Get A VA Mortgage
What You Need to Know to Get a VA Mortgage
If you’re a military veteran, you’ll be glad to know that the Department of Veterans Affairs has a program to help you buy a home. This program, known as VA loans, makes it much easier for a veteran to get a VA mortgage through a private lender. The VA does not make loans directly and instead, guarantees home loans for veterans.
One advantage of a VA loan is that a down payment isn’t always necessary. Other advantages are that mortgage insurance is not required, plus there is no VA requirement of a minimum credit score.
VA loans are available to active duty military personnel and also military veterans, who generally find that they can qualify for a VA loan easier than a conventional mortgage, especially if they have no down payment.
The VA has certain guidelines that need to be met in order that they can partially guarantee a mortgage through a private lender. There are certain requirements for this program, and if you believe that you qualify for a VA loan, you need to be aware of them
- Eligibility rules – Military personnel who are considered active duty qualify after they have served for six months. A spouse of a military person who died as a result of a disability that was service connected, or while serving on active duty, can apply.
National Guard members and others in the Reserves have a six-year waiting period, but they are eligible after 181 days of service if they are called to active duty.
If a war is declared, National Guard members and Reservists can be eligible after 90 days of service.
Anyone interested in obtaining a VA mortgage must have a Certificate of Eligibility from the VA. However, it generally isn’t necessary to have it before you begin the application process. Most lenders will get this certificate for you when you are getting preapproved for a mortgage.
- Cash savings on VA loans – A big plus is that a down payment isn’t necessary on a VA guaranteed loan. Big cash savings for sure. Another cash savings is that a VA loan doesn’t require mortgage insurance like an FHA loan would.
As an example, an FHA insured loan for $200,000, with a down payment of 3.5 %, would cost the borrower $100.00 per month just for the mortgage insurance as would a borrower on a conventional loan with less than 20% down payment.
- Upfront funding fee – On a VA loan, a funding fee is required based on the status of the veteran and the amount of the down payment, if any. Even with this funding fee, overall costs for a VA loan are still lower than some other types of mortgages with a low down payment. The fee can be paid in cash or added to the loan amount.
As an example, an active duty borrower getting a first-time mortgage with no down payment would be charged a funding fee of 2.15 % of the amount of the loan. If that borrower were to make a 10% down payment, the fee would be 1.25 % of the amount of the loan.
Those in the National Guard and Reserves would generally pay a fee that is about one-quarter of a percent higher than an active duty person.
If this is the second time that you’re using the VA program, and are applying for a VA guaranteed mortgage, the funding fee would be 3.3 % of the total amount of the loan.
For any veteran receiving compensation for a service-connected disability, the funding fee is waived.
- Underwriting conditions – There is no minimum credit score requirement for the VA, however, most lenders in today’s market have an internal prerequisite of 620 or higher. Some lenders with a lower minimum would more than likely, charge a higher rate of interest.
The guidelines for a VA mortgage are more flexible than for a conventional loan, however, any borrower must demonstrate that they have enough income to service the loan. Also, they need to show that their total debt load is not too heavy.
The underwriters still perform due diligence but do have some flexibility, since this is a benefits program.
Another guideline is that the VA permits veterans who have gone through a foreclosure or a bankruptcy to use their benefits for a home loan a couple of years later.
The VA reviews the applicant’s entire credit picture and determines the reason for the loan default. They also see what the borrower has done to prevent another problem.
A VA loan can only be used to finance the borrowers primary home and will not guarantee the purchase or refinance of an investment or vacation home.
Even though there isn’t a cap on the maximum amount of a loan, the VA does have a limit on the amount they can guarantee. This directly affects the amount a lender will advance to you. The loan limits do vary by the county since the location determines the value to some degree.
For 2018, the VA maximum amount they can guarantee ranges from $453,100 to $679,650 in the higher cost areas of the country.
- Available help for VA borrowers – A big advantage of a VA loan is the help available to struggling borrowers. The VA is authorized to negotiate with the lender on the borrower’s behalf if he is having problems making the payments on the loan.
The VA says that it is committed to assisting veterans, who are having financial problems, with their nationwide dedicated staff.
Financial counselors at the VA are able to help borrowers negotiate modifications to their mortgage, including plans for repayment, and other alternatives to foreclosure.
Veterans who are having financial difficulties in making their mortgage payments, even if their loan isn’t a VA mortgage, are encouraged to call (877) 827-3702 for help.