What are the benefits of a VA Home Loan?
A VA Home Loan has several benefits compared to conventional loan financing. These benefits include:
- 100% financing: no down payment or monthly mortgage insurance payments.
- Competitive interest rates comparable to conventional loans with 20% down payment requirements.
- The home buyer/borrower’s closing costs can be paid by the seller, up to 4% of the loan amount.
- Flexible credit requirements: Veterans with lower credit scores may qualify for a much lower interest rate than would be obtainable on a conventional loan.
How do I know if I am eligible for the VA Home Loan program?
Eligibility is dependent on whether you are on active duty, or have been discharged from the Military. There are different requirements depending on how long and when you served in the Military. For complete details please see the Eligibility page of this website, or contact a VA Loan Specialist for assistance.
What is a Certificate of Eligibility? How do I get it?
A Certificate of Eligibility (COE) is a document issued to you by VA certifying to your lender that that you are eligible for a VA Home Loan. In order to obtain your COE you can fill out VA form 26-1880 and mail it to the VA service center in Winston Salem, North Carolina. If there is a VA office in your area you may be able to obtain your COE in person by bringing form 26-1880 and your military ID or drivers license. Another alternative is to use a lender with VA Loan Specialists on staff. They may be able to obtain your COE online through the ACE (Automated Certificate of Eligibility) system in a matter of minutes, or will provide you with form 26-1880 and mail it to the VA service center for you.
What if I have used my eligibility for a VA Home Loan previously?
This does not prevent you from obtaining a VA Home Loan; however there are a few differences. Your previous VA Home Loan must be paid off before your eligibility can be restored. If you intend to sell your home that you previously used your eligibility on, and buy your next home shortly afterwards, then it is recommended you use a lender with VA Loan Specialists who can help you do a “rapid restore” of your eligibility in a short time frame. They will be able to set up the VA loan for your new home, and then once your previous home sells they will quickly restore your eligibility so you can obtain final approval and close on your new home.
If I am eligible for a VA Home Loan, why do I need to get Pre-Qualified?
Being eligible for a VA Home Loan (from VA) and being qualified are different. Qualification requires that a lender assess your income, debts and credit history in order to approve you for the loan. Pre-Qualification from a lender only takes a few minutes, and they will be able to tell you if you are qualified, and for up to what loan amount. Getting pre-qualified before shopping for a home is highly recommended. Real estate agents and sellers will most likely want a pre-qualification letter from a lender before entering in to a purchase contract with you.
What kind of property can I buy using my VA Home Loan?
VA Home Loans can be used to purchase most types of properties, including free standing single family homes, town houses and condominiums (if the condo project has VA Approval). Manufactured housing and mobile homes can be more difficult and will be dependent on the lenders specific requirements. Regardless of the type of property you purchase, VA Home Loans are only intended for personal home purchases that are going to be occupied by the Veteran and/or their immediate family.
Can I use my VA Home Loan benefit to build a home?
If the builder of your new home has financing for the construction and only requires a deposit from you, then once the home is built you can use your VA Home Loan to close on the purchase of your home. If construction financing is not available it is still possible to use your VA Home Loan benefit, however, there are several clauses that make the transaction much more complex.
Do all lenders offer VA Home Loans?
Not all lenders offer VA Home Loans, but there are several thousand VA approved lenders nationwide that offer VA guaranteed home loan financing. However, it is recommended that you work with an individual loan officer or branch of an approved lender that specializes in VA Home Loans. The VA Home Loan approval process is different from conventional loan financing and working with a loan originator and processors who are familiar with the VA Loan approval process will make your home purchase transaction much smoother.
What is the interest rate on a VA Home Loan?
Interest rates on VA Home Loans fluctuate with financial market conditions just like they do on conventional loans. The interest rate will be dependent on the specifics of your home purchase transaction, as well as on the rates your specific lender offers. Regardless of market conditions and your specific lender, the VA Home Loan program provides benefits that should enable you to obtain 100% financing at interest rates comparable to conventional programs that require a down payment.
What is the VA Funding Fee?
The VA funding fee is required by law and is charged by the VA, not the lender. In most cases the VA funding fee is added on to your loan amount and is not paid out of pocket by the Veteran borrower. The amount of the funding fee varies depending on whether the loan is the Veteran borrower’s first VA loan and/or if there is any down payment on the property. A VA Loan Specialist can help to determine what the exact funding fee will be for each borrower. Also, Veterans who are rated for disability and surviving spouses are exempt from the funding fee and it will not be added to their loan.
Do I have to put down a down payment for a VA Home loan?
