- What are the benefits of a VA Home Loan?
- What is the guarantee behind a Veteran Mortgage?
- How do I know if I am eligible for the VA Home Loan program?
- If I am eligible, why do I need to get Pre-Qualified?
- Do I have to have a house I want to buy before I get pre-qualified?
- How long does it take to get a VA Mortgage?
- What is a Certificate of Eligibility, and how do I get it?
- What if I have used my eligibility for a VA Mortgage previously?
- If I am eligible for a VA Mortgage, why do I need to get Pre-Qualified?
- What kind of property can I buy using my Veteran Mortgage?
- Can I get extra money for improvements or rehabilitation of the home I am buying?
- Can I use my VA Mortgage benefit to build a home?
- Do all lenders offer VA Loans?
- Should I use a local lender, don’t they know my market better?
- What is the interest rate on a Veteran Affairs Mortgage?
- What is the Funding Fee?
- Do I have to put down a down payment for a VA Mortgage?
- How much are the closing costs on a VA Loan?
- What amount can I get with a Veteran Mortgage?
- Can I have a co-borrower on my VA Loan?
- What forms do I need in order to obtain a Veteran Home Loan?
- Can I use my eligibility to re-finance my current home?
- Do past credit issues effect my ability to get a VA Mortgage?
- Can I get a Veteran Loan if I have filed bankruptcy?
- I heard VA appraisers can make a purchase difficult. Is this true?
What are the benefits of a VA Home Loan?
A Department of Veteran Affairs Mortgage has several benefits compared to conventional financing. These benefits include:
- 100% financing: no down payment or monthly mortgage insurance (PMI) payments.
- Competitive interest rates comparable or lower than conventional programs with 20% down payment requirements.
- The home buyer/borrower’s closing costs can be paid by the seller, up to 4% of the amount.
- Flexible credit requirements: Veterans with lower credit scores may qualify for a much lower interest rate than would be obtainable on a conventional program.
- Streamline Refinance (IRRRL) allows you to refinance to a lower rate without having to re-qualify.
What is the guarantee behind a Veteran Mortgage?
The Department of Veterans Affairs guarantees the mortgage to the lender in case the borrower defaults. This does not mean you are automatically qualified or entitled to a Veteran Mortgage, you still need to qualify based on your income, assets, credit profile etc. It also doesn’t mean if you default the guarantee will pay the mortgage for you and you can stay in the home. Under circumstances of default, the mortgage still goes through the same foreclosure process as conventional programs.
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 Specialist for assistance.
If I am eligible, why do I need to get Pre-Qualified?
Being eligible for a Veteran Mortgage through the Department of Veterans Affairs and being qualified are different. Qualification requires that a lender assess your income, debts and credit history in order to approve you. 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 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.
Do I have to have a house I want to buy before I get pre-qualified?
No, in fact it is better to get pre-qualified before you find a house you want to buy. The reason for this is through the pre-qualification process your Mortgage Specialist will be able to tell you how much you are pre-qualified for, and that way you will know what price range of houses you should be looking at.
How long does it take to get a VA Mortgage?
The process can vary between lenders and be dependent on how quickly the home buyer can provide the lender proper documentation required. As a rule of thumb, it is generally a good idea to give yourself 30 days from the time the home purchase contract is signed until the scheduled closing date.
What is a Certificate of Eligibility, and how do I get it?
A Certificate of Eligibility (COE) is a document issued to you by the Department of Veterans Affairs certifying to your lender that that you are eligible for a the guarantee. In order to obtain your COE you can fill out form 26-1880 and mail it to the Veterans Affairs service center in Winston Salem, North Carolina. If there is a Veterans Affairs 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 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.
What if I have used my eligibility for a VA Mortgage previously?
This does not prevent you from obtaining a Veteran Mortgage; however there are a few differences. Depending on your situation your previous mortgage may need to 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 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 mortgage 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 you need to move but are having trouble selling your current home that has a Department of Veterans Affairs Mortgage and have decided to rent it, you may still be able to use your benefits to buy a new home where you are moving. Due to the current economic circumstances and associated challenges in selling a home, the Department of Veterans Affairs has recently made guideline changes that may allow you to buy your new home using Veteran benefits while you still have a guaranteed mortgage on your old home. There are specific guidelines for this situation and you should contact a VA Specialist to review your specific situation and see if this may be an option for you.
If I am eligible for a VA Mortgage, why do I need to get Pre-Qualified?
