If you’re a military member or veteran in the market for a VA home loan, there are two basic things you need in order to get the process moving. One is your basic eligibility for the VA mortgage itself, the other is how much of that entitlement you have coming. First time home buyers with enough time in the service to qualify for a VA mortgage don’t have any worries when it comes to the entitlement issue; if you have never used your VA loan benefits and you qualify, you have 100% of your VA loan entitlement available to you. See if you qualify by filling out the form above.
Are Down Payments Ever Required On VA Home Loans?
The no-downpayment option is one of the most important features of the VA home loan--military members who are new in their careers, with a new family, or just new to the home buying experience get a lot of financial assistance from this aspect of the VA loan--not having to come up with as much as 20% down on the purchase price of the home is an obvious out-of-pocket savings for eligible borrowers.
But there’s an important question that should be answered in a borrower’s mind before he or she goes house hunting. Are there ANY circumstances where a down payment might actually be required as a condition of purchase with a VA mortgage loan?
Yes. Those situations may be voluntary, that is to say that the borrower has the option of not committing to the loan instead, but borrowers should know what these circumstances are and anticipate them where
One such circumstance is a situation the VA loan rulebook describes as follows. “If the purchase price exceeds the reasonable value of the property, a down payment in the amount of the difference must be made in cash from the borrower’s own resources. ”
The borrower is free to pay the difference out of pocket (it cannot be financed) or walk away from the loan.
Another situation where a borrower may be required to make a down payment is when the VA loan applicant does not have his or her full VA loan entitlement available to use on the new purchase loan.
According to the VA, “If a veteran has less than full entitlement available, a lender may require a downpayment in order to make the veteran a loan that meets GNMA or other secondary market requirements. The “rule of thumb” for GNMA is that the VA guaranty, or a combination of VA loan guaranty plus down payment and/or equity, must cover at least 25 percent of the loan.”
A third scenario where a down payment is required on a VA mortgage is when the borrower is applying for a Graduated Payment Mortgage. VA always requires a down payment on GPMs.
Knowing these scenarios can help you better prepare for the situations where a down payment is applicable. It’s also helpful to know that the VA does not require a downpayment on typical loans that don’t fall into the situations listed above, but the borrower is free to make a down payment if desired.
Courtesy of VA Loan News | Written by: J.Wallace Jr.