If you have served in the military and need a mortgage, a VA loan might be the right thing to do if you’re buying a home. VA loans are guaranteed mortgages by the Department of Veterans Affairs (VA) and issued by private lenders. They can make it easier to buy your home as they don’t usually require a deposit.
The VA home loan program was created by the GI Bill of Rights to help veterans get a foothold in civilian life after World War II. Veterans and their surviving spouses, family members, children, and other family members are eligible for VA loans.
How Does a VA Loan Work?
The VA guarantee means that the state pays back the VA loan portion even if the borrower does not make payments. This assurance reduces lenders’ risk as they can offer favorable terms and do not require a down payment.
If you are eligible, you can complete the VA mortgage application with the lender of your choice here.
Who Can Apply For a VA Loan?
You are eligible if:
-You are an active-duty military member or veteran who fulfills the requirements for the duration of service.
-You are the surviving spouse of a service member who died while on active duty or with a disability.
-A spouse of prisoners of war or remarried after the death of his or her husband or wife.
-The VA does not set a minimum score for VA loans, but lenders can set their own minimum standards. The lender takes your income and debts to assess your ability to repay the mortgage. If you meet the lender’s credit and income requirements, you can qualify for a VA loan.
If the property you are planning to buy is your primary residence, you will need to obtain a certificate from the VA. You can ask a VA-approved lender to receive this document from you, or you can bring it yourself by proving that you meet the requirements for military service and a surviving spouse, and then obtain your VA eligibility certificate before the loan closes.
Which VA Loan is Right For Me?
The VA loan program offers various options, including; cash-out refinancing, Interest Rate Reduction Refinance Loan (IRRRL), rehab and renovation loan, and Native American Direct Loan (NADL). The VA Home Equity Line of Credit (HFC) and Home Ownership Loan (HPL) programs do not require a down payment or require mortgages or insurance.
What are the drawbacks of this type of loan for borrowers, and what are the disadvantages of VA loans?
Although VA loans do not require mortgage insurance, they do carry additional costs known as funding fees. These fees are set by the federal government and cover the cost of foreclosure in the event of a borrower defaulting. The Department of Veterans Affairs limits lenders’ “funding fees” to no more than 1.4% to 3.6% of the loan amount and prohibits them from charging other closing costs. These fees can be paid upfront or folded into the loan.
A VA-approved appraiser will evaluate your desired home to estimate its value and ensure it meets the VA’s minimum requirements. Not all properties are eligible, and fixer-uppers may not meet VA minimum standards. With a VA loan, you can buy investment properties or vacation homes, but not all homes.
Ready to talk to a loan officer and get your VA loan? We can help, answer a few questions here and we’ll match you with a loan officer that meets your needs.