As a veteran, when you are ready to purchase your home, consider veteran loans for funding. While there are limits to eligibility, the VA home loan offers a zero down payment and even potentially the best rates.
Are you moving on from your military life to a new lifestyle? Or are you currently on active duty and you’re now ready to own your own home? This could be your chance!
For the military community, the VA loan is a convenient choice to make homeownership easier for you.
What is a Veteran Loan?
The VA loan is part of the 1944 Servicemen’s Readjustment Act or the G.I. Bill. The Department of Veterans Affairs supports the military community by making this loan available. It helps veterans, active-duty service and reserve members, and surviving spouses.
Veteran loans from the G.I. bill started as a support for transitioning World War II soldiers. After some time, the loan was extended to National Guard and Army Reserve members.
VA loans have continued to be popular, funding as much as 8% of total home purchases. This home loan with zero down payments is available with private lender funding.
The Department of Veterans Affairs guarantees VA loans. This provides lenders the security and comfort for funding VA loans. And it makes helpful funding available to borrowers.
Veteran Loan Availability
Veteran loans assist people with veteran eligibility to purchase a home at favorable terms.
The VA loan is guaranteed and funds the homes of eligible military personnel. When you qualify for VA loan eligibility, your CoE (Certificate of Eligibility) is the first step to receiving funding with a VA loan. You will also need to qualify with your credit, income, and expenses, in addition to the CoE.
IRRRL or Interest Rate Reduction Refinance Loan
The Interest Rate Reduction Refinance Loan (IRRRL) provides an opportunity for you to refinance a VA loan at a lower cost. Its purpose is to refinance and streamline payments and interest rates of existing VA loans.
Adapted Housing Grants
For military personnel with disabilities from their service, this could be for you. It assists veterans with certain service connected disabilities to purchase or adapt a home to live more independently.
Adapted Housing Grants can be an SAH or SHA grant. SAH is a Specially Adapted Housing grant and SHA is a Special Housing Adaptation grant. Complete VA Form 26-4555 and submit it online or in the Regional Loan Center to apply for the grant.
The Veteran Loan Process
Veterans Affairs offers assistance so military members can fund their homes with VA loans. The government does not provide the loan but instead provides insurance to the lender. This guarantee protects the lender for a portion of the unpaid loan if foreclosure is needed.
Eligibility & Qualification
With this promise, lenders are more willing to fund the loan. Eligibility for a VA loan is also easy to verify by applying for the Certificate of Eligibility. After verification, you will learn the amount guaranteed for your loan. Lenders can offer you more than the amount of your loan entitlement.
A VA home loan allows for a zero down payment.
First determine if you are eligible. Both VA loan eligibility and requirements depend on the loan type and offer. Some of the basic qualifications are:
- Military Members
- National Guard Members
- Air Force/Coast Guard Academy/U.S. Military Cadets
- Active-duty Military Personnel
- U.S. Naval Academy Midshipmen
- Military Reserves
- Veterans’ Surviving Spouses
Minimum Term of Active Service: Veterans, Active-duty, Honorably Discharged Military Personnel
- 90 Consecutive Days of Active Duty (Wartime)
- 181 Consecutive Days of Active Duty (Peacetime)
- More than Six Years of Service – Reserve/National Guard Members who served since the Gulf war
First, verify eligibility for a VA loan. Then, qualify financially for the loan. Basic qualifications include:
- Minimum Credit Score – No credit score is required but most lenders will look for at least a 620 FICO Score
- Debt-to-Income Ratio (DTI) – Maximum 40% (Monthly loan payments divided by Gross Income)
- Residual Income – VA guidelines require that you have sufficient income in addition to your major monthly expenses, including the mortgage payment
Securing VA Loan Certificate of Eligibility
The VA loan Certificate of Eligibility (CoE) is proof that you are eligible to apply for a VA loan. But it does not guarantee the loan approval.
Getting your CoE is a simple task in the VA loan process. Lenders can get the CoE for you. You can also use the VA benefits portal and get the certification yourself.
To apply for a VA loan Certificate of Eligibility, you need your DD form 214.
Choosing a Lender & Getting Pre-approval
As you are thinking about the best rates for a VA loan, your pre-approval process begins with a mortgage loan application. You can use Winner’s Mortgage Client Questionnaire here on our “Get Started” page.
While it is good to know that VA loans tend to offer some of the best rates in the market, please understand that you should not focus on interest rates as your primary factor in choosing a mortgage loan.
No mortgage company can ever quote an interest rate for you until you have properly applied for a mortgage. There are too many variables involved in a mortgage that cannot be defined until you actually apply for your financing. “Get Started” here.
Once your exact situation is determined through the Client Questionnaire loan application, then Winner’s Mortgage, as your leading mortgage broker, will find a lender who best fits your unique needs.
