Hawaii VA Loans

One of the main reasons we started HawaiiVALoans.com was that we found that there were so many misconceptions about VA Loans.  Whether it was the broker/lender giving the wrong information or Veterans finding outdated information from non-reliable websites - it was evident that for whatever reason, the facts about VA Loans were getting distorted.

Over the years - we’ve heard it all.  I thought it would be a good idea to debunk the 5 most common myths we’ve heard about VA Loans:

1. “I can only use my VA Loan eligibility once”

This is by far the most common myth we hear - but this is definitely false.  There is no limit on the number of times you can use a VA Loan.  Now if you’ve had a VA loan previously, you need to have had your entitlement restored by paying off the mortgage (pay off balance, sell the property, refinancing into a conventional mortgage) in order to get another VA Loan.  There is a possibility  in which you could have more than one VA Loan outstanding at a time - but only if you didn’t use your entire entitlement on the purchase of the first property.  Now if you’ve already used a VA Loan previously, you just have to keep in mind that the cost of the VA funding fee is increased from 2.15% to 3.3% (no down payment) for every subsequent use of a VA Loan.  If you’ve accumulated equity on the sale of your first home, and you can put a 5% down payment the next time, your funding fee can be reduced from 3.3% to 1.5%.

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In our last post I wrote about how on conventional mortgages, a borrower not putting at least 20% down is required to pay for Private Mortgage Insurance (PMI). The cost of PMI will increase the borrowers monthly payments an average pf $150 - $400 per month depending on the loan amount and down payment.

We also discussed how with VA loans, the home buyer is not required to pay for this PMI since the VA Department serves as the insurance backer on these loans. So how does the VA Department insure all these VA loans without being a burden on the US taxpayers? They do this by charging a VA Funding Fee.

The VA Funding Fee is a one time upfront cost that the VA Department charges the borrower on every VA transaction. This fee is collected and pooled into a fund that is used to repay any losses (up to 25% of the original loan amount) that the mortgage lender has incurred when VA loan goes into default and lender has to either short sell or foreclose on the property.

How Much Does the VA Funding Fee Cost?

The cost of the VA Funding Fee depends on three main factors:

• Whether the borrower is/was a member of the regular military (Army, Navy, Marines, Air Force, etc.) or if they were/are a member of the Reserves or National Guard.

• If the borrower is a first-time user of the VA Home Loan Program or a repeat user.

• The amount of down payment (if any).

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