A recent VA purchase closing had 2 characteristics of a VA loan that most do not know. First is using a VA bonus entitlement. This allows a qualifying veteran to have 2 VA loans at once. It is also called 2nd Tier Entitlement, which gives the veteran the ability to use over the basic $36,000 entitlement. Next is an even less known fact that a seller may pay off a buyer’s debt when a VA loan is involved.
VA Purchase Issue
Our buyer that is a Veteran has an existing VA mortgage on another property. That property is currently a rental property. The buyer thought he couldn’t use VA because the rental property has a VA loan on it. Additionally, to feel comfortable with the payment, the Veteran wanted some debts to be paid off. If the buyer could get rid of some payments, he felt he could better afford the house of his dreams. So our loan officer along with the VA underwriter came up with a plan.
The Plan! Using VA Bonus Entitlement & Sales Concessions
The Plan! Figure the VA Bonus Entitlement for using VA to purchase a home while keeping the other VA loan outstanding on the rental property. The VA loan, because of the size, couldn’t cover 100% of the price but it did cover about 98% of the price with no PMI! On a $300,000 purchase price, that helps a lot! On top of that, the buyer’s closing costs, pre-paids, and two installment loans were paid by the seller in the seller concessions. VA allows the seller to pay 4% of the purchase price towards concessions. Furthermore, VA allows the seller to pay all customary closing costs. Therefore the result was a very low down payment VA loan with no PMI, debts were paid off, and they get to keep the other VA loan as well.
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Other VA Tips
Our goal is to be your one-stop source for VA home loans. For instance, in order to determine bonus entitlement, we will order your Certificate of Entitlement. What if you are buying a condo as a primary residence? Check out VA approved condos! Want to learn more about VA loans? Click on the “VA Loans” category in our blog section.