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May 29, 2024 · VA home loans are a type of mortgage backed by the Department of Veterans Affairs. VA loans are only available to military members, veterans and, in some cases, their spouses.
- The VA Home Loan: Unbeatable Benefits For Veterans
- Top 10 VA Loan Benefits
- VA Loan Rates
- Eligibility
- The VA Loan Certificate of Eligibility
- Qualifying For A VA Mortgage
- VA Funding Fees and Loan Limits
- Eligible Property Types
- Veteran Mortgage Relief with The VA Loan
- When Not to Use A VA Loan
For many who qualify, VA home loans are some of the best mortgages available. Backed by the U.S. Department of Veterans Affairs, VA loans are designed to help active-duty military personnel, veterans and certain other groups become homeowners at an affordable cost. The VA loan asks for no down payment, requires no mortgage insurance, and has lenien...
1. No down payment on a VA loan
Most home loan programs require you to make at least a small down payment to buy a home. The VA home loan is an exception. Rather than paying 5%, 10%, 20% or more of the home’s purchase price upfront in cash, with a VA loan you can finance up to 100% of the purchase price. The VA loan is a true no-money-down home mortgage opportunity.
2. No mortgage insurance for VA loans
Typically, lenders require you to pay for mortgage insurance if you make a down payment that’s less than 20%. This insurance — which is known as private mortgage insurance (PMI) for a conventional loan and a mortgage insurance premium (MIP) for anFHA loan— would protect the lender if you defaulted on your loan. VA loans require neither a down payment nor mortgage insurance. That makes a VA-backed mortgage very affordable upfront and over time.
3. VA loans have a government guarantee
There’s a reason why the VA loan comes with such favorable terms. The federal government guarantees these loans — meaning a portion of the loan amount will be repaid to the lender even if you’re unable to make monthly payments for whatever reason. This guarantee encourages and enables private lenders to offer VA loans with exceptionally attractive terms.
The VA loan is viewed as one of the lowest-risk mortgage types available on the market. This safety allows banks to lend to veteran borrowers at lower interest rates.
Am I eligible for a VA home loan?
Contrary to popular belief, VA loans are available not only to veterans, but also to other classes of military members. The list ofeligible VA borrowersincludes: 1. Active-duty service members 2. Members of the National Guard 3. Reservists 4. Surviving spouses of veterans 5. Cadets at the U.S. Military, Air Force or Coast Guard Academy 6. Midshipmen at the U.S. Naval Academy 7. Officers at the National Oceanic & Atmospheric Administration. A minimum term of service is typically required.
Minimum service required for a VA mortgage
VA home loans are available to active-duty service members, veterans (unless dishonorably discharged), and in some cases, surviving family members. To be eligible, you need to meet one of these service requirements: 1. You’ve served 181 days of active duty during peacetime 2. You’ve served 90 days of active duty during wartime 3. You’ve served six years in the Reserves or National Guard 4. Your spouse was killed in the line of duty and you have not remarried Your eligibility for the VA home l...
What is a COE?
In order to show a mortgage company you are VA-eligible, you’ll need a Certificate of Eligibility (COE). Your lender can acquire one for you online, usually in a matter of seconds.
How to get your COE
Getting a Certificate of Eligibility (COE) is very easy in most cases. Simply have your lender order the COE through the VA’s automated system. Any VA-approved lender can do this. Alternatively, you can order your certificate yourself through the VA benefits portal. If the online system is unable to issue your COE, you’ll need to provide your DD-214 form to your lender or the VA.
Does a COE mean you are guaranteed a VA loan?
No, having a Certificate of Eligibility (COE) doesn’t guarantee a VA loan approval. Your COE shows the lender you’re eligible for a VA loan, but no one is guaranteed VA loan approval. You must still qualify for the loan based on VA mortgage guidelines. The guarantee part of the VA loan refers to the VA’s promise to the lender of repayment if the borrower defaults.
VA loan eligibility vs. qualification
Being eligible for VA home loan benefits based on your military status or affiliation doesn’t necessarily mean you’ll qualify for a VA loan. You still have to qualify for a VA mortgage based on your credit, debt, and income.
Minimum credit score for a VA loan
The VA has established no minimum credit score for a VA mortgage. However, many VA mortgage lenders require minimum FICO scores of 620 or higher — so apply with many lenders if your credit score might be an issue. Even VA lenders that allow lower credit scores don’t accept subprime credit. VA underwriting guidelines state that applicants must have paid their obligations on time for at least the most recent 12 months to be considered satisfactory credit risks. In addition, the VA usually requi...
VA loan debt-to-income ratios
The relationship of your debts and your income is called yourdebt-to-income ratio, or DTI. VA underwriters divide your monthly debts (car payments, credit cards, and other accounts, plus your proposed housing expense) by your gross (before-tax) income to come up with your debt-to-income ratio. For instance: 1. If your gross income is $4,000 per month 2. And your total monthly debt is $1,500 (including the new mortgage, property taxes and homeowners insurance, plus other debt payments) 3. Then...
