VA Loans: The easiest way to buy a home

Learn about the VA loan programs. Take a close look at our topics.

VA loan graphicA VA loan is a home loan guaranteed by the United States Department of Veterans Affairs for the purpose of helping veterans to purchase or refinance property. The system was created in 1944 to assist returning World War II veterans obtain suitable housing. The program has been broadened to enable veterans from throughout the entire history of the United States Armed Forces to register and receive loans.

Types of VA Loans: Which One is Right for You?

There are many different types of VA loans available to active duty military members and veterans. The most common type is the purchase loan, which can be used to buy a home or refinance an existing mortgage.

There are also many types of VA loans available for those who already own a home. These include the cash-out refinance loan, which allows borrowers to take out a new loan for more than they owe on their current mortgage and use the extra money to pay off debts or make home improvements; and the interest rate reduction refinance loan, which allows borrowers to lower their interest rate by refinancing their current mortgage.

How Do VA Loans Work When Buying a House?

VA loans are a great way for active duty service members and veterans to purchase a home. VA loans are available to active duty service members, veterans, and their spouses.

VA loans offer a number of benefits, including no down payment required, no mortgage insurance required, and competitive interest rates. To qualify for a VA loan, you must meet certain eligibility requirements, including being an active duty service member or veteran, having good credit and a steady income, and being able to afford the monthly mortgage payments.

Who Is Eligible for a VA Loan?

Serving in the military is a noble and honorable duty, one that can be difficult to maintain a civilian career. Fortunately, there are many benefits available to active duty military members, including VA home loan eligibility. In order to be eligible for a VA home loan, eligible service members must meet several requirements.

To be eligible for a VA home loan, you must be an active serving military member or veteran who served in the armed services for at least 90 consecutive days during a period of war or 181 consecutive days during a period of peace.

Additionally, you must have been honorably dismissed from the service. Under Title 32, national guard and reservists must serve 90 days or a minimum of six years with at least 30 days being continuous.

Active duty service members may also qualify for a VA home loan if they are currently on active duty and expected to serve for at least another six months.

Spouses of military personnel who died on active duty or as a consequence of a service-connected injury may also qualify for a VA loan.

Veteran and familyThe list of military personnel and dependents who are eligible for loans from the VA is lengthy, and specific requirements vary depending on the type of service and the length of time that they've been in the military.

If you or your eligible spouse served in any branch of the military and were not discharged due to misconduct, then you're probably eligible. At least 90 days' active wartime duty in World War II, the Korean War or the Vietnam War.

From 1947 to 1964, you must have served at least 181 days of active duty. For officers, you must have served from 1975 to 1980.

If you left the military after September 7, 1980, then you must have served at least 24 months. You can also serve during the Gulf War if it began on August 2, 1990.

After six years in the reserve or National Guard, you can expect to receive an honorable discharge. You can also retire or continue serving as a reserve member.

Discharged service members who were injured or disabled due to a service-related injury are usually eligible for loans.

What Is A Certificate of Eligibility (COE)?

A Certificate of Eligibility (COE) is a document issued by the United States Department of Veterans Affairs (VA) that confirms a veteran’s eligibility for a VA home loan. The COE verifies that the veteran meets the VA’s requirements for home loan eligibility, which include service in the U.S. military and a satisfactory credit history.

The COE is not required for all VA home loans, but it is required for some, including loans with no down payment. The interest rate on a VA loan is typically lower than the interest rate on a conventional mortgage, so having a COE can save veterans money on their home purchase.
Read more about the VA Certificate of eligibility.

VA Home Loan Basics

The VA home loan program is a benefit for active duty military members and veterans. It offers a low interest rate, and no down payment is required. There are also no monthly mortgage insurance premiums.


Fees Associated with VA Loans: What to Know

When you're looking at a VA home loan, it's important to understand the funding fee and other costs associated with the loan. The funding fee is a one-time fee charged by the Department of Veterans Affairs to help offset the cost of guaranteeing loans made to active duty military members, veterans, and certain surviving spouses.

