Closing Cost Assistance For Disabled Veterans

How Closing Cost Assistance Works

An overview of closing cost assistance for VA loans

Generally, closing cost assistance is not a standalone program. Its included as part of a down payment assistance program.

DPAs offer money that can typically be put toward your down payment or closing costs whatever will help most with your home purchase. And the funds can come to you in one of four ways:

Grant The money is never repaid
Forgivable loan The loan doesnt have to be repaid if you stay in the home a set number of years
No- or low-interest loan This loan would be repaid in tandem with your primary mortgage
Lender credits Some mortgage lenders offer credits to cover closing costs. But be aware, these mortgages often come with higher interest rates

These grants and loans can be generous, often bestowing thousands to tens of thousands of dollars to eligible recipients.

Who Qualifies For A Usda Direct Loan

USDA-subsidized home loans are available to borrowers, including disabled borrowers, who:

Do not have safe, decent, or sanitary housing
Are unable to get an affordable mortgage
Meet citizen or eligible non-citizen requirements
Are not barred from federal loan programs
Have qualifying low income for their area

In addition, the home being purchased must meet the following guidelines:

Square footage usually cant exceed 2,000
The home price must be within local loan limits
The home must not be designed for income producing activities

Borrowers who qualify for the Housing Direct Loan can use the mortgage to buy a new or resale home. In addition, they can build, repair, or renovate a house.

The payback period is 33 to 38 years. This extended repayment, combined with the low rate, helps make payments affordable.

Understanding Assisted Living Benefits For Veterans

Explore Veteran’s benefits that can help with assisted living costs

By Arthur Bretschneider, last updated August 8, 2022

The U.S. Department of Veterans Affairs offers a wide variety of benefits and programs to Veterans of all ages. These programs can help Veterans find and afford healthcare and housing, pursue an education, and find mental health counseling and services, to name just a few.

Senior Veterans may be able to draw on the VA benefits available to them to help pay for senior care. Additionally, their spouse/dependent may be eligible to receive some assistance as well. Every little bit can help when covering the cost of assisted living and other care options, we encourage you to investigate whether you or your loved one may be eligible for VA benefits.

These various VA care benefits have different eligibility requirements and can sometimes be difficult to navigate. Here, well be focusing on the VA benefits that seniors can draw on, particularly those that can be applied to assisted living and other senior care services.

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Va Home Loans For Disabled Veterans

The VA loan program, backed by the U.S. Department of Veterans Affairs, is one of the best home loan programs available. VA loans do not require a down payment and they offer some of the lowest mortgage rates youll find. This makes VA loans attractive for any veteran or service member.

But there are additional VA loan benefits for veterans with service-related medical problems or disabilities:

VA disability income can be counted on your mortgage application
You are exempt from paying the VA loan funding fee. Spouses of veterans who died in the line of duty may also be exempt
There are no minimum service requirements. If you have a service-connected disability, there is no minimum time to serve before youre eligible for a VA home loan
You may be eligible for a property tax exemption and/or a mortgage tax credit to reduce your taxable income. Requirements vary by state, level of disability, and other factors. Check with your states tax authority for more information

Youll also need to meet the VAs standard lending requirements to qualify for one of these loans.

VA loan income requirements can be met by income from disability benefits. Technically, theres no minimum credit score to qualify for a VA loan. However, many lenders require a FICO score of at least 580 to 620.

Can A Spouse Get Va Healthcare

Additionally, there are other care programs that can provide healthcare to spouses, dependents, and even family caregivers of Veterans. TRICARE can provide comprehensive healthcare coverage to the eligible family members of an active-duty, retired, or deceased service member, National Guard soldier, Reservist, or Medal of Honor recipient. If you do not qualify for TRICARE, you might be able to receive partial coverage for some healthcare services and supplies from The Civilian Health and Medical Program of the Department of Veterans Affairs . Take a look at some other programs that might be able to help family members of veterans.

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Have The Lender Pay Your Closing Costs

Some lenders will also let you roll your closing costs into the loan by paying a higher interest rate, notes Graham. This is known as a lender credit.

But while youll pay less money upfront with this strategy, youll end up paying more in the long run through compounded interest, he cautions.

Whatever approach you explore, weigh the pros and cons carefully.

Home Loans For Disabled Buyers Are Widely Available

Some people think they cant own a home or get a mortgage because of a disability. Thats an understandable misconception. Fortunately, its wrong.

Home loans for disabled buyers can be a fast track to homeownership or to a better mortgage than youre in now. Even if youve been turned down for a home loan before, now could be the time to apply for one of todays programs.