Mortgage financing is a highly individualized process and you should never rely on or trust anyone who tries to quote interest rates without fully knowing your exact circumstances.
As a highly credible mortgage broker, Winner’s Mortgage will do everything possible to get you approved for your mortgage with a lender who is a good fit for your needs.
You will also receive the best possible rate, but make sure you know what is much more important than rate. Discover that with our training “How to Pay Less for Your Mortgage With Three Simple Secrets”.
Application and Processing Proper
Once you submit your “Get Started” Client Questionnaire loan application and the necessary documents the lender will need, Winner’s Mortgage will order an appraisal to determine the property’s value. Along with the appraisal, your assets, credit and income will be reviewed.
Winner’s Mortgage then provides this information to the lender chosen as the best for your needs.
The lender’s underwriting department reviews your loan application, and for a VA home loan the fits the proper loan limits, this will include your qualifications for the VA loan.
Once the lender approves your VA loan, the process moves to closing. Winner’s Mortgage works with the title company to schedule your loan closing.
The Winner’s Mortgage Process
Review the Winner’s Mortgage 6-Phase loan process here, and discover why the Winner’s Mortgage Program is unique in the mortgage business and why it gives you the edge to WIN with your mortgage.
Property Types Eligible
VA home loans can give you flexibility in their funding but they also have their limits on what is available. Some property types qualify, and others do not qualify. Here are the properties worth considering for your VA home loan.
VA loans are only available for your primary residence. The federal government sets VA loan limits for your primary home based on the entitlement available.
Veteran loans can provide funding for a condo unit if it is part of the list of approved projects. Many condo complexes are approved across the United States. Check if the condo you want is VA-approved through this government website.
The first step when planning to buy a condo unit using a VA loan is to check on the approval of the complex. The complex’s management can usually tell you the status of the complex.
Purchasing a home using veteran loans offers options with property types. You can purchase a multi-unit home from a duplex to a four-plex with a VA home loan. You do need to live in one of the units to finance it with a VA loan.
Lenders view multi-unit homes as higher risk than other properties, so the pricing will be less favorable.
A multi-unit home can still be a great choice for you. You can use the rent for the additional unit or units to pay for your own home. This makes it more affordable since your renters help you.
Most homeowners will find that this rental income is necessary to prove your qualification for the loan. By renting the units, you get your home.
Perhaps this will be your first experience as a landlord. As a landlord, you generate the income you need. At the same time you gain experience that you could use for a lifetime as a landlord if you choose, generating another potential stream of income for life.
Benefits/Advantages of A VA Loan
Although VA loans have some limits, they are a great option to consider for your home purchase when you qualify as a veteran.
Here is the summary of the benefits:
Offers zero down payment for a home loan
These veteran loans do not need a down payment. The VA zero down payment home loan can be an advantages of choosing this loan since it can help you become a homeowner sooner.
With 100% financing, you don’t need a down payment. While this is an advantage, it comes with risk, so let your Real Mortgage Consultant help you set it up so you can WIN with your mortgage, not lose like most people lose.
VA loans can be refinanced to lower rates with a streamlined process. This is another benefit of choosing VA loans. With the zero down payment home loan, purchasing your home is easier and more convenient.
No prepayment penalty
Besides its zero down payment, the VA home loan offers a zero down payment, providing more flexibility for borrowers.
Veteran loans have fewer fees than other mortgage loans, supporting the dreams of military personnel to own their home.
Offers more security since it is government-guaranteed
A VA loan is government-guaranteed but the government does not fund the loan. Instead, private lenders provide the funding. The federal government offers security to lenders as a guarantor of a percentage of the loan. If the borrowers do not pay, the government guarantee takes responsibility for paying part of the loan.
The government guarantees the VA home loan but there are limits to it. Remember, despite the guaranteed amount, only borrow what you know you can repay. The guarantee does not protect you, it protects the lender.
In cases where you are unable to make payments, programs are offered to help you keep your home. The Department of Veterans Affairs has loan technicians that can talk to the lenders, working with the lender on your behalf.
An upfront funding fee, but no mortgage insurance
Although the VA loan does not require mortgage insurance in addition to some of the best rates, borrowers do pay an upfront funding fee for most situations. Find the current funding fees and exclusions from the funding fee here.
The VA funding fee is less than if mortgage insurance were required. Therefore, military personnel find this program to be affordable and convenient.
Lower VA loan closing costs
VA loans offer lower closing costs. This is possible because the VA home loan has some restrictions on allowable closing costs.
Best VA loan rates widely available
The VA loan usually has the best rates in the market. Winner’s Mortgage will help you get the job done and choose the best VA loan for you when you “Get Started” here.
VA loan eligibility is easier to qualify for
Being eligible and qualified for the VA loan is easy with your credible Real Mortgage Consultant and Winner’s Mortgage. For the VA loan eligibility, your time of service is credited for you. You will also need to document your income, assets and credit.