 The funding fee can be as low as 2.30% or as high as 3.60%, depending on your military service history and whether you're using your VA home loan benefit for the first time or subsequent time.

The VA funding fee may be included in the loan amount, paid in cash at settlement, or the seller is allowed to pay the funding fee.

There are also other costs to consider when taking out a VA home loan. For example, you may need to pay for closing costs, including an appraisal, credit report, and title search. Your lender can provide more information on specific costs associated with your loan.

Veterans who have been classified as 10% handicapped or more may also be eligible for a complete remission of the financing fee. Survivor spouses of service troops killed in action may also be eligible for a complete waiver.
Read more about the VA funding fee.

VA Loan Limits Now Higher Than Ever

Attractive suburban houseAs a result of rising house prices, the FHFA, the department that administers the Veterans Administration's mortgage operations, recently announced an increase in the loan maximum for all loans guaranteed by the agency to $647,200 from the previous ceiling of $55,200.

The new loan limit applies to all loans guaranteed by the Department of Veterans Affairs, including purchase and refinance loans. The dollar amount applies to the total loan, not just the principal amount.

In certain high-cost areas of the country, the lending limit will be higher.

How Much of a VA Home Loan Am I Eligible for?

The first step a lender takes to determine whether or not a veteran is eligible for a VA mortgage, is to examine the veteran's credit report. You might be surprised to learn is that the VA does require a minimum credit score. The VA leaves the minimum credit score up to the lender. The next step is to calculate the debt to income ratio.

When it comes to VA home loans, there is no limit to how much you can borrow. However, your debt-to-income ratio will be a factor in determining how much you can qualify for. Generally, VA lenders look for a debt-to-income ratio of 41% or less. This means that your monthly housing costs should not exceed 41% of your monthly income. Keep in mind that this is just a general guideline and that each lender may have their own requirements. Read more about debt to income

VA Loan vs. Traditional Mortgages

One of the biggest benefits of a VA loan is that you can get a mortgage with no money down. You may also be able to get a lower interest rate than you would with a traditional mortgage due to the VA guarantee (funding fee). The home seller is permitted to pay all closing costs on behalf of the borrower. Another benefit of a VA loan is that you can refinance your home even if you have less than 20% equity. This can be helpful if you want to take advantage of lower interest rates or if you need to reduce your monthly payments.

Rotating question markFrequently Asked Questions (FAQs)

Q. Are VA loans good?
A. There is no definitive answer to this question, as it depends on the individual's specific financial situation. That said, VA loans can be a great option for eligible borrowers, as they offer competitive interest rates and no down payment requirements. And the home seller can pay the veteran's closing costs.

Q. Can VA loans be used more than once?
A. Active-duty service members, veterans, and surviving spouses can still take out multiple VA loans throughout their lifetime. There’s no limit to how many mortgages they can take out each year.

Q. Can you get VA loan with bad credit?
A. Yes, you can get a VA loan with bad credit. However, the interest rate may be higher than if you had good credit. Additionally, you may need to put down a larger down payment. Most lenders steer clear of applicants with bad credit. Be prepared to spend a lot of time on the telephone to find a cooperative lender.

Q. Can you refinance VA loan?
A. The Department of Veterans Affairs (VA) offers several refinancing programs that allows veterans to get a new mortgage with a lower interest rate.
See Cash out refinance and interest rate reduction.

Q. Can you use a VA loan to build a house?
A. Yes, you can use a VA loan to build a house. The VA loan program was created to help military veterans buy homes, so there are many benefits that come with using a VA loan. One of those benefits is that you can use the loan to build a home.

Q. Does the VA loan cover closing costs?
A. The VA does not cover closing costs, however, the VA does restrain lenders from excessive fees.

Q. Does the VA loan have mortgage insurance?
A. The VA requires their own mortgage insurance premium, but it is called the funding fee. The VA does not require monthly PMI charges.
Read more about VA Funding fees.

Conclusion

In conclusion, VA loans are a great way for veterans and their families to buy a home. The process is simple and the rates are typically lower than those offered by other lenders. If you're thinking of buying a home, be sure to check out VA loans.