Disclaimer: As of January 1, 2020, the VA Funding Fee will change to a range of 1.4% -3.6% based on factors such as your down payment or equity amount, your service status, and whether this is a first-time or subsequent use of one VA deals in loans.
The VA loan is a great option for any eligible veteran, active soldier, or surviving spouse. It offers the option of buying your own home instead of mortgage insurance without a down payment and one-off financing fee.
If you have a disability because of your time serving our country, you have made a special sacrifice. Because of this, the VA has some specific loan guidelines and programs to help you out when you get your VA loan.
Before we get there, however, let’s discuss a fundamental question that is often asked by veterans.
Do veterans have to pay graduation fees?
There are closing costs associated with every mortgage that must be paid by the customer. VA loans are no exception, but those VA guideline on concessions for sellers allows the seller to pay a greater amount of these costs than would be the case with many other loans.
There is no limit to the amount someone can choose to deposit into the following categories:
- Origination fees
- Discount points-These are prepaid interest points. By paying part of your interest upfront, you can lower your interest rate.
- Various fees – these include things like paying credit reports, real estate appraisals and valuations
There are certain things that a seller can only pay up to 4% of the purchase price or appraisal for, whichever is lower. This limit applies to trust items (prepaid property taxes and household insurance) as well as the VA financing fee.
However, you may be able to exempt yourself from the grant fee. More on this below.
In addition to the seller’s concession option, you can choose to take part or all of the closing costs through lender loans. In this case, these are built into the loan balance and paid off over the term of the loan.
Who is exempt from the VA funding fee?
If you have a service disability, are a surviving spouse of someone who died on duty or due to their service disability, or are an active service member who received the Purple Heart, you can get the Funding Waiver Fee waived.
If you are currently receiving disability benefits and you have not yet completed your VA loan, your financing fee will be waived and you will not have to pay it. (This applies regardless of your degree of disability.)
If you terminate your loan before the benefits are received, the financing fee can be refunded if you were in the middle of applying for a disability at the time of the purchase or refinancing. For example, if a first-time home buyer purchases a $ 200,000 home with a VA loan and qualifies for a disability, the 2.15% finance fee is waived – saving the homeowner $ 4,300. Once your disability benefits have been approved, you must submit a written application to the VA Regional Loan Center in your state for a loan refund. When you have financed the financing fee, the refund amount will be deducted from your principal amount due, and if you paid in cash, the VA will write you a check.
It is important to remember that if you are not currently receiving disability benefits, you must have a pending disability claim before the loan expires. If the disability application is dated after completion, you may not receive a refund.
Grants for Disabled Veterans
A disabled veteran may be able to buy a home with a VA toll-free loan, but if the home also requires accessibility changes, the Specially Adapted Housing (SAH) grant and the Special Housing Adaptation (SHA) grant are available. To qualify for these specific scholarships, you must have a 100 percent service-related disability rating from the VA.
The SAH assists qualified veterans with one of the following:
- Build a house with special handicapped modifications.
- Conversion and adaptation of an existing house to suit the needs of the living area.
- Offset the grant against the main mortgage balance of an adjusted home that was already purchased without VA grant assistance.
The SHA will assist qualified veterans with any of the following:
- Adapt an existing house that already belongs to the veteran.
- Customize a home that the veteran might want to buy.
- Help a veteran buy a home that has already been customized.
It is important to note that if you are considering a scholarship, that maximum allowable amount for the SAH for fiscal 2018 is $ 81,080. For the SHA, the grant limit is $ 16,217. In addition, veterans must have their disability benefits approved before applying for housing benefit.
Veterans eligible for any of these programs may also qualify for a Temporary Residence Adjustment Scholarship (TRA). This allows you to get funds to temporarily adjust the residence of a family member whose home you temporarily live in. The maximum loan amount for a SAH-Eligible Veteran is $ 35,593. If you are eligible for SHA, the maximum TRA grant for 2018 is $ 6,355.
Even if you don’t qualify for any of these programs, contact yours local VA office as well as the local branch of the Department of Health and Human Services near you. There may be other sources of funding, veteran-specific or otherwise, that will allow you to achieve goals related to housing or anything else that is made difficult by your service-related disability.
There are tax credits and exemptions on home ownership
Once you have used your VA loan benefit to buy a new home, you are entitled to some very useful tax credits and exemptions that could come in very handy. The Disabled Veteran Tax Exemption can help reduce the amount of tax a disabled veteran pays each year. The amount varies by state, so it is important to check with your local VA office in person or through their website to find out about your state benefits. For example, some states offer 100 percent tax exemptions for all veterans, while others limit it to 100 percent disabled veterans.
With a VA loan, you may also be eligible for a Mortgage Loan Certificate (MCC). The MCC is issued at the state level and allows you to apply for a tax credit for a portion of the mortgage interest paid per tax year. The loan amount is set at the country level, but it is definitely a benefit that is well worth taking.
Disability payments can help you get a VA loan
If you are currently receiving disability allowance from the VA, it can count towards income, which in turn will help you meet VA loan income requirements. To be eligible for a VA loan, income must meet three criteria – it must be stable, reliable, and likely to continue. The key factor in using a disability pension on a VA loan is that your payments are likely to continue.
If you are interested in getting your own VA loan, you can get started online or call one of our real estate loan experts at (800) 785-4788. We are happy to help!
VA loans are in place to help veterans of the armed forces so make sure you take advantage of these benefits if you qualify. Do you have any questions about these benefits? Ask in the comments below!