VA Frequently Asked Questions
Below you will find the answers to some of the most frequently asked quesions pertaining to a VA mortgage loan.
No Down Payment VA Mortgage Program
With regulatory reform sweeping the mortgage industry over the past few years, there are very few options that allow 100% financing for a home purchase. A VA mortgage is one of the few remaining no down payment mortgage programs and is only available to eligible veterans.
Your VA Benefit Allows $0 down on home purchases
Most conventional lenders require at least 5% down, if not 10% or 20% down which would very difficult for many Veterans and Military families. FHA requires a 3.5% down payment but also required monthly mortgage insurance which increases the cost. Because a VA Mortgage is guaranteed to the lender by the federal government through the Department of Veterans affairs, VA mortgages do not require a down payment.
VA Loans Do Not Have Mortgage Insurance
Even with 100% financing, a VA Mortgage does not have any mortgage insurance (PMI) as part of the monthly payment. Conventional programs with less than 20% down and FHA both have expensive mortgage insurance that can cost several hundred dollars per month.
VA Loans do have a VA Funding Fee
Although the VA does not have monthly mortgage insurance or PMI most VA loans will have a onetime VA funding fee that ranges from 0% to 3.30% of the loan amount and is almost always rolled into the VA loan. A veterans with a VA disability rating of 10% or greater is completely exempt from the funding fee, so many veterans pay no funding fee at all.
Competitive VA Rates
Because VA Mortgages are guaranteed by the Federal Government, the risk level associated with default is much lower, and thus the interest rates are usually lower than a conventional program with less than 20% down payment.
Flexible Qualification Requirements
VA Mortgage guidelines are more flexible than many other programs. Each lender has their own standards, but because the VA mortgage is guaranteed by the Federal Government, most lenders have lower minimum credit score and credit history requirements, making them easier to qualify for.
Your VAbenefit simplyprovides loan programs that do not exist for conventional consumers. For instance, VA loans allow borrowers to purchase a home without a down payment, one of the few remaining mortgage loans with this characteristic.
The VA also limits the amount of closing costs which veteran borrowers pay during home purchase, and provides no appraisal options for VA interest rate reduction refinance loan or “IRRRL” further reducing the cost of these loans. Another benefit your VA loan will provide is no mandatory monthly VA mortgage insurance fee. The VA mortgage program is exceptionally cheap and provides qualified veterans with incredible benefits.
How do I qualify for a VA loan?
In order to qualify for a VA loan, borrowers must submit a request for and obtain a Certificate of Eligibility. Since we are a VA approved lender we can eliminate this process by ordering the Certificate of Eligibility directly for you. All we need is a copy of your DD-214, the Certificate of Release or Discharge from Active Duty, which illustrates the character of service. When applying for your VA mortgage benefit, borrowers will also need to present documentation regarding income, assets, employment information and credit history.
Are reservists eligible?
Yes, but eligibility for Reservists and National Guard members differs from the standard requirements that dictate VA eligibility. In general, a service member is eligible for a VA home loan if he or she meets any one of these requirements:
• Served 181 days during peacetime (Active Duty)
• Served 90 days during war time (Active Duty)
• Served 6 years in the Reserves or National Guard
• You are the spouse of a service member who died while in service or from a service-connected disability.
What military service is not eligible for VA loan?
Veterans seeking VA financing cannot qualify based solely upon military service performed in World War I, Active Duty Training in the Reserves, or Active Duty Training in the National Guard. Note, however, that National Guard and Reservists are eligible to receive VA benefits if they activated under the jurisdiction of the title 10 U.S. Code during the Iraq/Afghanistan conflict.
What does it mean that VA Loans are guaranteed?
This just means that once the borrower has qualified for the loan the federal Government will guarantee the loan against default to the lender. Remember this doesn’t mean that the borrower is guaranteed a loan; credit and income are still big factors getting approved.
What is the maximum VA Loan amount?
This will vary from state to state; the maximum amount a veteran can borrow for a VA loan will depend on the loan limit in the county in which the prospective property is located. The majority of counties have a loan limit of $417,000. Some counties have higher VA Loan limits, but borrowers need to keep in mind that they still have to qualify for the requested loan amount. Borrowers may not be approved for the entire loan amount even if they are eligible for the loan. If a borrower wants a home that is more expensive than the maximum VA Loan amount, he or she will have to come up with the extra money as a down payment.
