VA Home Loans
Why Choose the VA Home Loan?
The VA Loan program was establish to help active duty service members, veterans, and eligible surviving spouses become home owners. Eligibility of the VA Home Loan is identified lower on this page. Being a veteran doesn’t automatically make a potential home buyer eligible. The borrower must still meet both service and credit/income requirements to be elgibile for the loan program. To apply for a VA Home Loan, you must apply with a VA approved lender.
- Maximum loan amount of $424,100
- 100% financing up to the County Loan Limits
- No PMI (Private Mortgage Insurance)
- Can receive closing cost help along with 4% for points, pre-paids, etc.
- 2.15% Funding Fee for first time use of eligibility
- 3.3% Funding Fee for subsequent use
- Funding Fee can be rolled into loan amount. (Disabled Veterans could be exempt from the Funding Fee)
Why Choose the VA Home Loan?
No Down Payment
The VA Home Loan helps qualified borrowers by financing 100% of the home’s value. The no money down benefit of the VA Loan allows Veterans to save a substantial amount of money upon purchasing a home.
Competitive Interest Rates
Because the VA backs each VA Home Loan, lenders carry less risk. This allows lenders to offer very competitive interest rates to eligibile VA Home Loan borrowers. To find current rates, contact an approved VA Loan mortgage lender.
No PMI (Private Mortgage Insurance)
PMI, is insurance that protects mortgage lenders in case of a default by the borrower. Under conventional loan requirements, a borrowers is required to pay private mortgage insurance on a monthly basis. Unless, they are able to put down at least 20% of the home’s value as an initial down payment.
The VA Loan however, requires $0 down payments along with No PMI. This is due to the federal government backing of all VA Home Loans. They assume the risk on behalf of all VA Loan borrowers.
Savings of several hundred dollars each month can be had by not having paying into Private Mortgage Insurance.
Requirements for VA Home Loans
The VA Home Loans do have certain eligibility requirements.
They are defined as:
- Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service.
- Or has served during wartime or a minimum of 181 continuous days during peacetime.
- 6 year requirement for National Guards and Reservists.
- You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.
To obtain a VA Home loan, these guidelines must be met:
- The applicant must be an eligible veteran.
- The loan must be for an eligible purpose.
- The veteran must occupy or intend to occupy the property as a home within a reasonable period of time after closing the loan. There are exceptions and workarounds in some cases. Talk with a lender about your particular occupancy situation.
- The veteran must be a satisfactory credit risk.
- The income of the veteran and spouse, if any, must be shown to be stable and sufficient to meet the mortgage payments, cover the costs of owning a home, take care of other obligations and expenses, and have enough left over for family support.
The VA doesn’t require a specific credit score for veterans and military members who want to use this benefit. But VA lender typically will, and it’s often around a 620. Credit score requirements can be different among lenders.
Similarly, lenders will compute debt-to-income (DTI) ratios. This measure is a snapshot of a borrower’s monthly debts and payments compared to his or her gross monthly income. Despite the VA’s preference for borrowers to have a 41 percent DTI ratio or lower, lenders will often allow for higher DTI ratios. That, too, can be different depending on the lender.
VA also has a requirement for residual income, or monthly income remaining after all major debts and obligations are paid. Residual income is measured to ensure borrowers and their families will have enough money to cover basic living costs (e.g. food, transportation), and amounts vary based on family size and part of the country. The VA loan program’s success in terms of low foreclosure rate is due in part to these residual income requirements.
Once the buyer gets under contract on a home, a VA appraisal is conducted to assess the market value and condition of the property. The VA appraisal is a required step in the process and isn’t the same as home inspection, which is more thorough but not required. A home inspection is usually a good investment and can be done before the lender orders the independent appraisal.
The VA appraisal provides an estimate of the value of the property compared to the price of comparable homes. The appraiser will also check the property’s condition against the VA’s Minimum Property Requirements (MPRs). The VA wants to help ensure veterans buy homes that are safe and sound. Being familiar with MPRs will curtail frustrations if any red flags while you’re home shopping.