All You Need To Know About VA Loans
The VA loan is a $0 down mortgage option available to Veterans, Service Members and select military spouses. VA loans are issued by private lenders, such as a mortgage company or bank, and guaranteed by the U.S. Department of Veterans Affairs (VA).
The VA Home Loan was created in 1944 by the United States government to help returning service members purchase homes without needing a down payment or excellent credit. This historic benefit program has guaranteed more than 24 million VA loans, helping veterans, active duty military members and their families purchase or refinance a home.
Today, the VA Mortgage is more important than ever. In recent years, lenders nationwide have tightened their lending requirements in the wake of the housing market collapse, making the VA loan a lifeline for Veterans and active Military homebuyers, many of whom find difficulty when faced with tough credit standards and down payment requirements.
Like all home loans, VA Mortgages have considerable details and information to review. We encourage you to use our website’s educational resources to learn about the specifics of this exclusive home loan benefit. To start your VA Loan, send us an email and one of our VA Loan Specialist will contact you in less than 48hrs.
VA helps Servicemembers, Veterans, and eligible surviving spouses become homeowners. As part of our mission to serve you, we provide a home loan guaranty benefit and other housing-related programs to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.
VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.
VA Loan Eligibility Requirements
To be eligible for a VA loan, you or your spouse must meet the basic service requirements set by the Department of Veterans Affairs (VA), have a valid Certificate of Eligibility (COE) and satisfy the lender’s credit and income requirements.
You may be eligible for a VA loan by meeting one or more of the following requirements:
- You have served 90 consecutive days of active service during wartime, OR
- You have served 181 days of active service during peacetime, OR
- You have 6 years of service in the National Guard or Reserves, OR
- 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.
VA Loan Certificate of Eligibility (COE)
While you DO NOT need your Certificate of Eligibility (COE) in hand to apply for a VA loan, it is an important part of VA loan eligibility. Your COE provides the lender with confirmation that you qualify for VA loan benefits.
Again, it is not necessary to obtain your COE before applying for a VA loan as most VA lenders are able to instantly pull your COE through the VA’s automated system. In fact, nearly all VA loan COEs are requested electronically, and about two-thirds of certificates are issued immediately, according to the VA.
There are three basic ways you can obtain your COE for a VA loan, which include:
- Applying through a VA approved lender
- Applying online through the VA’s eBenefits portal
- Applying by mail with VA Form 26-1880
Documents Required to Obtain a COE
Proof of service to obtain your COE often comes in the form of the DD Form 214 for regular military, and the NGB Form 22 and NGB Form 23 for National Guard and Reserves. However, this isn’t always the case.
Documents Your Lender May Require
Service Type Required Documents
- Veteran DD Form 214 (Report of Separation)
- Current or Former Activated National Guard or Reserves DD Form 214 (Report of Separation)
- Active Duty Statement of Service
- Current National Guard or Reserves (Never Activated) Statement of Service
- Discharged National Guard (Never Activated) NGB Form 22 (Report of Separation and Record of Service) and NGB Form 23 (Retirement Points Accounting and proof of the character of service)
- Discharged Reserves (Never Activated) Army Reserve: DARP Form FM 249-2E or ARPC Form 606-E. Navy Reserve: NRPC 1070-124. Air Force Reserve: AF 526. Marine Corps Reserve: NAVMC HQ509 or NAVMC 798. Coast Guard Reserve: CG 4174 or 4175
How Spouses can Obtain their COE
Getting a COE as a surviving spouse depends on whether or not you’re receiving Dependency and Indemnity Compensation.
Spouses receiving Dependency and Indemnity Compensation benefits must fill out VA Form 26-1817 (Request for Determination of Loan Guaranty Eligibility – Unmarried Surviving Spouses) and obtain a copy of the Veteran’s separation paperwork, such as a DD Form 214.
If you’re not receiving Dependency and Indemnity Compensation benefits, you’ll need to fill out VA Form 21P-534EZ (Dependency and Indemnity Compensation, Survivors Pension and/or Accrued Benefits) and submit to your state’s VA Pension Management Center.
Additionally, you’ll need to provide a copy of your marriage license, the Veteran’s death certificate (or DD Form 1300 – Report of Casualty) and the Veteran’s separation paperwork. Separation paperwork can be requested from the U.S. National Archives and Records Administration.
Surviving spouses can reach out to a Veterans United loan specialist with questions or for more details.
Additional VA Loan Eligibility Requirements
Although the VA determines the guidelines for VA loan eligibility, private lenders who finance the home typically have an additional set of guidelines potential borrowers must satisfy, including sufficient reliable income to repay the loan, acceptable levels of debt, and a credit score that meets the lender’s credit requirements.
The property will also need to satisfy the VA’s appraisal process, which looks at the home’s fair market value along with its condition.
Ready to see if you’re eligible for a VA loan? Start your VA loan with Veterans United and speak with one of our VA loan specialist today.
VA Loan Credit and Income Requirements
The VA does not set a minimum credit score requirement for VA loan eligibility, but lenders typically do. Because of this, VA loan credit score requirements vary by lender, with most lenders typically requiring a minimum 660 mortgage credit score.
In addition to credit score, the VA requires borrowers to maintain a certain amount of income left over each month after all major expenses are paid. The excess is meant to cover typical family needs, such as food, transportation and medical care, and is known as residual income.
