What is a VA loan?

VA loans, better known as Veterans Affairs mortgages, offer considerable benefits for service members, spouses, and eligible military veterans interested in buying a home. Making it easier to get financing is the main draw of VA loans because they offer more lenient credit and income requirements and no down-payment loans as opposed to conventional mortgages.

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Compared with traditional bank financing, VA loans have low VA rates. According to reports by VA mortgage software firm Ellie Mae, VA loans consistently offer the lowest rates on the market. VA loans don’t require private mortgage insurance, known as PMI, because VA loans are guaranteed by the Department of Veterans Affairs and are closed through private lenders.

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VA loan eligibility requirements - What are they?

Here are some things to know about the VA mortgage program if you think you may be eligible for a VA loan.

 

Most reservists, National Guard, members of the regular military, and veterans are eligible to apply for a VA loan. Military service members who die from a service-connected disability or while on active duty pass their benefits to surviving spouses. After about six months of service, Active-duty military personnel generally qualify. Reservists and members of the National Guard, if they are called to active duty before 6 years, bypass the 6-year requirement and are eligible after 181 days of service.

 

You may qualify if you:

1. Served 90 consecutive days - active service during wartime

2. Served 181 days - active service during peacetime

3. Have been an active member of the Reserves or National Guard - 6 years or more

4. Married to a service member who, as a result of a service-related disability, died in the line of duty.

 

Do VA loans require PMI?

A VA loan doesn’t require PMI, unlike other low down-payment mortgage options.  Conventional mortgages with less than 20 percent down and Federal Housing Administration (FHA) loans require PMI, which costs the borrower tens of thousands over the life of the loan. The benefit translates into substantial monthly savings for VA loans. For example, a borrower who makes a 3.5 percent down payment on a $400,000 FHA-insured mortgage would pay $200 a month for mortgage insurance premiums alone.

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What is the VA loan funding fee?

Although the costs of obtaining a VA loan are usually lower than other kinds of low-down-payment mortgages, they nevertheless carry a one-time funding fee that deviates depending on the amount of the down payment and VA loan program. This fee helps the Department of Veterans Affairs guarantee your loan by 25% in the event of foreclosure, which automatically makes a VA loan a low-risk loan to the best VA lenders. In turn, Veterans get the lowest VA rates on their VA mortgages.

A first-time borrower in the armed forces applying for a VA loan, with no money down, must pay a fee of 2.15 percent of the VA loan amount. The fee can be reduced to 1.25 percent of the VA loan amount if the veteran makes a down-payment of 10 percent or more. National Guard members and Reservists usually pay about a 1/4th of a percentage point more in charges than active-duty members.

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Without a down payment, those applying for the VA loan program for the second time must pay 3.3 percent of the total VA loan amount.

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Can existing VA mortgage holders get the lowest VA interest rate?

The Interest Rate Reduction Refinance Loan (VA IRRRL) awards existing VA loan holders the chance to refinance to a lower VA interest rate. This VA benefit requires veterans to refinance their current VA loan into a new VA loan.

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The VA benefits of the VA IRRRL is that credit and VA appraisal underwriting packages are not needed. Furthermore, you won’t have to pay cash out of pocket to finance closing costs for the VA IRRRL. It’s designed so that any fees get rolled into the new VA loan or the VA interest rates get adjusted so that the veteran's costs are covered.

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Are there VA loan mortgage occupancy requirements?

VA loans normally require borrowers to move into their new home within 60 days of purchase and must use it as a primary residence. However, exceptions are made given the circumstances.

 

The Best VA Lenders will assess occupancy scenarios case-by-case. For active duty service members, the soldier's spouse can satisfy the occupancy requirement if the military service-member cannot. A service member’s minor child, in some cases, can also satisfy occupancy. Borrowers cannot use VA loans to purchase investment properties or secondary homes.

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What are the underwriting requirements of a VA loan?

Lenders generally have their own internal requirements, but the VA doesn’t require a minimum credit score for a VA loan. The best VA lenders do not have a minimum credit score, like the VA, because they are inclined to help everyone.

