VA Benefits: Use It or Lose It!

For years, it seemed that Hawai`i Veterans’ home loan benefits existed in name only. With previous loan limit guarantee limits hovering around $230,000, trying to use VA loan benefits seemed hopeless in most of Hawai`i. An increase in the VA loan guarantee to over $725,000 gave veterans confidence to begin searching knowing their potential loan amount would make their offer to purchase competitive.

Use It!

There are reasons that using VA benefits make a lot of sense. It’s refreshing to see that VA seems willing to bend over backward to assist qualified Veterans. VA interest rates are competitive or even lower than prevailing conventional rates. Veterans enjoy higher allowable debt ratios enabling them to purchase “more house” with the same income.

While other programs (especially zero down 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 family in East Hawai`i making $5,000 per month could qualify for a VA mortgage of over $450,000. Other loan programs would cap this amount around $380,000. VA has always been a bit more forgiving about credit “hiccups” than other loan programs.

Keep in Mind…

Where the Veteran’s Administration had strict requirements for homes less than a year old in the past, these requirements seem to have been relaxed. So, while it’s still not possible to build a home using a VA loan (except on DHHL lands), purchasing new construction (and there’s still plenty out there) is an appealing possibility.

Many National Guard and Reserve soldiers do not realize that they qualify for VA home loan benefits. Widows of qualified Vets can use a spouse’s benefits but children cannot.

For this reason, I always encourage Veterans to use their benefits. It’s possible to inherit a home but, for other than a spouse, VA benefits are extinguished at death. Vets with existing mortgages should consult their lender to determine if refinancing into a VA loan is worthwhile.

Remember, other government-guaranteed loans (Rural Development) 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. In fact, in general, VA loans have fewer restrictions and limitations. While they do require water testing for homes serviced by catchment, they have recently relaxed restrictions related to unpermitted space.

Considering that no down payment is required, that points are now negotiable and that interest rates are extremely low, it’s easy to understand why VA loans are once again becoming very popular in and around our East Hawai`i neighborhoods. All-in-all, this means that VA loans are not only good for sellers, they are great for us Vets!