More Buying Power for Us Vets

For many years, it seemed that Hawaii Veterans’ home loan benefits existed in name only. In fact, the first year I sold real estate, I could find only one VA loan on the entire island. I was on a mission to educate both buyers and sellers. At that time, loan limits hovered around $230,000.

With loan guarantee amounts now over $1 million, Veterans have a wide range of choices. VA interest rates are lower than conventional rates, but there are other reasons that using VA benefits makes a lot of sense. VA seems willing to bend over backward to assist Veterans.

Enhanced Purchasing Power for Veterans

With no mortgage insurance and higher allowable debt ratios, Veterans can purchase more house with the same income. While other programs (especially low-down-payment programs) cap the borrower’s debt ratio at 29-33%, including the proposed house payment, VA expands this ratio to 41%. As an example, a dual-income family in East Hawaii making $5,000 per month could qualify for a VA mortgage of approximately $324,000. Other loan programs would cap this amount around $248,000.

Credit Flexibility and New Construction Options

VA has always been a bit more forgiving about credit “hiccups.” In order to put more Veterans into homes, VA has relaxed some permitting and new build requirements. So, while it’s still not possible to build a home using a VA loan, purchasing new construction is an appealing possibility.

Many National Guard and Reserve soldiers do not realize that they qualify for VA loan benefits. Married couples (even same-sex couples) may qualify together. Some widows of qualified Vets can use a spouse’s benefits, but children cannot. For this reason, I always encourage Veterans to use their benefit. It’s possible to inherit a home, but for the most part, VA benefits are extinguished at death. Vets with existing mortgages should consult their lender to determine if refinancing into a VA loan is worthwhile.

Comparing VA Loans to Other Programs

Remember, other government-guaranteed loans (like USDA Rural Development/RD loans) do not set limits on the cost of the home, but caps on household income keep loan amounts below the median-priced home in most areas. Homes purchased with RD loans have location restrictions that don’t always apply to VA loans.

FHA loans, which are low-down-payment, government-insured loans, are more expensive and restrictive than VA. Considering that VA loans offer no down payment, points are negotiable, and interest rates are still low, it’s easy to understand why VA loans remain a popular option in and around our East Hawaii neighborhoods. Embracing VA loans offers a good opportunity for sellers while presenting a great option to “use it or lose it” for us Vets!