No, the VA Home Loan Program does not require a down payment and allows for 100% financing of the purchase price of the home, without mortgage insurance. Veteran borrowers will still have closing costs they need to pay, however, the VA Home Loan Program allows for the seller of the property to pay the Veteran borrower’s closing costs, up to 4% of the loan amount. A VA Loan Specialist can advise you on how to structure a property purchase contract for seller paid closing costs in order to minimize cash out of pocket closing costs for the home buyer/borrower.
How much are the closing costs on a VA Home Loan?
Closing costs on a VA Home Loan can vary just like they do on conventional loans. The closing costs will be dependent on the lender’s fees, title or closing agent’s fees, and any state or regulatory fees. Also, like many loans, VA Home Loans set up an escrow account for the borrower/home owner’s property taxes and insurance. Escrow accounts require a portion of the insurance and taxes to be “pre-paid”. These pre-paid items are closing costs, but it is important to note that they are dependent on the insurance rates and property taxes for the area where the home is being purchased, and are not related to lender or title company fees.
What loan amount can I get with a VA Home Loan?
The maximum VA loan amount is $417,000 or $625,500 in Alaska and Hawaii. However, the loan amount each Veteran borrower (and a spouse if applicable) can get is dependent on their income from their jobs and liabilities or debt payments for things like car loans or credit cards. A VA Loan Specialist can help determine the borrower’s debt to income ratio and subsequently tell them the maximum amount they can qualify for on a VA Home Loan. This process is known as Pre-Qualification.
Can I have a co-borrower on my VA Home Loan?
Generally speaking, only the legally married spouse of an eligible Veteran is allowed to sign as a co-borrower on a VA Home Loan. If the spouse is a co-borrower on the loan, then the spouse’s income as well as assets and liabilities will be included in determining both borrowers' joint qualification for the loan.
What forms do I need in order to obtain a VA Home Loan?
In order to obtain a VA Home Loan, the Veteran borrower will need to provide several types of documents regarding both Military service and personal income. These documents include but are not limited to:
- Veteran’s VA Certificate of Eligibility
- Statement of Service (if on active duty)
- A copy of the Veteran’s DD214 (if the Veteran has been discharged/separated from the Military)
- Past 2 years W2 statements
- One month of most recent LES or pay stubs
- Two months of most recent bank statements.
These documents will be needed in conjunction with the formal 1003 home loan application and disclosures. Additional documents may be required depending on each borrower’s unique situation or circumstances. A VA Loan Specialist can determine the specific documents you will need and provide you with a complete VA Home Loan package that contains the application along with disclosures and forms required for obtaining the required documents.
Can I use my eligibility to re-finance my current home?
If you currently own a home you can use your eligibility to re-finance the home on to a VA Home Loan. The current loan on your home is paid off by the new VA Home Loan financing.
If you have built up equity in your home you may be able to take cash out of your house for things like home improvements or to pay off other debts. VA cash out re-financing allows for financing of up to 90% of the appraised value of your home (except in certain states where prohibited by state law).
If you currently have a VA Loan on your home you may be able to lower your interest rate and payments through a VA Streamline Re-Finance, also known as an IRRRL (Interest Rate Reduction Re-Finance Loan).
Do past credit issues effect my ability to get a VA Home Loan?
VA Home Loan approval is not determined by the borrowers credit score as much it is by the borrower’s recent credit history in the past 12 months. So if you have had some credit issues in the past, but have been on time with your payments in the past 12 months then there is a good chance you can get approved for a VA Home Loan. If a credit issue did recently occur due to a situation out of your control, then you may be able to write a letter of explanation which a VA Home Loan underwriter will review and consider in making the approval decision. If you have questions or concerns about your specific credit situation the best thing to do is contact a VA Loan Specialist who can help you assess your situation and determine the best route to get you approved for a home loan.
Can I get a VA Home Loan if I have filed bankruptcy?
Yes, but there are conditions. If the borrower has a Chapter 13 bankruptcy then it must be at least 12 months since the bankruptcy discharge date before the borrower can obtain a VA Home Loan. If the bankruptcy was a Chapter 7 bankruptcy then it must be 24 months from the discharge date. Also, the borrower must have a relatively clean credit history since the bankruptcy with no late payments or collection accounts.
I heard VA appraisers can make a purchase difficult, is this true?
There is not any truth to this statement. VA Appraisers are randomly selected by the VA from a pool of registered appraisers in the area of the home purchase. This is done to protect the Veteran borrower and the VA who is guaranteeing the loan. They are ensuring that the home is not being purchased for over market value and that the home meets certain safety and quality guidelines.
Most VA approved appraisers are also “regular” appraisers who do appraisals for conventional loans as well. They register with VA in order to obtain extra work and provide a service to Veterans. They are not any easier, or more difficult to work with than any other appraiser. Like all appraisers, they are independent 3rd parties hired to assess the value of a property.
