What is a VA Home Loan? How do I qualify? Here are the details:
A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders.
The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities.
The VA loan allows veterans 103.3 percent financing without private mortgage insurance or a 20 percent second mortgage and up to $6,000 for energy efficient improvements. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA; this fee may also be financed. In a purchase, veterans may borrow up to 103.3% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment. In a refinance, where a new VA loan is created, veterans may borrow up to 100% of reasonable value, where allowed by state laws. In a refinance where the loan is a VA loan refinancing to VA loan (IRRRL Refinance), the veteran may borrow up to 100.5% of the total loan amount. The additional .5% is the funding fee for an VA Interest Rate Reduction Refinance.
VA loans allow veterans to qualify for loan amounts larger than traditional Fannie Mae / conforming loans. VA will insure a mortgage where the monthly payment of the loan is up to 41% of the gross monthly income vs. 28% for a conforming loan assuming the veteran has no monthly bills.
The maximum VA loan guarantee varies by county. As of 1 January 2012, the maximum VA loan amount with no down payment is usually $417,000, although this amount may rise to as much as $1,094,625 in certain specified “high-cost counties”.
Who Is Eligible for VA Loans?
VA loans are designed for military personnel, veterans, and military families. The list of those who are eligible for this home-buying military benefit include:
National Guard members
Some surviving spouses
You must also have suitable credit, sufficient income, and a valid Certificate of Eligibility (COE). And you must use the home for your own personal occupancy.
What Are the Benefits?
The VA loan program is offers some of the most attractive and flexible loans available, and they are exclusively for military personnel, veterans and their families. Perhaps the two biggest benefits that make these loan more affordable than a typical loan are that the borrower typically does not need to make a down payment, and there is no private mortgage insurance (PMI) requirement.
Here’s a look at the complete list of benefits, as taken directly from the Veterans Affairs site:
No down payment required (unless required by the lender or the purchase price is more than the reasonable value of the property).
Negotiable and competitive interest rate.
Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5 percent and exemption for veterans receiving VA compensation).
VA rules limit the amount you can be charged for closing costs.
Closing costs are comparable with other financing types (and may be lower).
Closing costs may be paid by the seller.
No private mortgage insurance premiums are required.
An assumable mortgage.
Right to prepay your mortgage without penalty.
For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
VA assistance to veteran borrowers in default due to temporary financial difficulty.
Please contact our VA home lenders today to get started.