VA Home Loan
VA Home Loan – U.S. Department of Veterans Affairs
Purchasing a home can be a complicated process, especially for first-time buyers who are just learning the ropes. But one thing that doesn’t have to be overly complicated is a VA mortgage loan. Designed for veterans, these mortgages can be a great deal, especially for buyers who are struggling to save for a down payment. VA mortgage loans have certain eligibility criteria that must be met, along with program specific forms to complete prior to applying for a VA mortgage.
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A VA Home Loan Makes it Easier
The U.S. Department of Veterans Affairs (VA) makes it easier for veterans and current members of the military to afford a home. Requiring no down payment and no private mortgage insurance, these loans can significantly cut both your up-front costs and monthly payment costs.
VA Mortgage Loan
Most traditional mortgages want you to put down 20 percent or more for a down payment. If you cannot afford the down payment, you’ll have to pay private mortgage Insurance (PMI) on top of your monthly mortgage payment, which is an extra fee to ensure your lender gets paid even if you cannot make your payments. But in the case of a VA mortgage loan, your loan is guaranteed by the U.S. government, which means lenders don’t require these standard fees. Additionally, a VA mortgage gives you the benefit of avoiding prepayment penalties.
Who is Eligible for a VA Mortgage Loan
Many current and former members of the military, including reservists and National Guard members, are eligible to apply for a VA mortgage loan. In certain conditions, surviving spouses may also be eligible. You will need to meet specific service requirements ranging from 90 days to six years, depending on the type of service. We will help you check with the VA to see if you meet the requirements. If you’re eligible, you will need to have a Certificate of Eligibility (COE), which confirms your military service, to apply for a VA mortgage loan from a lender. We will also help you attain this certification from the online VA system. We prefer not to use regular mail, due to the time it takes to receive the COE.
How To Get a VA Home Loan
Other than the need to prove your military service with a COE, the process of applying for a VA mortgage loan is much like the process for applying for a traditional mortgage. Your financial institution will review your credit history to see if you have the ability to make monthly payments. However, even if you qualify for a VA mortgage loan, a lender can still decide to turn you down due to poor credit. We will work with you to make sure your credit score is high enough to obtain a loan before you apply.
Fees Associated with the VA Home Loan Program
Required by law, the VA Home Loan program does charge an up-front VA funding fee. The fee ranges from 1.25 percent to 3.3 percent, depending upon the following conditions:
- Type of service (reservists and National Guard pay slightly higher rates).
- How much of a down payment you are able to make (down payments over 10 percent get the lowest rates).
- Whether or not this is the first time you’ve used your VA mortgage loan entitlement (subsequent uses pay higher rates).
The VA funding fee can be pretty steep, but it’s much less than you would need for a down payment, and it keeps your monthly payment low, because you won’t pay for PMI. Disabled veterans and their surviving spouses are typically exempt from funding fees, making it even easier for them to get into a home. Check with us for full rate details.
Additional Fees with VA Home Loans
Beyond the VA funding fee, you’ll still have the closing costs associated with a traditional mortgage. These fees could potentially include: appraisal, title insurance, credit report, taxes and discount points. Like with any mortgage loan, you’ll pay an interest rate set by the lender, as well as home insurance and taxes. Some of these fees may be rolled into your monthly payment and put into an escrow account. Without the need for a down payment, you’ll pay less up-front, but getting a VA mortgage loan isn’t completely free, even if you qualify to have the funding fee waived.
Eligible Properties for VA Financing
There are some restrictions to what you can buy with a VA mortgage loan, but for most homebuyers, this should not be a problem. You can use your loan to buy a home or multi-unit property, build a home, refinance your existing home loan or buy a manufactured home. Regardless of the type of home you’re buying, VA mortgage loans are to only be used for your primary residence. You cannot use a VA mortgage loan to buy a vacation home, second home or investment property.
VA Mortgages are a Good Deal
For many borrowers, a VA Home Loan is a good deal. The combination of no down payment and no PMI makes a VA mortgage an appealing method of purchasing a home, due to the lack of big up-front costs. However, it’s not necessarily a good deal for everyone. If you have the savings to make a 20 percent down payment on a house, you wouldn’t need to pay PMI anyway, and if that’s the case, the VA funding fee is an extra expense. In this scenario, a traditional mortgage is most likely to be a better buy. Before you rush into making a final decision, we will run the numbers for you. Take the time to compare rates and the costs associated with more traditional mortgages versus a VA mortgage with our team. Then decide which type of mortgage is best for you.