Will I need a down payment for my VA Loan?
In most cases the answer is NO, this is one of greatest features of a VA Home Loan. However, if the house purchase price is greater than the county loan limit, a VA loan down payment will be required to cover the difference.
How important are credit scores when looking for a VA Loan?
Although the VA doesn’t approve or deny based on credit scores the underwriting bank does and so maintaining a good credit score is important to getting a final approval. In some cases such as a VA IRRRL credit scores may be ignored.
Do VA Loans require mortgage insurance?
No, there is no third-party mortgage insurance with VA Loans. This is because the lender is guaranteed by the VA.
What are the VA loan repayment options?
VA loans types vary and offer flexibility in terms of repayment plans, allowing borrowers to choose between traditional fixed-payment, graduated payment, or even growing equity mortgages, depending on which plan best suits the borrower’s financial circumstances. Furthermore, VA mortgages do not include any prepayment penalties, allowing borrowers to pay off the mortgage sooner and consequently save money on interest payments.
What VA refinance options are available?
The VA offers several refinance options for VA mortgage homeowners, the most popular being the Interest Rate Reduction Refinancing Loan (IRRRL) and the VA Cash-Out Refinance Loan. The IRRRL, also known as a VA Streamline Refinance, refinances an existing VA Loan into a new VA Loan with a lower interest rate or from an ARM (adjustable rate mortgage) into a fixed rate mortgage. In addition, as a streamline refinance, borrowers do not need to undergo credit or income verification to qualify. As for the latter option, the VA Cash-Out Refinancing Loan allows Veterans to take cash out of their home’s equity. In order to use the VA Cash-Out Refinancing Loan, borrowers must be refinancing an existing VA Loan.
Can I build a home with VA loan?
VA loans allow borrowers to both construct a home and purchase land in order to do so, although the plans for construction must be specifically outlined to be performed within a particular time frame. Many veterans utilize VA home loans in order to negotiate the construction of a home using a private home construction loan, subsequently refinancing using VA home loan benefits.
Can I purchase a second home using a VA Loan?
VA guidelines specify that borrowers must occupy the property as their primary residence. However, provisions allow a veteran’s spouse to occupy the residence, though no other family members can satisfy this requirement. For more information regarding second home purchase with VA loans, visit our Lender411 VA Loan Second Home Purchase page.
Can VA loans be used to purchase property outside the U.S.?
VA loans can only be applied to properties within the United States, its territories, and its possessions, the latter including Puerto Rico, Guam, the Virgin Islands, American Samoa, and the Northern Mariana Islands.
What if I’ve already obtained a VA loan previously?
VA borrowers can restore their VA entitlement depending on the circumstances. For those who have paid off the original VA mortgage but still own the home, borrowers can perform a one-time restoring of entitlement in order to purchase a new property. If the borrower repaid the VA mortgage but does not own the property, he or she can restore entitlement as many times as desired, reusing VA eligibility for each home purchase.
In general, veterans who have already obtained VA loans but have not restored entitlement may still have remaining entitlement to utilize for a new VA mortgage. However, utilizing entitlement and restoring entitlement does not occur automatically; borrowers can do so by completing another VA Form 26-1880 to request a new Certificate of Eligibility, which will list the remaining or restored entitlement depending on the circumstances.
Does VA entitlement expire?
VA entitlement does not expire until the borrower resumes active duty. Once released or discharged from active duty, borrowers must request a re-determination of their eligibility and entitlement based on the service provided during the most recent session of active duty and the type of discharge received.
How can I restore my entitlement?
Borrowers who purchased a home using a VA mortgage and have paid off the loan in full but still own the property may perform a one-time restoration of entitlement to purchase another property
However, under the following circumstances, borrowers who have already secured a VA home loan can restore entitlement as many times as necessary:
The property was purchased with a VA mortgage loan and has been sold, the
loan being paid in full as a result.
A VA-eligible borrower has assumed the previous mortgage and agreed to exchange his or her entitlement for the seller’s entitlement