NJ Loan Programs: Veterans Administration (VA) Loans
There are many NJ loan programs for prospective homebuyers. One particular loan that is an attractive option is the VA mortgage loan. This article will serve to spotlight some of the details of this special NJ loan program.
What is a VA Loan?
The VA loan is a mortgage loan guaranteed by the United States Department of Veterans Affairs. This loan is issued by qualified lenders. Unlike traditional NJ loan programs, the VA loan allows veterans 103.15 percent financing without private mortgage insurance or a twenty per cent second mortgage and/or up to $6,000 for energy efficient improvements.
With a home purchase, veterans may borrow up to 103.15% of the sales price or reasonable value of the home. Given the unique element of not requiring private mortgage insurance, more of the mortgage payment is directed to qualifying for the loan amount, thus allowing for larger loan amounts with the same payment.
In a refinance, where a new VA loan is created, veterans may borrow up to 90% of reasonable value. In a refinance where the original loan was a VA loan, the veteran may borrow up to 100.5% of the total loan amount. The additional 0.5% is the funding fee for a VA Interest Rate Reduction Refinance.
Another interesting aspect of the VA loan is that it allows veterans to qualify for larger loan amounts than with other NJ loan programs. In addition, the VA will insure a mortgage where the monthly mortgage payment constitutes 41% of the veteran’s gross monthly income. This contrasts other NJ loan programs in which the threshold is usually 28%.
The maximum VA loan guarantee varies by county. As of January 1, 2011, the maximum VA loan amount with no down payment is $417,000 – although this amount could be increased to as much as $1,094, 625 in certain specified high-cost counties.
Who is Eligible for VA-Backed Loan?
Four types of individuals are eligible: 1) Veterans, 2) Active duty personnel, 3) Reservists/National Guard members, and 4) Some surviving spouses.
How Do You Prove to the Lender that You’re Eligible?
You’ll need a Certificate of Eligibility (COE) before you can get a VA-back loan.
If you are a veteran, on active duty, or are a Reservist/National Guard member who has served on active duty (or never served on active duty) – you can acquire the COE on online (http://www.ebenefits.va.gov), through the lender or by mail (use VA form 26-1880).
If you are a surviving spouse of a Veteran who died in service or as a result of service, you can apply for the COE by mail (use VA Form 26-1817). In addition, if the veteran died after service, the VA must determine that the death was due to a service-connected disability.
There are many NJ loan programs and the VA-backed loan is one type of unique mortgage opportunity available if you qualify. Despite a great deal of confusion and misunderstanding, the federal government generally does not make direct loans under this type of loan. The government simply guarantees loans made by ordinary mortgage lenders after veterans make their own arrangements for the loans through normal financial circles. The VA then appraises the property in question and, if satisfied with the risk involved, guarantees the lender against loss of principal if the buyer defaults.
Finally, in association with the VA's program, the Servicemembers’ Civil Relief Act protects service members from financial woes on their home loan that may occur as a result of active duty commitments, freezing their interest rates at 6%.