area and live in the house for a year. I bought 2 while I was stationed in NC and a 3rd when I got my final orders to Quantico. I was renting out the 2 in NC, but now have them on the market to sell.

The house still needs to be appraised for the VA loan to get approved so be wary of properties listed as "As is". Agree that the VA loan is a great deal. Just because you do not have to put money down though, consider the benefits of a lower mortgage if you do put money down.

All 3 times I used my VA loan though I was still active duty. In most states there are benefits for being 100% disabled so look that up. Breaks on property taxes, commuter benefits, many at the state level. Virginia for example, waves the property tax on one vehicle if you are 100%, but only the property tax on the home (up to the home and 1 acre) if you are 100% and cannot work.

There really is no benefit to a conventional loan. The interest rate should be the same for Conventional and VA.