Purchasing a home is one of the biggest financial steps a person can take, and for eligible veterans, active-duty service members, and certain military spouses, a VA loan can be one of the most advantageous options available in Oahu, Hawaii. VA loans, backed by the U.S. Department of Veterans Affairs, offer unique benefits tailored to those who have served. This comprehensive guide covers everything you need to know about VA loans, from eligibility to the application process, benefits, and potential limitations.
What is a VA Loan? A VA loan is a type of mortgage guaranteed by the Department of Veterans Affairs and designed specifically to help military personnel and their families secure home financing. Unlike conventional loans, VA loans are provided by private lenders but come with unique benefits and protections from the VA, helping those who served to buy or refinance homes without the typical hurdles of high down payments or mortgage insurance.

Key Benefits of VA Loans

1. No Down Payment Required: Perhaps the most well-known advantage of a VA loan is that it often requires no down payment. While traditional loans may require anywhere from 5% to 20% down, eligible VA borrowers can finance 100% of the home’s purchase price.
2. No Private Mortgage Insurance (PMI): Conventional loans typically require PMI if the down payment is less than 20%. VA loans don’t require PMI, potentially saving borrowers hundreds of dollars per month.
3. Competitive Interest Rates: VA loans usually have lower interest rates than conventional loans, which can mean substantial savings over the life of the loan. The VA’s guarantee to lenders enables them to offer these favorable rates to eligible borrowers.
4. Flexible Credit Requirements: While credit scores do matter, the VA program generally allows for more flexibility. This makes it possible for buyers with lower credit scores to qualify compared to conventional loans.
5. Limits on Closing Costs: The VA sets limits on what closing costs a borrower can pay, making the purchase process more affordable. Additionally, sellers can cover closing costs, reducing the out-of-pocket expenses for VA loan borrowers.
6. You can assume the seller's VA loan with a lower Interest rate: A unique benefit for VA-eligible buyers in Oahu is the option to assume a seller’s existing VA loan, including its lower interest rate. This is particularly helpful in areas like Oahu, where military members frequently buy and sell properties. By assuming a VA loan, a buyer can take over the seller’s low-interest mortgage, freeing up the seller’s VA loan eligibility for their next purchase. This arrangement can result in significant savings for the buyer while adding desirability to the property for sale by the seller.

Eligibility Requirements
To be eligible for a VA loan, you generally need to meet one of the following service requirements:

• Active-Duty Service Members: Must have served at least 90 consecutive days during wartime or 181 days during peacetime.
• Veterans: Service requirements vary based on when you served, but in most cases, you need at least two years of active duty if enlisted after September 7, 1980.
• National Guard and Reserves: Typically, six years of service is required unless activated for a certain period, in which case active-duty service requirements apply.
• Spouses of Service Members: Certain surviving spouses of service members who died in the line of duty or due to a service-related disability may qualify.

How to Apply for a VA Loan

1. Obtain a Certificate of Eligibility (COE): The COE verifies to lenders that you meet the VA’s eligibility requirements. You can apply online through the VA’s website, by mail, or through your lender.
2. Find a VA-Approved Lender: Not all lenders offer VA loans, so make sure to choose a lender experienced in VA loan procedures to make the process smoother. Here a few of my favorite VA loan officers in Hawaii: (Make sure to let them know Marina Yamamoto sent you!)

• John Keifer 
  808-222-9799 
  [email protected]
• May Nguyen
  619-808-5545  

          [email protected]

1. Pre-Approval and House Hunting: After pre-approval, you can start your home search. With a pre-approval letter, sellers and agents will know you’re serious and financially qualified.
2. Underwriting and Closing: Once your offer is accepted, the lender’s underwriter will review your application, appraise the property, and finalize the loan details. VA loans often require an appraisal from a VA-certified appraiser.

VA Loan Limitations
While VA loans offer numerous benefits, there are some limitations to be aware of:

• Funding Fee: The VA charges a funding fee to help sustain the program, though this fee can be rolled into the loan amount. The amount varies based on factors like down payment size and prior use of a VA loan.
• Primary Residence Requirement: VA loans are meant for primary residences, meaning you cannot use a VA loan for vacation homes or investment properties.
• VA Appraisal Process: VA appraisals have specific requirements and are often stricter than conventional appraisals, which can affect property eligibility or value assessment.

