Friday, September 10, 2010

Government-backed loan programs for our men & women in the military

"This post comes to you from James Kelley of VA Benefit Blog. A law school student at the University of Missouri, James Kelley works to educate the public on government financing options for home purchases. He is a co-founder of Military Basebook, a facebook application that helps connect military members based on where and when they served."

Active duty service members and veterans living on can fulfill their dreams of homeownership with government-backed loan programs.

There are still programs out there that offer credit and financial leniency in this economy—USDA and VA loans. These mortgage programs provide low monthly mortgage payments to help low to middle income families.

The VA Loan

Qualified lenders of the VA loan around the country love approving these loans for veteran homebuyers. Why? Statistically, veterans are not so quick to default. Also, if a borrower does default for some reason, the Department of Veteran Affairs covers most of the cost for lenders. In other words, they lose very little money when compared to conventional programs. The upshot is that borrowers can save a lot of money on their first home purchase by utilizing a VA Loan.

Because lenders take little risk in approving these loans, the VA mortgage program comes with great rates for eligible veteran homebuyers. Those rates are lowered even more when buyers factor in that they do not have to pay private mortgage insurance (PMI). There is also a no down payment option, which saves service members tons of money.

For eligible veterans, VA loans can be used in any vicinity—large cities, small ones, rural areas and suburbs. The loan guarantee amount varies according to county. The maximum VA loan amount is $417,000. However in high cost areas, loans as high $1 million have been given
To get a VA home loan, one must fill out a certificate of eligibility and an application. A VA loan counselor can help with the process fast and easy.

The USDA Loan

The USDA loan is a only for qualified rural areas. Like the VA Loan, it boasts some great benefits for families.

There is no down payment required. A potential buyer can get 100% financing within eligible areas. Closing costs can be paid along with monthly mortgage payments, which reduces the upfront costs of buying a home. In addition, there is no prepayment penalty.

Local USDA offices are the ones that make final decisions on eligibility. They look at credit history as opposed to credit scores. They will also want to see a decent income to debt ratio. An applicant can visit the USDA website to see if he or she meets household income limits.

Which one do I choose?

Deciding which loan is best can be complex and difficult. However, sitting down with your family and a lending counselor can make the process a lot easier. A lending counselor can look at your financial history and present and guide you on the right path.

Friday, September 3, 2010