While credit history is part of the documentation, the credit score is not a requirement of the VA. Certain lenders may enforce minimum credit scores. Many lenders approve borrowers with at least a 620 credit score.
When applying for a VA loan, you don’t need to be a first-time homebuyer with a clean record. Even after filing for bankruptcy, you can qualify for a VA loan after one or two years of filing.
What to Consider When Applying for VA Loans
In addition to the amount you are borrowing from lenders, here are other monetary-related factors.
While the VA loan is a zero-down home loan, fees still apply. The VA funding fee covers the government guarantee. The funding fee is a one-time fee paid at closing.
What is the amount of the fee for veteran loans? There are several deciding factors that will determine the fee’s amount, including:
- Military Branch/Service Category – National Guard and Reserves normally have higher fees compared to other service members
- First-time VA Loan – The funding fee changes depending on how many times you have used your VA entitlement
- Down Payment – While down payments are not mandatory, they can affect VA loan fees
The VA loan fee, also known as the funding fee, can be included in the loan amount, meaning you can pay the fee through your monthly payments. It is waived though for the following borrowers:
- Unmarried Surviving Veteran’s Spouses (Died in Service/Disability Connected to the Service
- Veterans with Disability Compensation
The VA loan is popular for being a zero down home loan. It does not require a down payment from borrowers, which makes it very affordable.
You can choose to make a down payment. This helps by reducing the funding fee.
A down payment may be required due to the VA home loan limits of the county, see the next section.
VA Loan Limits
VA home loan limits are the maximum loan amounts available for VA funding. Lenders can set the maximum loan amount based on the conforming loan limit by county. See the limits here.
When you finance a property priced higher than the VA home loan limits, you can still qualify for a VA loan. You can make a large enough down payment to bring the loan amount within the conforming loan limit for the location.
Otherwise, your financing will require a jumbo loan. Compared with standard VA loans, jumbo loans require a down payment.
VA Loan Rates
A VA loan has the best rates because it is a low-risk mortgage loan guaranteed by the government. This offers security to lenders and banks, enabling them to offer funding at lower rates.
Veteran loans offer rates that are often 0.25% lower than standard rates. The VA home loan is more lenient offering zero down payments and no VA requirement for minimum credit scores. Normally, these circumstances would equate to a higher rate but that is not the case with the VA. Veterans Affairs works to help eligible service personnel easily buy their homes.
Terms You Need to Know Related to Veteran Loans
The VA loan is easy to understand once you know the terms used in VA loan transactions.
The VA entitlement is a key feature of veteran loans. This is the amount that Veterans Affairs will guarantee with your VA loan eligibility. The basic entitlement refers to 25% of the total mortgage.
Before the year 2020, VA lenders usually funded up to four times the basic entitlement amount. This meant you could borrow $144,000 with the basic entitlement at $36,000. This is also known as the VA home loan limits.
Beginning in 2020, eligible service persons have a full entitlement without loan limits. Even if the loan amount is more than $144,000, the VA guarantees 25% of the loan amount to the lender.
VA Loan Assumption
VA loan assumption allows the option to take over another person’s mortgage loan and monthly payment. You can assume a VA loan if:
- You have VA loan eligibility and want to substitute it with the seller’s eligibility; or
- You pass VA standards qualification for the payment and would assume responsibility for the loan
What a VA loan assumptions means:
As a qualified veteran, when you purchase a home with an existing VA loan, you can have the option to assume that existing loan if the lender agrees. This includes the existing loan balance, the interest rate and the monthly payment.
Both the lender and the Veterans Affairs must approve the loan assumption. The VA pamphlet 26-7 provides guidelines to borrowers on what to do and when to contact the VA or the lender.
The requirements for the VA loan assumption are as follows:
- Updated/Current Existing Loan (Past due amounts must be paid on or before closing)
- Funding Fee (0.5% of the principal loan balance)
- Paid-in-advance Processing Fee (Including credit report cost estimate)
Qualified buyers need to pass the VA income and credit standards. The buyer takes on the responsibility for the repayment obligation to Veterans Affairs if the loan goes into default.
An assumption requires more tasks to complete for a complete transfer of the loan obligation.
The seller’s legal liability for the VA loan is not automatically released on the assumption. Therefore the seller could still be liable if the new borrower fails to make the payments. This means the seller needs to seek a release of liability from the lender.
The seller’s VA entitlement stays with the property, unless the seller requests a release and a formal substitution with the entitlement of the new owner.
So, be aware that these transfers are not automatic and must be requested when a VA loan is assumed by a buyer.
Veteran Mortgage Relief
Veteran mortgage relief is assistance from the Veterans Affairs for veterans encountering financial problems. Even with the best rates VA loan offers, home retention assistance can sometimes be necessary.