Being eligible for a Veteran Mortgage through the Department of Veterans Affairs and being qualified are different. Qualification requires that a lender assess your income, debts and credit history in order to approve you. 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 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 Veteran Mortgage?
Veteran Mortgages can be used to purchase most types of properties, including free standing single family homes, town houses and condominiums (if the condo project has Department of Veterans Affairs 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, Veteran Mortgages are only intended for personal home purchases that are going to be occupied by the Veteran and/or their immediate family.
Can I get extra money for improvements or rehabilitation of the home I am buying?
Unfortunately no, the Veteran Affairs mortgage program does not allow you to get extra money for improvements or rehabilitation when you buy a house. There is a program available that allows the amount to go above the purchase price of the home if you are making energy efficiency improvements to the home.
Can I use my VA Mortgage 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 Veteran benefit to close on the purchase of your home. If construction financing is not available it is still possible to use the Veteran benefit, however, there are several clauses that make the transaction much more complex.
Do all lenders offer VA Loans?
Not all lenders offer Veteran Affairs Mortgages, but there are several thousand approved lenders nationwide that offer VA guaranteed financing. However, it is recommended that you work with an individual or branch of an approved lender that specializes in Veteran Mortgages. The approval process is different from conventional financing and working with an originator and processors who are familiar with the process will make your home purchase transaction much smoother.
Should I use a local lender, don’t they know my market better?
Not necessarily, many local banks and credit unions are not approved lenders and therefore may try to discourage you from using your Veteran benefits. Additionally, there are many lenders that specialize in VA Mortgages and they may be able to provide you better service or interest rates. Finally, the Department of Veterans Affairs approved appraiser will be a local appraiser who knows the market so there shouldn’t be issues with the appraised value of the property being too high or too low.
What is the interest rate on a Veteran Affairs Mortgage?
Interest rates on Veteran Mortgages fluctuate with financial market conditions just like they do on conventional programs. 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 Department of Veterans Affairs 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 Funding Fee?
The funding fee is required by law and is charged by the Department of Veterans Affairs, not the lender. In most cases the 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 mortgage is the Veteran borrower’s first and/or if there is any down payment on the property. A VA 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.
Do I have to put down a down payment for a VA Mortgage?
No, the Department of Veterans Affairs 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 program allows for the seller of the property to pay the Veteran borrower’s closing costs, up to 4% of the mortgage amount. A VA 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 Loan?
Closing costs on 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 mortgages, Veteran 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 house is being purchased, and are not related to lender or title company fees.
What amount can I get with a Veteran Mortgage?
Technically there is not a limit on VA loans, however, with most lender the maximum amount will be the conforming loan limit of $548,250. In certain high cost areas the maximum amount may be increased. There is also a jumbo program where the Veteran borrower must contribute 25% of the amount over the base $548,250 limit. You can read more about VA Loan Limits at this page.
However, the 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 cars or credit cards. A VA Specialist can help determine the borrower’s debt to income ratio and subsequently tell them the maximum amount they can qualify for. This process is known as Pre-Qualification.
Can I have a co-borrower on my VA Loan?
Yes, but who can be a co-borrower is somewhat limited. Generally speaking only a spouse of the Veteran, or another Veteran can be co-borrowers on a Department of Veterans Affairs mortgage. There is a program called a Joint Veteran Mortgage that allows for a co-borrower who is not a Veteran or a spouse, but the underwriting requirements are complicated and most lenders do not offer the program.
What forms do I need in order to obtain a Veteran Home Loan?
In order to obtain a Veterans Affairs Mortgage, 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 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 application and disclosures. Additional documents may be required depending on each borrower’s unique situation or circumstances. A VA Specialist can determine the specific documents you will need and provide you with a complete application package that contains the 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 . The current mortgage on your home is paid off by the new Veterans Affairs 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 Veterans Affairs Mortgage on your home you may be able to lower your interest rate and payments through a 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 Mortgage?
Veteran Affairs loan approvals are determined 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. 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 an 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 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 Veteran 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 they have been in the bankruptcy before the borrower can obtain Department of Veterans Affairs financing. 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. The Appraisers are randomly selected by the Department of Veterans Affairs from a pool of registered appraisers in the area of the home purchase. This is done to protect the Veteran borrower and the Department of Veterans Affairs. 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 programs as well. They register with the Department of Veterans Affairs 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.
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