VA LOANS: TO VETS BY VETS

WHAT YOU NEED TO KNOW ABOUT VA LOANS

Everyone deserves a roof over their heads and shelter from nature.

Established in 1944 the federal Servicemen Readjustment Act has worked to offer eligible service members, and select spouses, the opportunity for just that. With no down payment, favorable rates, and the ease of qualification, the VA home mortgage loan continues to be the best option for many military families, or individual borrowers, in an increasingly difficult housing market.

In short, the VA loan is a mortgage loan, from approved lenders, backed by the U.S. Department of Veterans Affairs, which offers an excellent long-term, cost-saving option for qualified borrowers.

The aim is to save you money and get you into a house.

If you are looking to take full advantage of the program, it is important to understand who is eligible and the many benefits that can be enjoyed.

ADVANTAGES OF A VA LOAN

The many advantages of VA loans compared to more traditional loans are listed below:

• Requires no down payment – Many other types of loans require you to make, at least, a minimum 20% down payment, which is not an option for many families.
• Requires no Private Mortgage Insurance (PMI) – Since the loan is backed by the government, it does not require additional PMI. Not needing this extra insurance translates into a sizeable amount of savings each month.
• Offers competitive rates- Because mortgage lenders have an extra layer of security in knowing their loan will not be defaulted on; they can be more flexible and lower interest rates.
• Ease of qualification- Compared to traditional loans, lending intuitions are less strict in issuing VA loans, because it is considered lower risk.
• No prepayment penalties- Many loan institutions discourage borrowers for paying off their loan amount early, because they lose out on the extra interest that would accumulate over time. Without a penalty, borrowers with a VA home mortgage can save additional money by paying off their amount at their earliest convenience.
• Saves on closing cost- The closing cost associated with purchasing a property is often pushed to the seller, or the lending institution, again saving the borrower a large chunk of the cost.

WHO CAN APPLY FOR A VA LOAN?

The good news is that the eligibility requirements have become more relaxed than when they were first created. This means most members of the military, veterans, reservist, and National Guard are eligible for a VA loan, along with spouses in some instances.

For general guidelines, set forth by the Department of Veterans Affairs, a person qualifies for a VA home mortgage if they meet any of the following conditions:

• They have served 90 consecutive days of active duty during wartime.
• Have served 181 days of active service during peacetime.
• Have more than 6 years of service in the National Guard or Reserves.
• Are the un-remarried spouse of a service member who has died in the line of duty or as a result of a service-related disability.
• Are the spouse of a service member who is missing in action or a prisoner of war.

A Certificate of Eligibility (COE) is used as a record to verify the length and character of service, to make sure you are eligible for the VA-guaranteed loan. Please note that you do not need this before you start your application process.

WHAT CAN YOU USE THE VA LOAN FOR?

While it is easier to get, there are some restrictions on what a person can and cannot use the loan for.

Loans may be approved only if:

• The property is in a ‘move-in ready’ condition. VA loans can be used for mobile home purchases since 1970
• For purchasing, refinancing, or making improvements to a primary residence. This means you will be living in the house. No investment properties or vacation homes.

If you are looking to refinance your existing property, instead of purchasing a new one, the VA Interest Rate Reduction Refinance Loan (IRRRL) can be used. With this you’ll be able to lower interest rates, which means lower monthly payments for you.

Despite popular beliefs, borrowers are not limited to only one VA loan. If you’ve had one before, or currently have one, it may still be possible to get another. Talk to an advisor for more information.

LOAN LIMITS

Loans are most often approved for purchases in rural areas and small cities. As a general benchmark, a borrower can get a loan for up to 103.3% of the sale price of the home in question, or $417,000 without putting any money down. Maximum amounts vary by location, so it is important to get a quote in the early stages, or even before you start looking at potential properties.

If you qualify, lenders will then review your credit score, ensure you have sufficient income to make the monthly loan payments, and be able to tell you how much you qualify for.

MINIMUM CREDIT SCORE

Officially there is no minimum credit score requirement to obtain a VA home loan. It is important to note that the VA loan does not come directly from the government, but a mortgage lender. Once all the information of the loan is processed, the government sends an inspector to review the property and approve that the loan does is not considered a valuable risk.

Since these loans, backed by the government, are considered less risky to the lenders, they can work with, and approve loans for people with less than perfect credit scores. Minimum credit scores will vary from lender to lender, but a widely accepted cutoff is a 620 FICO score. A shaky credit score will not automatically disqualify you for a loan as there are still many other factors lenders will consider when trying to establish a satisfactory credit risk. Here at HomeRate Mortgage, we take pride in being able to work with borrows with a credit score of 580 or above.

It is even possible to be approved for a loan even if you have a history of bankruptcy or a foreclosure on your record.

ONE TIME FEE

While one of the main benefits of obtaining a VA loan is not having to purchase Private Mortgage Insurance, as noted above, it is important to note that there is a fee involved. A one-time mandatory VA funding fee, which is usually around 2% of the entire loan, is used to keep the VA program funded for future generations. If applying for a second or subsequent loan, the funding fee may increase to around 3%.

This fee can be rolled into the loan amount, or waived entirely in some cases if the borrower suffers injuries or disabilities connected to service. This means it is still possible to close on a mortgage with no money due at closing.

LENDERS

Since the start of this program in 1944, over 21 million loans have been insured by the government. In 2016 alone The Department of Veterans Affairs backed more than 70,000 loans; an all-time high.

With the increased attention and popularity of FHA loans & VA home loans, more and more lenders are offering this type of service, but that does not mean that they are all equal in providing assistance and favorable conditions. It is important to pick an institution that has a proven track record and high success rate.

Here at HomeRate Mortgage, we have over 20 years of experience and expertise in the industry. Owned and operate out of VA, we have a strong history of consistently beat out other top VA lenders such as Navy Federal Credit Union and USAA when it comes to prices and services. We are able to offer quick quotes, low rates, and fast closing times.

Like the Department of Veterans Affairs, we believe you shouldn’t have to pay to get a mortgage, and we do everything in our power to make that happen and get you into your dream house as soon as possible.

ELIGIBILITY REQUIREMENTS

VA loans are meant to give resources to those that have served our country, and put their life on the line for us, the ability to purchase their residence.  The U.S. Department of Veterans Affairs set the following guidelines on eligibility requirements for VA loans:

• The borrower must be of the following categories:
  • Veteran
  • Active-duty personnel
  • Reserve member
  • National Guard member
  • Some surviving spouses
• Sufficient household income and credit rating (FICO starting at 720)
• Possess a valid Certificate of Eligibility (COE) – click here for more details on obtaining a COE

For more information on eligibility requirements you can visit the VA’s website here.