VA loans remain a terrific bargain

Memorial Day is a reminder to honor the service of our veterans. It is also a good time to take another look at VA mortgage loans. Now that rates are rising, VA loans have become even more attractive. If you ever served in the military and are considering buying or refinancing a home, your eligibility never expires and you can apply for VA loans over and over again.

The current rate on a 30-year fixed-rate VA mortgage is slightly under 5%. That compares to a conventional mortgage currently costing about 5.37%. But there is zero down payment on the VA loan, while conventional loans require at least a 3% down payment — and PMI (a monthly insurance payment to protect the lender). VA loans do not require PMI.

So, using the example above, on a $450,000 home purchase, the no-down-payment VA loan monthly cost would be $2,415. That compares to a monthly payment of $2,710 (including PMI of $265 per month) on the conventional loan that requires a 3% down payment. That’s nearly $300 per month savings on your payments. (Those figures don’t include property taxes and homeowners’ insurance.)

Not all lenders have expertise on VA loans, so it’s worth searching for a knowledgeable lender or broker who can lower your payment by taking even a partial disability into account, or who may have offerings that lower your rate.

For example, Chase has a program of grants — of up to $5,000 — for those who purchase in certain lower-income or minority census districts. Guaranteed Rate does not charge the 1% origination fee or any lenders fees, thus lowering the overall cost, according to Leslie Struthers a vice president of mortgage lending at the company.

VA loans don’t require a down payment because of the government guarantee. But you’ll still have to pay for a VA appraisal, title insurance costs, attorney fees and processing fees or transfer taxes, as well as a small VA funding fee (unless you have a service-related disability). You can use the above-mentioned grant money to cover these fees.

Many lenders require a minimum 620 credit score, unless you are refinancing a current VA loan. Spouses’ income may be used to qualify; they, too, must have a

620 score. (Widowed spouses of service members who have not remarried are also eligible for VA loans.)

Veterans must have conservative debt ratios and fully documented income.

The VA benefit limit is tied to a loan limit of $647,200, although jumbo VA loans are also available.

All properties with VA loans must be owner-occupied.

You can also use a VA loan to take cash out of your current home, which has likely appreciated in value. But beware giving up older, low fixed-rate loans to access your home equity.

The first step in getting a VA loan is filling out your certificate of eligibility (COE), using the application VA Form 26-1880.

The COE requires your work history and proof of employment income. You can find the application forms and more details at www.VA.gov; search for “COE.”

I’ve written about these loans in the past, with the help of VA loan specialist (and a former volunteer military chaplain) Daniel Chookaszian at Chase Bank. He’s made it a mission to reach out to military families and inform them of how VA loans work. You can reach him at 847-648-7107. Or you can start by contacting the VA Loan Center at 877-827-3702, Monday-Friday, 8 a.m. to 6 p.m. EST to find your nearest local office.

VA loans are not the only housing-related benefits available to veterans. In some states, disabled veterans pay reduced or even waived property taxes. Disabled veterans are eligible to apply for grants to pay for home renovations and repairs through the Specially Adapted Housing Grant program at the VA. Search for more benefits at www.va.gov/housing-assistance.

Our military vets have served to protect all of us. Let’s make sure they know of their available benefits. This is the perfect time to remember. And that’s The Savage Truth.

Terry Savage is a registered investment adviser and the author of four bestselling books. She responds to questions on her blog at TerrySavage.com.