Refinancing with a VA Loan
The VA offers two refinancing options:

1. Interest Rate Reduction Refinance Loan (IRRRL): This option, also called a “streamline refinance,” is available to veterans with existing VA loans. It helps lower monthly payments by refinancing to a lower interest rate, typically with minimal documentation and no appraisal.
2. Cash-Out Refinance: For eligible homeowners who need funds, a VA cash-out refinance allows borrowing against the home’s equity. This is available to veterans with or without a VA loan and can be used to pay off debt, fund home improvements, or cover other expenses.

Common Myths About VA Loans

• Myth 1: VA Loans are only for first-time buyers. In reality, VA loans can be used multiple times, as long as you meet eligibility requirements.
• Myth 2: VA loans take too long to close. While VA loans may take slightly longer due to appraisals and eligibility checks, working with an experienced VA lender can help streamline the process.
• Myth 3: You can only use a VA loan once. Borrowers can actually reuse the benefit, though certain conditions apply, especially if an existing VA loan is outstanding.

Is a VA Loan Right for You?
A VA loan is an incredible option for those who qualify, offering affordability and flexibility unmatched by many other loan types. However, it’s important to weigh the pros and cons based on your specific needs. For example, if you plan to buy an investment property, a VA loan won’t be suitable. But for many service members and veterans, a VA loan can be a straightforward path to homeownership with favorable terms.
Final Thoughts
VA loans provide significant benefits to those who have served the country, making homeownership more attainable and affordable. If you think you might qualify, start by obtaining your Certificate of Eligibility and connect with a VA-experienced lender. With the right preparation, a VA loan can be a valuable tool in achieving your dream of homeownership.

For more information, visit the U.S. Department of Veterans Affairs website or speak with a VA loan specialist today to understand how this powerful benefit can work for you. 

To find a property on Oahu with an assumable VA loan, reach out to me for the assumable loan balance and interest rate on properties you like! You can see what is available using this website. Visit available listings with an assumable VA loan here.

let's clear up some of the confusion about how the process of assuming a seller's loan on the house works for buyers:

WHAT IS AN ASSUMABLE LOAN? 
There's a lot to talk about the VA assumable loans. Learn how you can take advantage of lower interest rates. It's a pretty cool opportunity if you wanted to just search through those listings alone and see what you can get!

So basically, an assumable loan means that you're taking over the seller's existing loan on the house that has a lower interest rate from a couple of years ago versus interest rate now. Most of the assumable-loan listings for sale today have interest rates from a few years ago, which means the interest rates are in the twos and threes. To get a new VA loan today, it's about 6.25%. For conventional loans, it's at least 1% higher - in the 7.25 and up range.

WHO CAN TAKE OVER A VA LOAN? VETERANS ONLY, OR ANYONE?
You don't necessarily need to be a veteran to assume these VA loans! This is really important to know. A lot of people don't know that a civilian can also assume a VA loan. It's totally doable, and people do it all the time. Of course, the caveat to that is that the seller's VA loan entitlement stays with that home if a civilian takes over. So, he can't take that entitlement to his next property, but it's okay. Yes, you can have more than one VA loan at a time. But if you are a VA eligible buyer, you have a little bit of an advantage because if you're assuming that loan, you will have more listings to choose from. If it's a veteran-to-veteran assumption, then just like a normal VA loan, the buyer's VA entitlement would be used for the loan on the home, and then the seller's VA entitlement would be cleared up, restored. Like a normal transaction. The offer makes it a little bit stronger if it's coming from a veteran who can assume the entitlement.

However, you just don't know what their circumstances are for the seller. They could be like, okay, I only want a veteran to assume my loan because I need my entitlement restored. Other sellers might be like, you know what, I don't even care. I don't need it. I've got enough entitlement left over. They can still buy another place wherever they're moving to, right? So, just because you're not a veteran, I wouldn't let that stop you from pursuing that as a buyer. Each property and seller's situation is different. Work with us Beach Villa Realty to find properties that work for your situation!