In this article

Additional resources

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Housing Grants For People With Disabilities

Unless you qualify for a zero-down USDA or VA loan, youll likely need to come up with cash for the down payment and closing costs on your new home. Luckily, there are a number of assistance programs to help reduce or eliminate these out-of-pocket costs. And disabled persons have access to more of these programs than other home buyers.

Fees Taken Care Of By Seller

VA Loans Closing Cost Fees | Ready Front Real Estate

1% flat charge by the lender, plus reasonable discount points to lower the rate
Appraisal and compliance inspections including pest inspections, water well, septic, etc.
Prepaid items includes prorations for property taxes, insurance, and initial escrow deposits as required by lender
Insurance the first years hazard insurance must be paid at closing, plus flood insurance if required
VA flood certification third party verification to determine if a property is located within a special flood hazard area
Any survey fees associated with selling the home
Title examination and insurance
VA funding fee unless exempt each veteran must pay a funding fee to VA. If you are a disabled veteran you can be exempt from the VA funding fee.

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How To Apply For A Usda Direct Loan

Unlike USDA Guaranteed loans, private lenders do not offer the USDA Direct Loan. Youll have to apply with your local Rural Development Office. Be aware that application processing times could be longer and the process could be less convenient. Buyers who can qualify for the USDA Guaranteed loan program should try that first.

Buyers with moderate incomes who dont qualify for USDAs subsidized program can still access a USDA Rural Housing loan. It has looser guidelines, but still allows zero down payment and offers below-market mortgage rates.

Can Disability Payments Help You Get A Va Loan

If youre currently receiving disability compensation from the VA, it can be counted as income, which, in turn, helps you meet VA loan income requirements. To be eligible for a VA loan, income must meet three standards it must be stable, reliable and expected to continue. The key factor in using disability pension toward a VA loan is that your payments are likely to continue.

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Do Fha Loans Accept Disability Income

Like the other loan programs described above, FHA loans allow both SSI and SSDI income on your mortgage application. According to FHA guidelines, disability income can be verified with any one of these documents:

Federal tax returns
The most recent bank statement showing receipt of income from social services programs
A Proof of Income Letter, also known as a Budget Letter or Benefits Letter that shows income from the SSA
A copy of the borrowers Social Security Benefit Statement

Another benefit of the FHA loan is that youre allowed to cover 100% of the down payment and closing costs using down payment assistance or gifted money. This eliminates the need to save up a large amount of money before you can buy a home.

On the downside, youd probably have to pay the FHAs mortgage insurance until you pay off the house unless you refinance out of the loan sooner.

Mortgage Assistance Programs Every Veteran Should Know About

Spectrum of Solutions: Down Payment Assistance

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In a Nutshell

If you are a US military service member, a veteran, or a surviving spouse you may have access to special mortgage assistance programs and grants that can be helpful in buying, refinancing, and modifying a personal home loan. These homeownership programs exist at both the federal and state level. Additionally, the Department of Veterans Affairs provides assistance and counseling if you have difficulty making mortgage payments. This article gives a brief overview of five mortgage assistance programs every veteran should know about.

Letâs Summarize…

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Disability Compensation = Va Funding Fee Waiver

Vets who receive VA compensation for a service-connected disability, or are entitled to it but are getting retirement or active duty pay instead, are exempt from the VA funding fee. The fee can run from 0.5 to 3.3 percent. If youre receiving disability compensation each month, then let your loan officer know so you can get the appropriate exemption.

How Can I Avoid Closing Costs With A Va Loan

Now, you know there are closing costs on VA loans, but what if you dont want to or cannot bring those costs to closing? The most common way to overcome bringing these funds to closing is by seller paid closing costs and VA sales concessions. Remember, the seller is NOT required to pay the buyers closing costs.

Disabled Veterans Property Tax Exemption And Homeownership Tax Credits

Once you use your VA loan benefit to buy a new home, youre eligible for some very useful tax credits and exemptions that could help quite a bit. The Disabled Veterans Property Tax Exemption can help reduce the amount a disabled veteran pays per year in taxes. The amount varies by state, so its important to check with your local VA office in person or through their website to find out about your state-specific benefit. For example, some states offer a 100% tax exemption to all veterans, while others restrict it to 100% disabled veterans.

With a VA loan, you may also be eligible for a Mortgage Credit Certificate . The MCC is issued on the state level that allows you to claim a tax credit for a portion of the mortgage interest paid per tax year. The credit amount is determined on the state level, but is definitely a benefit worth taking advantage of.

