June 15th, 2018 5:44 AM by Jackie A. Graves, President
Veterans Affairs mortgages, better known as VA loans, make it
easier for veterans to get financing to buy a home. VA loans do not always
require a down payment and are available to military veterans and active
military members. These home loans are made through private lenders and are
guaranteed by the Department of Veterans Affairs, so they do not require
mortgage insurance. There’s no minimum credit score requirement.
The VA loan
remains one of the few mortgage options
for borrowers who don’t have the money for a down payment. VA loans are
somewhat easier to qualify for than conventional mortgages.
Department of Veterans Affairs is not a direct lender. The loan is made through
a private lender and partially guaranteed by the VA, as long as guidelines are
If you think
you may be eligible for a VA loan, here are some things you must know about the
of the regular military, veterans, reservists and National Guard are eligible
to apply for a VA loan. Spouses of military members who died while on active
duty or as a result of a service-connected disability also can apply.
military personnel generally qualify after about six months of service.
Reservists and members of the National Guard must wait six years to apply, but
if they are called to active duty before that, they gain eligibility after 181
days of service.
reservists are qualifying under active duty,” says Michael Frueh, chief of
staff of the Veterans Benefits Administration of the VA.
members of the National Guard and active-duty members generally are eligible
after 90 days of service during a time of war.
“If you were
on any type of foreign soil, more than likely you are eligible,” says Grant
Moon, a veteran and president of VALC Enterprises Inc., a loan referral
loan borrowers must obtain a Certificate of Eligibility, or COE.
don’t need the Certificate of Eligibility in hand to start the mortgage
process,” says Chris Birk, director of education at Veterans United Home Loans.
“Lenders, in many cases, can get this document for borrowers during the
Advantages of a VA loan
guaranteed by the VA can be obtained without any down payment. “That’s a huge
plus,” Frueh says.
Another plus: A
VA loan doesn’t require mortgage insurance, as do Federal Housing Administration (FHA) loans and
conventional loans with less than 20 percent down. The benefit translates into
significant monthly savings for VA borrowers. For instance, a borrower who
makes a 3.5 percent down payment on a $200,000 FHA-insured mortgage pays $100 a
month for mortgage insurance alone.
“And with a
VA loan, you don’t have to save all the money you would have to save for a
conventional loan,” Moon says.
costs of getting a VA loan are generally lower than they are for other types of low-down-payment mortgages,
they still carry a one-time funding fee that varies, depending on the down
payment and the type of veteran.
A borrower in
the armed forces getting a VA loan for the first time, with no money down,
would pay a fee of 2.15 percent of the loan amount, Frueh says.
The fee is
reduced to 1.25 percent of the loan amount if the borrower makes a down payment
of 10 percent or more. Reservists and National Guard members normally pay about
a quarter of a percentage point more in fees than active-duty members pay.
the VA loan program for the second time, without a down payment, would pay 3.3
percent of the total loan amount.
“And if you
receive disability compensation, the fee is waived,” Frueh says.
The VA does
not require a certain credit score for a VA loan, but lenders generally have
their own internal requirements. Most lenders want an applicant with a credit
score of 620 or higher, Moon says.
players that would go lower, but they would probably charge a higher interest
rate,” he says.
must show sufficient income to repay the loan and shouldn’t have a heavy debt
load, but the guidelines are usually more flexible than they are for
tell underwriters to do their due diligence, but this is a benefits program, so
there is some flexibility,” Frueh says.
allow veterans to use their home-loan benefits a year or two after bankruptcy
“We look at
the whole credit picture, what was the reason for the credit bankruptcy and
where the borrower is now,” says John Bell III, deputy director at the VA.
VA loans are
available only to finance a primary home. A VA loan cannot be used to purchase
or refinance vacation and investment homes.
The VA says
there is no cap on the amount you can borrow. “However, there are limits on the
amount of liability VA can assume, which usually affects the amount of money an
institution will lend you,” the agency says. “The loan limits are the amount a
qualified veteran with full entitlement may be able to borrow without making a
down payment. These loan limits vary by county, since the value of a house
depends in part on its location.”
The limit on
VA loans varies by county, but the maximum guaranty amount for 2018 is $453,100
and up to $679,650 in high-cost areas in the continental United States and even
higher in parts of Hawaii.
Help for struggling VA borrowers
advantage of a VA loan is the assistance offered to struggling borrowers. If
the borrower of a VA loan can’t make payments on the mortgage, the VA can
negotiate with the lender on behalf of the borrower.
dedicated staff nationwide committed to helping veterans who are experiencing
financial difficulty,” Bell says.
financial counselors can help borrowers negotiate repayment plans, loan
modifications and other alternatives to foreclosure, he says.
whether they have VA loans, veterans who are struggling to make their mortgage
payments can call (877) 827-3702 for assistance.
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