Military veterans who are planning to buy their own home have the option to finance it through the VA home loan program. The Veterans Affairs (VA) offers loans that have lenient qualifying requirements, affordable interest rates, and favorable terms.
Veterans and military buyers who are eligible for a VA home loan can take advantage of the zero down payment option. This makes the program very attractive, especially to first-time homebuyers.
It is easier to get a house with a 100 percent financing loan. However, there’s also a disadvantage to that.
When you don’t put any down payment towards your mortgage. You start with zero equity. Without an initial equity, it will take you a longer period to build your home equity.
The good thing about the VA loan is that it isn’t restrictive. Vets and military homebuyers have the option to use it alongside other programs.
Even though the VA home loan offers 100 percent financing, borrowers have the option to qualify for additional down payment assistance.
There are a number of assistance programs that come as zero-interest loans, non-repayable grants and others that can help veterans build initial equity. In fact, there are those that can also be used to cover closing costs. This allows the homebuyers to save money from closing costs and other upfront expenses.
Here are some programs that may work well with the VA home loan:
Military Housing Assistance Fund
The Military Housing Assistance Fund ( MHAF) offers a cash gift to qualified military service members which they can use to pay for the closing costs. It is very simple to qualify for the MHAF gift. The borrower will only need to qualify for a mortgage from approved lenders.
The grants are considered as true gifts. This means that the funds don’t need to be paid back. It is designed to assist homebuyers in owning their home.
The Dream Makers Grant
This gift is offered by the PenFed Foundation. The Dream Makers program is designed to provide assistance to first-time military homebuyers for down payment and closing cost.
The maximum grant is $5,000. The amount of grant a military may receive is determined by the two-to-one match of the homebuyer’s contribution as earned deposit. A military may offer $500 as his/her contribution.
The mortgage has to be a 30-year term fixed rate loan. The maximum loan-to-value ratio is 97%. This means that a minimum down payment of 3 percent is needed. A pre-qualification or a pre-approval is necessary to qualify for this assistance.
The Home In 5 Advantage Program
Available in certain areas in Phoenix, the Home in 5 Advantage program provides a maximum of 4 percent in down payment and/or closing cost assistance grant. Most qualified homebuyers get a 3 percent assistance grant. Eligible individuals, such as qualified active duty military, veterans, educators and frontline responders, get an additional 1 percent assistance grant.
For a loan amount of $195,000, most borrowers can get $5,850 worth of assistance. With the additional 1 percent, the assistance can be up to $7,800.
To qualify, borrowers must meet credit and income requirements. The Debt-to-income ratio must be higher than 45 percent. Moreover, a borrower is required to complete a homebuyer education course.
Like Phoenix’s Home In 5 Advantage Program, there are also other local and statewide programs available in other states. A down payment assistance grant also helps lessen the risk because lenders they won’t have to finance the entire price of the property. This is why Local lenders will be eager to help you in searching for any existing grant programs to aid you in homeownership. Discuss with your lender if there’s any possibility of using an assistance program with their mortgage.