Whos Exempt From Paying Closing Costs

Veteran Benefits All Disabled Veterans Qualify For

Not all VA loan requirements for closing costs apply to everyone. If youre a veteran considering a VA loan, you might be exempt from paying the funding fee portion of closing costs if you are:

Receiving VA compensation for service-connected disabilities
Eligible to receive VA compensation for service-connected disability, but are receiving retirement or active-duty pay instead
A surviving spouse of a Veteran who died during active duty and youre receiving Dependency and Indemnity Compensation
A service member with a proposed or memorandum rating saying youre eligible to get compensation due to a pre-discharge claim
An active duty service member who can provide proof of earning a Purple Heart

Tip: Veterans or service members awarded VA compensation for a service-connected disability should apply for a refund of their closing fees if theyre awarded VA compensation for a service-connected disability retroactively.

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Explore All Your Home Buying Options

Mortgage lenders can connect you with loan programs that help people with disabilities become homeowners. Shop with several competing lenders to find the best program and most competitive interest rate for you.

In addition, be sure to ask your loan officer, real estate agent, or Realtor about financial assistance programs available in your area. There are many assistance programs for disabled home buyers and especially for low-income families or individuals. These programs can make buying your own home more affordable than many people expect.

Are There Home Loans For Disabled Persons With Bad Credit

Mortgage loans for people with disabilities tend to focus on income and down payment flexibility, since lack of income and savings can be a big barrier to homeownership. But what if you have a low credit score as well?

One option is the FHA mortgage program, which is geared toward home buyers with a lower credit score or imperfect credit history. FHA loans are insured by the Federal Housing Administration, which means they can have more lenient eligibility guidelines.

FHA will accept a credit score of 580 with just a 3.5% down payment. You might even get approved with a credit score of 500 to 579 but only if you can put 10% down.

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Closing Cost Assistance Programs

There are grants and loans available at the local, state, and federal levels to help with closing costs. It may be easier than you think to qualify.

Every state has special programs for first-time home buyers. Repeat home buyers can often find help, too.

Many of these programs award funds that can be used toward the down payment and/or closing costs.

There are grants and loans available at the local, state, and federal levels to help with down payments and closing costs.

Often, closing cost assistance is offered by local or state housing commissions authorized by the U.S. Department of Housing and Urban Development . But assistance can also come from nonprofits and private mortgage lenders.

Home buyer aid is often geared toward low- and moderate-income home buyers. But thats not always the case.

In expensive cities like San Francisco and New York, for example, the income limits to qualify for down payment and closing cost assistance can be quite high.

So before you dismiss the idea of qualifying for help, check with your real estate agent, loan officer, or local Housing Finance Agency to learn whats available.

What Grants Are Available To Disabled Veterans

100 Percent Veterans Disability Property Taxes

A disabled veteran may be able to purchase a home with a fee-free VA loan, but if the home also needs accessibility modifications, the Specially Adapted Housing grant and the Special Housing Adaptation grant are available to help. To qualify for these particular grants, you need to have a 100% service-connected disability rating from the VA.

The SAH helps qualified veterans with one of the following:

Build a home with special disability-related modifications.
Remodel and modify an existing home to meet adapted housing needs.
Apply the grant against the principal mortgage balance of an adapted home thats already been purchased without VA grant assistance.

The SHA helps qualified veterans with one of the following:

Adapt an existing home that is already owned by the veteran.
Adapt a home that the veteran intends to purchase.
Help a veteran purchase a home that has already been adapted.

Its important to note that if youre considering a grant, the maximum amount allowed for the SAH for the fiscal year 2021 is $100,896. For the SHA, the grant limit is $20,115. Additionally, veterans must have their disability benefits approved prior to applying for housing grants.

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Laws And Programs That Arent Just For Veterans: Bankruptcy Forbearance And Repayment Plans

Some people find that filing bankruptcy can help them stay in their homes by giving them the ability to keep current with their mortgage payments. A Chapter 7 bankruptcy allows you to eliminate unsecured debts like credit card debt and medical debt which can free up cash to make your mortgage payments. Upsolve is a non-profit that offers a free online tool to eligible individuals wishing to file Chapter 7 bankruptcy without a lawyer.

If youâve already fallen behind on your mortgage, you may be able to make use of a forbearance or repayment plan with your lender. Veterans can call 877-827-3702 to speak with a VA loan technician to get advice before calling their mortgage servicer.