First introduced back in 1944 as part of the original Servicemen’s Readjustment Act of 1944, the VA home loan is the ideal choice for those who are eligible for the program and want to come to the settlement table with as little cash as possible. The VA mortgage in Florida requires no money down from the borrower and provides extremely competitive interest rates. The VA mortgage is a government-backed mortgage which means the lender is compensated at 25 percent of the loss should the loan ever go into default. A VA loan default is rare however as it is the highest performing loan of all in today’s marketplace. The guarantee is financed by what is referred to as the Funding Fee.
The funding fee varies based upon the term of the loan, the existence of any down payment, the term of the loan and the type of borrower. For first time VA borrowers taking out a 30 year fixed rate, the funding fee is 2.15% of the appraised value of the property.
Eligible borrowers for the VA home loan program include veterans of the armed forces, National Guard and
Armed Forces Reserve members with at least six years of service and unremarried surviving spouses of those who died while serving or as a result of a service related injury. The VA loan can only be used to finance a primary residence and may not be used to finance a vacation property, second home or rental.
The VA home loan program also restricts the types of closing costs the borrower is allowed to pay. The borrower may only pay for an appraisal, credit report, title insurance, origination fee, recording fee, survey and abstract. All other fees must be paid by others, either the sellers or with a lender credit.