 

Borrowers must show adequate income to repay the VA loan and should lighten their debt-load, but VA guidelines are ordinarily more flexible than guidelines for conventional loans.

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VA guidelines allow veterans to use their VA home-loan benefits a year after bankruptcy or foreclosure if there are extenuating circumstances, or two years if that is not the case.

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The VA loan limits on VA loans changes by county, but the maximum VA loan guaranty amount for 2018 is $453,100 and $679,650 in high-cost areas across the United States and some areas in Hawaii.

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Aid for struggling VA loan borrowers

Another benefit of a VA loan is the assistance given to financially distressed borrowers. If a VA loan homeowner can’t make payments on the VA mortgage, someone at the VA can help renegotiate with the best VA lenders on behalf of the borrower.

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VA’s financial representatives can help borrowers renegotiate repayment plans, VA loan modifications or other options to foreclosure.

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Veterans who are scrambling to make their mortgage payments, regardless of whether they have VA loans, can always call (877) 827-3702 for help.

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How to apply for VA Loan COE or VA Certificate of Eligibility

You must prove you are eligible before you can apply for a VA loan. VA loan Applicants should get a VA Certificate of Eligibility (COE). Veterans and spouses, and eligible service members need to meet any of the following criteria:

1. 181 days of service during peacetime.

2. 90 days of service during wartime.

3. Six years or more of service in the National Guard or Reserves.

4. Surviving spouse of a service member who died as a result of a service-connected disability or directly in the line of duty.

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Here are Three ways to apply for the COE:

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1. Ask for a COE from the best VA lenders. The best VA Lenders can tap into a database which will produce your COE instantly.

2. Apply online for the COE at VA.Gov by logging into your account and navigating to the COE eligibility page.

3. Mail in your application after printing out this form, fill it in and include all applicable proof of VA eligibility.

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Documents needed for COE:

Veterans and National Guard or Reserve members in Active Federal service

• DD214 – Include a copy confirming the type of service in addition to the reason for honorable discharge.

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Active duty service members, Reserve members or National Guard who have never had Active Federal service

• A current statement of service needs to be signed by your commanding officer, personnel office, or adjucent that includes your full name, date of birth, Social Security number, duration of lost time and the name of the coming officer providing the data, along with entry date of active duty.

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Current National Guard or Reserve member without Active Federal service

• An NGB Form 22, a record of service and report of separation for each period served in the National Guard.

• An NGB Form 23, proof of the character of service and Retirement Points Accounting.

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Discharged member of the Selected Reserve - never activated for Federal active duty

• One copy of the latest evidence of honorable service and annual retirement points statement.

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Surviving Spouse is inheriting DIC benefits (Dependency and Indemnity Compensation) benefits.

• Submit VA 26-1817 and deceased veteran’s DD214

• You are required to include the veteran’s and surviving spouse’s social security number on the VA 26-1817 form.

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Surviving Spouse not receiving DIC (Dependency and Indemnity Compensation) benefits.

• VA 21-534.

• DD214, if available, proves discharge orders.

• A copy of your marriage license is needed.

• The death certificate or DD1300 Report of Casualty is required.

• Send the VA 21-534 to the nearest VA regional loan center in your state. 

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How to apply for a VA loan

After you have your certificate of eligibility (COE), the application process is straightforward and you can apply for the VA loan. However, remember that only the best VA lenders can originate VA loans, so here is what you will need to apply:

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1. Find the best VA lender by searching this VA home mortgage loan website, or get recommendations from friends after trying to do your own research online.

2. Always shop around for low VA rates, as because the best VA lender’s terms are not available everywhere.

3. Apply for a VA loan through the best VA lenders.

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Other benefits of a VA loan

Buying a home is one way to use a VA loan. You may also take advantage of VA loans in the following ways:

1. VA Cash-out refinance

2. VA Interest rate reduction refinance loan (IRRRL)

3. Native American Direct Loan program

4. Adapted housing grants