Over the years I have originated many VA loans and learned that whenever I am working with a repeat VA borrower, it is worthwhile to give the Veteran a cash flow analysis of both a $0 or minimum down payment option and a 5% down option. Why would I do this? Isn’t the objective of most VA buyers and the attraction of the VA loan program that little or no down payment is required? The answer is yes. However, if you are an experienced and diligent loan originator you instinctively think outside the box a little bit sometimes.
A case in point is a recent VA purchase transaction I just completed. I was working with a Veteran using his VA eligibility for the second time. The veteran was purchasing a brand new home in a single family home development of my client / builder. The loan would be a VA jumbo (over $417,000) but the property was not located in a county designated as a high cost area by VA. So the VA loan limit in this county is $417,000.
Total Equity after closing $12,000 $23,850
This comparison shows that a subsequent user can benefit from putting 5% down. His cash to close will be slightly higher (in this case $3,070) but more of that cash ($11,850) is going toward equity versus the expense of a VA Funding Fee.
I am not sure what percentage of loan originators do these sorts of calculations as a practice on VA loans but when arranging the largest debt on the larger asset a buyer is likely to ever be responsible for, there must be an effort to make sure it is planned well and managed correctly upfront. In this case a little instinct, experience and a few extra moments of loan originator work allowed the Veteran to close with a little less cash in his account but a higher net worth over all.
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