According to Examiner.com, VA Loans are getting very popular in Bay Area, and most of the house purchases are being done with the help of these loans. Now why these loans are becoming so popular. Actually, there’re various reasons. The VA makes 100% financing achievable with entitlements for veterans. The entitlement acts as a veteran’s down payment and is available for all veterans or surviving spouses. Entitlements vary for each veteran with the average basic entitlement amount around $36,000.
In contrast with a conventional/FHA guaranteed loan, the VA loan allows veterans 100% financing without private mortgage insurance or a 20% second mortgage. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA and is allowed to be financed.
In a purchase, veterans may borrow up to 100% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI (private mortgage insurance), more of the mortgage payment goes directly towards qualifying for the loan amount. This allows for larger loans with the same payment.
VA loans allow veterans to qualify for loans amounts larger than traditional Fannie Mae / conforming loans. VA will insure a mortgage where the monthly payment of the loan is up to 41% of the gross monthly income vs. 28-35% for a conforming loan.
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