WHAT IS THE FIRST STEP?
Let's start with the process. Let's say someone finds a house they like and it has an assumable loan. What's the first step for you as the buyer?

Instead of starting with your lender to get pre-approved, start with you Realtor. You will need to get approved by the seller's mortgage provider, rather than your own. So the process starts by finding the home(s) you like first, which means working with your realtor and VA lender simultaneously. 

STEP #1:
- Have your realtor find sellers offering assumable loans. He/She will also find out the balances of the assumable loans and how much of a gap there is. Not working with a realtor yet? Get started with Marina Yamamoto who specializes in Assumable VA transactions!

- Talk to a lender to understand how much you qualify for. You need to know what your limit is so you don't waste time on homes that are outside the budget of what you can do. 

However, here's what a lot of people don't know and they need to know. Whoever the seller's lender is, whoever the seller is making their monthly payment to, we'll call them the loan servicer, that company is the only one that can say yes or no to the assumption. And they do all the approving, the pre-approvals, everything is done through that loan servicer. There's no outside mortgage broker involved. John Keifer is happy to give information, "because as a fellow veteran, I want veterans to get the homes they want and deserve, whether I can be involved or not, I'm going to help them out."

Contact John Keifer with questions about getting a mortgage for the gap:
[email protected] 
Johnny Loans on Instagram
Johnny Loans Website

STEP #2: THE ASSUMPTION PACKET 
Once you find a home you love, your realtor representing you as the buyer will request an assumption packet from the seller's agent. 

- The seller will contact their loan servicer and ask for an assumption packet.This packet of information will be sent by snail mail. It's not electronic. It's going to come to them in the mail, and then from there, they would fill out the information that's needed from them as the seller, and then they would pass that packet of information onto the buyer, and then the buyer would fill out their section which is a full loan application.

Even if you're assuming the loan, you will need to be fully approved as if you were buying it yourself. You need to have your finances in order, and everything's got to be up to date because they're going to do an underwrite for you.  It's really just information about the buyer and then the loan servicer will do a pre-approval on that buyer. And then if the buyer passes that pre-approval, the the buyer's agent will get a copy of that pre-approval, and we would write the offer and send it over to the seller. 

HOW LONG DOES IT TAKE TO PURCHASE A HOME WHEN ASSUMING THE SELLER'S LOAN?
The process of assuming a loan takes longer than a normal transaction. The shortest time I've seen so far is 60 days. What the guideline says is that the loan servicer has 45 days to make a decision after they get the full assumption packet of information from the person assuming the loan. The loan servicer has no financial incentive to work quickly. Once they do complete this approval process, an offer can be accepted, and the regular escrow timeline begins which is an average length of 30 to 45 more days. 

Let's say the buyer goes through this process, they get approved, everything's good to go, what happens next? At that point, it's a normal transaction from there. Once you're approved and you're under contract, you would start your escrow process, and your closing would be just like any other closing. The only difference is that your closing costs would be lower because you're not originating a brand-new loan. The loan is already there, you're just taking it over. There's no loan origination fees, but there are still prorations for taxes, homeowner's insurance, and whatever other fees the seller and buyer agree to in the contract, just like a normal transaction.  It's a pretty straightforward process once you get through that initial approval stage.  

HOW DO YOU PAY THE DIFFERENCE BETWEEN THE ASSUMABLE LOAN AND THE PURCHASE PRICE? 
A couple of things to think about for buyers, if you're buying a home that's worth more than the loan balance that's being assumed. You might need to come up with some cash to cover the difference, and that's called gap funding. The options are to pay it with cash, use a Home Equity Line of Credit, or get another mortgage to fund the gap. 

When you're assuming a loan, you need to be patient. You can't really speed up the process, so it's not for somebody who needs to move in 30 days. If you have more than 60 to 90 days, start with step #1 NOW.  It can definitely be worth it in terms of the savings and the opportunity to get into a home with a lower interest rate. And for my non-veteran buyers, I would say, don't let the fact that you're not a veteran stop you from pursuing a VA assumable loan! 
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