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Hawaii Veteran Benefits: Use Them or Lose Them

There’s More Buying Power for U.S. Vets

For years, it seemed that Hawaii Veterans’ home loan benefits existed in name only. With previous loan limits hovering around $230,000, trying to use VA loan benefits seemed hopeless in most of the Hawaii. Two major factors changed this. Home prices softened allowing Vets to qualify for existing inventory. In addition, new higher limits means veterans can begin searching with confidence knowing their loans can be guaranteed on pricing over $600,000 as long as they qualify financially.

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There are reasons that using VA benefits makes a lot of sense. It’s refreshing to see that VA seems willing to bend over backward to assist qualified Veterans. Once again, VA interest rates are competitive with 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%. This only works because there is no private mortgage insurance. As an example, a family in East Hawaii making $5,000 per month could qualify for a VA mortgage of approximately $350,000. Other loan programs would cap this amount at approximately $285,000.

Relaxed Requirements Make the Process Easier

VA has always been a bit more forgiving about credit “hiccups” than other loan programs. Where the Veteran’s Administration previously had strict requirements for homes less than a year old, these requirements seem to have been relaxed. A recent release from VA even indicates that permit exceptions can be considered. So, while it’s still not possible to build a home using a VA loan, purchasing new construction (and there’s still plenty to purchase) is an appealing possibility.

In East Hawaii, it’s even possible to buy an oceanfront property using a VA loan guarantee. 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 benefit. 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. VA loans have fewer restrictions and limitations than many loan programs.

May Be Better Option Than FHA

FHA loans, which are low-down payment government insured loans, have a lower loan cap than VA. FHA has quirky requirements (peeling paint for instance) that impact qualified properties. Their mortgage insurance charge adds a hefty additional charge on top of the monthly payment.

Considering that no down payment is required for VA loans and points are now negotiable and interest rates are still very low, it’s easy to understand why VA loans are once again becoming very popular in and around our East Hawaii neighborhoods. All-in-all, VA loans are great for sellers and awesome for us Vets!

By the way, have you thanked a Vet today?

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