For example, in 2015 over 90,000 veteran homeowners were saved from foreclosure. The VA has assisted more than half-million a borrowers and lenders to agree on a repayment plan. The goal is to avoid foreclosures.
Veteran Mortgage Relief is beneficial not just to service members and veterans. It was able to generate an estimate of 10 billion dollars’ worth of tax in 2015.
Refinancing Veteran Loans
Potentially easy refinance options gives a big advantage to VA loans.
You can streamline your VA loan with an Interest Rate Reduction Refinance Loan (IRRRL). This pays off your previous loan and initiates a new loan with new terms.
The primary purpose of an IRRRL reduces your interest rate at a reduced cost.
The IRRRL works to refinance and streamline VA loans by lowering the interest rate. It requires 0.50% of the total loan as an upfront funding fee.
A cash-out refinance is a form of VA loan refinancing. A VA loan can be used for cash out to fund urgent needs. Always be very careful with cash out refinance loans. If you use them for the wrong reasons, or you don’t get great advice when doing a cash out refinance, you could end up in a worse position than before.
Whether it is a cash out VA refinance or a VA streamline refinance for a lower rate, this is where it is imperative for you to work with a Real Mortgage Consultant, not just a typical run-of-the-mill loan officer.
Veteran Loans for Spouses & Divorcees
Veteran loans are also offered for divorcees and spouses of deceased military personnel. The VA loan eligibility requirements to qualify include:
- The surviving spouse should have remained unmarried (For spouses below 56 years old on or after December 16, 2003)
- Deceased service personnel from non-service-connected causes should have:
- Been a disabled veteran for 10 years minimum
- Died while in line of duty
- Died due to service-related disability
- Been missing in action for at least 90 Days
- Been a prisoner of war for at least 90 Days
A VA loan offers both generally the best rates and flexible refinancing. A VA streamline refinance also can offer excellent rates to spouses.
Guidelines for VA loan refinance eligibility for a surviving spouse are as follows:
- Married to the service person when he/she died
- Included on the original VA loan
Lenders offer different rates even with a VA streamline refinance. If the spouse is on the original VA loan and meets the eligibility requirements, he or she can be eligible for the loan. A surviving spouse can be exempt from the VA funding fee.
FAQs about Veteran Loans
A VA loan offers benefits including some of the market’s best rates to refinancing flexibility. Here are FAQs for VA loans:
Can I buy a rental property using Veteran loans?
Veteran loans cannot be used to buy a rental property.
Do I have to move from my property if I am stationed in another city?
If you are stationed in another city, you can rent out your property. You cannot use a VA loan to purchase a rental property, but you can rent out your home funded by the loan. When you take out the loan, you must intend to live and remain in the property.
Do disabled service personnel have special privileges?
Besides the zero down payments for the home loan, VA also waives the funding fee. Accessibility modifications are also funded by the VA.
Can I be eligible for a Veteran home loan even if I’ve used it in the past?
In a situation where you have purchased your owner-occupied home with a VA loan, then subsequently made it a rental or second home, your VA entitlement can be restored and even used as an installment for another VA loan. It is only a one-time offer if you’ve fully paid the loan and still own that property.
When you have fully repaid the loan but you do not own the property now, you can use your VA entitlement again. You can reuse your eligibility repeatedly when you are qualified.
Does the VA home loan entitlement expire?
Veteran loan entitlement does not expire. If eligible, you can enjoy the zero down payments that the VA home loan offers. When you use it, you can restore it or assume another veteran’s VA loan.
This makes VA loans more flexible. More than offering advantageous rates, its flexibility extends to the possibility of a VA streamline refinance.
Does a VA home loan limit qualifications base on home quality?
Veteran Affairs desires a good home for service personnel. Therefore, the VA sets limits to the minimum quality of the property the VA home loan will fund.
Can VA loans be used to buy a home in a foreign country?
You cannot use veteran loans to purchase property in other countries. A VA loan funds only properties in the United States and its territories. This includes Guam, Puerto Rico, and the Virgin Islands.
What are the refinance options for a VA loan?
A VA streamline refinance or Interest Rate Reduction Refinance Loan are available.
Is it worth it to get VA Loan?
A VA loan offers service personnel the chance to own their own home and provides unique benefits to the borrower. A VA home loan allows zero down payments plus the potential for the best rates. This includes more leniency with qualifications and financing eligibility.
For example, VA does not charge a monthly mortgage insurance premium. Closing costs and loan limits are more limited and favorable.
Veterans can use the VA loan to buy a home, refinance their existing loan, or possibly refinance for cash out if really necessary.
Additionally, besides offering offering financing assistance, the VA adds financial counseling when necessary. This service serves the purpose of helping veterans with financial difficulties save their homes.