Eligible Veterans Can Really Benefit from a VA Mortgage

If you are eligible for it, a VA mortgage can be a great way to finance a home.

The program comes under the Department of Veterans Affairs. Its purpose is to allow eligible veterans to finance a home at favorable terms. Effectively, with a VA loan an eligible veteran can buy a property for less money than through another financing option.

You obtain a VA loan from a private lender, and the Department of Veterans Affairs guarantees a portion of the loan, allowing the lender to offer favorable terms.

You’ll still go through the process of qualifying for a VA mortgage, as you would with any other type of mortgage. In order to qualify, you must have a Certificate of Eligibility, plus good credit and sufficient assets; occupancy rules are complicated, but basically you must personally live in the home as your primary residence.

There is no down payment unless the lender requires it or the price is higher than the home’s value. Other advantages include:

  • The benefit can be reused.
  • A VA loan can also be used to make improvements to your home at the time of purchase.
  • You can refinance in order to get a lower interest rate.
  • There are no mortgage insurance premiums, but there is a funding fee, which is a percentage of the purchase price. You may be able to roll it into the mortgage.
  • The loan is assumable. This means that a qualified potential buyer can take over your loan payments.

How to Finance a Condominium or Townhome

Financing a condominium or townhome differs from financing a single-family property. If you’re considering which of these options is right for you, you may want to factor in this information.

According to a blog post on nationwide.com, “A condominium, or condo, is a building or community of buildings in which units are owned by individuals, rather than a landlord.” Townhomes are defined as “conjoined units that are owned by individual tenants.”

One important difference: When you purchase a townhome, you own the structure you live in, as well as the land underneath it. In a condo, you own the interior, but the building exterior and the land on which the building sits is owned by a homeowners association (HOA).

The HOA is governed by a board of directors elected by the owners of individual units. There are monthly HOA fees for both townhomes and condominiums, designed to assist with maintaining the property. Typically, these fees are higher for condos, because they include lawn care, snow removal, pest control, and other regular maintenance tasks. Townhome owners usually have more responsibility for upkeep.

In financing a condo or a townhome, your lender may require that the development be on the Federal Housing Administration (FHA) approved condo list, which is maintained by the Department of Housing and Urban Development (HUD). This is a nationwide list of developments that have been approved, and are regularly reapproved, for loans. Depending on the way the development is classified, some townhome projects may not be included on the FHA list.

Your real estate attorney will be able to examine the HOA financials, as well as bylaws, insurance certificates, and other documents that indicate how well – or how badly – the HOA operates.

This is an important step; your purchase will likely hinge on what your attorney finds in those documents.