By enforcing residual income requirements, the VA increases the chances of its borrowers earning sufficient income to meet all financial obligations, and also ensures borrowers have a cushion in the event of an emergency.
How to Apply for a VA Loan
Veterans and service members don’t need to know if they’re eligible for a VA loan to try and start the process. You’ll get a good handle on your ability to land a VA loan during the first step – loan preapproval.
The VA loan process typically takes 30 to 45 days once you’re under contract on a home, although every buyer’s situation is different. Applying for a VA loan doesn’t obligate you in any way to a particular lender or to moving forward with the homebuying process.
Here’s a look at the four basic steps to applying for a VA Home Loan:
- Familiarize yourself with the broad VA loan eligibility requirements above
- Contact us to start your VA Loan application
- Obtain your Certificate of Eligibility through your lender or on your own
- Finalize your loan application and provide all necessary paperwork to your lender, including W-2s, tax returns and additional financial information
Questions about whether you qualify?
Our Home Loan Specialists are available 10am-7pm Monday – Friday to answer any questions you have about the VA loan Program. Give us a call at 305-742-8179
The VA Loan program is the most powerful home loan program on the market for many veterans, service members and military families. These flexible, government-backed loans come with significant benefits that open the doors of homeownership to veterans who might otherwise struggle to obtain financing.
VA loans require no down payment or private mortgage insurance. They feature competitive rates and terms and allow qualified borrowers to purchase a home with little to no money out of pocket.
The increasing popularity has stemmed from the loan program’s signature benefits, which include:
1. No Down Payment
Saving money and building credit can be difficult for service members who are constantly on the move. With the VA Loan, qualified borrowers can finance 100 percent of the home’s value without putting down a dime.
2-Private Mortgage Insurance
With a VA Loan, however, there is no PMI. This is because the federal government backs all VA Loans and assumes the risk on behalf of the borrower that is typically covered by the PMI.
This VA Loan advantage allows you to build more and more equity in your house, effectively saving you thousands of dollars over the life of your mortgage.
3. Competitive Interest Rates
Interest rates on home loans are based on risk assumed by the bank to finance the loan. Because the VA backs each VA Loan with a guaranty, financial institutions carry less risk and can offer interest rates that are typically 0.5 to 1 percent lower than conventional interest rates.
Pair that lower interest rate with the ability to purchase a home with no money down and no private mortgage insurance and the savings start adding up significantly.
- Basic Allowance for Housing
- Basic Allowance for Housing (BAH) is a significant benefit for qualified active military members. Lenders can count your Basic Allowance for Housing as effective income, which means you can use BAH to pay some or all of your monthly mortgage costs. BAH varies based on your pay grade, your geographic location and your number of dependents. Learn more about Basic Allowance for Housing.
- No Pre-Payment Penalty
With many different types of loans, paying off a home loan before it matures results in a pre-payment penalty. This is because lenders miss out on additional opportunities to collect interest payments. The pre-payment penalty is a way for financial institutions to recoup some of that money.
The VA Loan allows borrowers to pay off their home loan at any point without having to worry about a pre-payment penalty. With the absence of a pre-payment penalty, borrowers are free to consider future home purchases and refinancing options.
How are VA loan rates determined?
A variety of factors go into determining VA loan interest rates. Many of these factors stem from market forces beyond the lender’s control – including inflation, job growth, and the secondary mortgage market.
Beyond market conditions, VA loan rates are determined by your:
- Mortgage credit scores
- Previous loan repayment history
- Loan duration (15 or 30-year)
- Loan type (purchase, IRRRL, cash-out, jumbo, etc.)
The VA loan process has five key steps:
- the home search
- getting under contract
- and closing.
For Veteran and military homebuyers, this journey doesn’t look much different than the process for other types of home loans. The big differences come in more when you look at the advantages VA loans offer, from $0 down payment and no mortgage insurance to flexible credit guidelines and the industry’s lowest average interest rates.
Homeownership remains at the heart of the American Dream.
That’s especially true for veterans and the military community, who continue to own homes in greater numbers than their civilian counterparts.
A home can be a great vehicle to build equity, but above all else it’s a significant financial responsibility. It’s important for potential homebuyers to take a serious look at whether they’re ready to handle that responsibility.
The VA loan program does a tremendous job helping ensure veterans can truly afford the homes they purchase. In fact, this no-down payment program has had the lowest foreclosure rate of any mortgage on the market for nearly all of the last six years.
Still, there are no guarantees. Job loss, family changes and scores of other things can affect your financial health. The mortgage still needs to be paid.
Here are a few key financial considerations for prospective homebuyers to keep in mind:
More than a mortgage payment
Your monthly mortgage payment will typically cover your principal and interest on the loan, along with a portion of your annual property tax and homeowners insurance bills. You’ll often see it expressed as PITI (principal, interest, taxes, insurance). The principal and interest portions won’t change on a fixed-rate mortgage. But property taxes and homeowners insurance premiums can adjust annually.
In addition, you’re responsible for regular maintenance and unexpected repairs. To be on the safe side, homeowners often budget about 1 percent of their home’s value each year for maintenance and repair costs. That’s $2,000 on a $200,000 home.
Default does happen
Despite the VA program’s incredible track record, borrowers do occasionally default on their loans. Late payments, loan modifications and foreclosure can crush your credit score and have a serious long-term impact on your financial profile.
For any question about the VA Loans … Contact Us today and one of our VA Loans Expert will call you in less that 48 hours.