About the VA funding fee
The VA charges an upfront fee to defray the costs of the program and make it sustainable for the future. Veterans pay a lump sum that varies depending on the loan purpose and down payment amount. The fee is normally wrapped into the loan. It does not add to the cash needed to close the loan.
VA loan limits in 2024
VA loan limits have been repealed, thanks to the Blue Water Navy Vietnam Veterans Act of 2019. There is no maximum amount for which a home buyer can receive a VA loan, at least as far as the VA is concerned. However, private lenders may set their own limits. So check with your lender if you are looking for a VA loan above local conforming loan limits.
Houses you can buy with a VA loan
VA mortgages are flexible about what types of property you can and can’t purchase. A VA loan can be used to buy a: 1. Detached house 2. Condo 3. New-built home 4. Manufactured home 5. Duplex, triplex or four-unit property You can also use a VA mortgage to refinance an existing loan for any of those types of properties.
VA loans and second homes
Federal regulations limit loans guaranteed by the Department of Veterans Affairs to “primary residences” only. However, “primary residence” is defined as the home in which you live “most of the year.” Therefore, if you own an out-of-state residence in which you live for more than six months of the year, this other home, whether it’s your vacation home or retirement property, becomes your official “primary residence.” For this reason, VA loans are popular among aging military borrowers.
Buying a multi-unit home with a VA loan
VA loans allow you to buy a duplex, triplex, or four-plex with 100% financing. You must live in one of the units. Buying a home with more than one unit can be challenging. Mortgage lenders consider these properties riskier to finance than traditional, single-family residences, so you’ll need to be a stronger borrower. VA underwriters must make sure you will have enough emergency savings, or cash reserves, after closing on your house. That’s to ensure you’ll have money to pay your mortgage eve...
The U.S. Department of Veterans Affairs, or VA, provides home retention assistance. The VA intervenes when a veteran is having trouble making home loan payments. The VA works with loan servicers to offer loan options to the veteran, other than foreclosure. In fiscal year 2019, the VA made over 400,000 contact actions to reach borrowers and loan ser...
If you have good credit and 20% down
A primary advantage to VA home loans is the lack of mortgage insurance. However, the VA guarantee does not come free of charge. Borrowers pay an upfrontfunding fee, which they usually choose to add to their loan amount. The fee ranges from 1.4% to 3.6%, depending on the down payment percentage and whether the home buyer has previously used his or her VA mortgage eligibility. The most common fee is 2.3%. On a $200,000 purchase, a 2.3% fee equals $4,600. However, buyers who choose a conventiona...
If you’re on the “CAIVRS” list
To qualify for a VA loan, you must prove you have made good on previous government-backed debts and that you have paid taxes. The Credit Alert Verification Reporting System, or “CAIVRS,” is a database of consumers who have defaulted on government obligations. These individuals are not eligible for the VA home loan program.
If you have a non-veteran co-borrower
Veterans often apply tobuy a home with a non-veteranwho is not their spouse. This is okay. However, it might not be their best choice. As the veteran, your income must cover your half of the loan payment. The non-veteran’s income cannot be used to compensate for the veteran’s insufficient income. Plus, when a non-veteran owns half the loan, the VA guarantees only half that amount. The lender will require a 12.5% down payment for the non-guaranteed portion. The Conventional 97 mortgage, on the...
- Editor
Oct 1, 2024 · A VA loan is a government-backed mortgage option available to Veterans, service members and surviving spouses. VA loans are made by private lenders, like mortgage companies and banks, and not the Department of Veterans Affairs.
- VP of Mortgage Insight
- Although the VA loan is a federal program, the government generally does not make direct loans to Veterans. Instead, private lenders including Vete...
- The VA loan limits help determine how much Veterans with diminished VA loan entitlement can borrow before needing to make a down payment....
- The VA Funding Fee is a governmental fee applied to every VA purchase and refinance loan. This fee is set by Congress and goes straight to the Depa...
- VA loans are arguably the most powerful loan option on the market. They come with a list of big-time benefits, including $0 down pa...
- A long-time misconception about low and no-down payment loans is that they're inherently risky. The reality is VA loans have been the safest loan o...
- Talk with a trusted lender that knows VA loans and how to get the most from this hard-earned benefit. The process typically starts...
- Yes, this is a lifetime benefit. You can reuse the VA loan over and over again. Buyers usually regain the full pow...
Nov 26, 2021 · VA loans help active service members, veterans, and their surviving spouses become homeowners. They provide up to 100% financing on the value of a home. Eligible borrowers can use a VA loan...
- Julia Kagan
- 2 min
Aug 28, 2020 · Military service members and veterans who want to buy a home have access to a unique benefit: a VA loan. It’s the only widely available mortgage that requires no down payment and has no minimum...
May 2, 2024 · FAQ. VA loan vs. conventional loan: Which is better? If you are eligible, a VA loan is often better than a conventional loan. You can buy a home with no down payment, a higher...
People also ask
What is a VA loan?
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What is the difference between a VA loan and a conventional loan?
Jun 3, 2024 · A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs and issued by a private lender, such as a bank, credit union or mortgage company. A VA loan can make it easier to...
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