March 6th, 2018 8:12 AM by Jackie A. Graves
U.S. Department of Veteran’s Affairs (VA) doesn’t make VA loans, but rather
backs the VA loans that lenders make. The VA sets the loan guidelines by which
VA loans can be approved, and lenders make the loans. So you can’t get a loan
from the VA, but you can get a VA-backed loan from a VA approved lender. It’s easy to find lenders who
make VA loans.
loans allow those who have served in the U.S. military or are presently serving
to buy a home with up to 100-percent financing.
you must occupy a home you buy with a VA loan as your primary residence. VA
loans aren’t available to purchase second homes or investment properties.
you can pay off a VA loan early without incurring any extra fees because there
is no prepayment penalty on a VA loan. You can pay it off in full, or you can
pay it down more aggressively than the normal monthly payments require along
the way. If you pay the loan down extra along the way, it doesn’t lower your
you experience a major life transition like a job loss or divorce that will
make it impossible to pay your VA mortgage payments, talk to your lender
immediately to explain your hardship situation.
your hardship situation will result in a permanent change that will render you
unable to make your mortgage payments, it’s best to explore selling your home
to avoid foreclosure. If the hardship is only for a short period of time, the
VA may be able to offer an alternative repayment plan.
addition to talking to your lender, you can get counseling from the VA by
calling 877-827-3702 and requesting a call from a Loan Service Representative
or by contacting the
VA regional loan center closest to you.
you can get a VA loan for a condo, but the VA must approve the condo project.
The agency maintains a database
of pre-approved condos, and if the condo you want isn’t on this
list, you’ll need to work with your lender to get the condo you want to buy
approved. This process can add considerable time to a home purchase
transaction, so make sure you do this research before writing an offer, and
make sure your real estate agent is aware you’re getting a VA loan.
eligible for VA loans include:
be eligible for VA loans, your service requirements are as follows:
get a VA loan, you need a Certificate
of Eligibility (COE).
type of COE you need depends on your type of service: veteran, active duty
service member, current or former National Guard, etc. To obtain your COE
online through the VA benefits portal or by requesting via mail.
your lender can obtain your COE for you. The VA requires all VA-approved
lenders to include a COE in their loan underwriting process, so the fastest way
to get your COE is through a VA lender. They can usually obtain it for you
within minutes through a lender-only portal provided to lenders by the VA.
national VA limit is $417,000, but there are certain exceptions to this for
high-cost areas, where you can get VA loans as high as $1 million depending on
your financial profile. When you apply for a VA loan, your lender can brief you
on the options you qualify for in your specific area. You can review
the entire list of VA loan limits by county here. And you can estimate
the cost of your VA loan here.
You can find lenders
on Zillow who make VA loans. You can read reviews and compare
rates, then make contact with a lender. They will tell you how to apply —
usually by completing an online application, providing an application over the
phone, or meeting face to face.
the initial application, the lender will ask you to provide detailed
documentation of your residence, employment, income, credit, debt, and asset
history. You must give your lender everything they ask for in a timely fashion
for them to be able to accurately advise you on your options and approve you.
— also called co-borrowers because they’re equally liable for the loan — are
allowed but only if the co-borrower is a spouse or another veteran.
credit scores affect your VA loan rate and your ability to qualify. Each lender
will vary in terms of the credit score they require, but generally a score of
620 or better is required for you to qualify for a VA loan.
is a direct correlation between rate and credit score: the higher the credit
score, the lower the rate. Your lender can quote you based on your credit
score, and you can even get a feel for what your rate will be based on your
credit score without talking to a lender with a quick
VA allows certain borrowers who meet post-bankruptcy guidelines to get a loan
two years after a bankruptcy. But the VA doesn’t actually make the VA loans,
the VA-approved lenders do, and these lenders can choose to be more stringent.
Conversely, there are certain circumstances where borrowers might not have to
wait a full two years. Consult your lender for details based on your specific
a VA loan isn’t a one-time benefit, so you can get a VA loan even if you’ve had
one for a previous home in the past. But you can only use a VA loan to buy a
primary residence, so you can’t use VA loans to acquire multiple properties.
VA says your total monthly housing cost plus all other monthly payments (car
loans, student loans, etc.) cannot exceed 41 percent of your income. There are
select exceptions to this rule, which you can discuss with your lender.
you’re salaried, your current income will be used. If you’re self-employed, an
average of two years’ income will be used. In all cases, your income is
evaluated by viewing two years of tax returns and W-2s, as well as current
paystubs to determine how it will be calculated.
you’re on active duty, you’ll need a Leave and Earnings Statement (LES) with an
Expiration of Term of Service (ETS) date less than 12 months after loan closing
to prove income, and a Statement of Service to prove ongoing service and
your separation date is 12 months or less from your loan closing, you must
document income in one of the following ways:
fees for a VA loan are much like fees for any other mortgage loan. There are
lender fees like origination, discount, underwriting, processing, and credit
report. And there are settlement fees like title insurance, escrow fee, and
document preparation. Additionally there is a VA funding fee that’s specific to
VA loans. This list isn’t all-inclusive. See VA Closing Cost Guide for
VA Funding Fee is a percentage of the loan amount that the VA assesses every
borrower to fund the VA home loan program. Funding fees break down like this:
the VA funding fee can be financed into your loan. For example, if you were
regular military personnel buying a $250,000 home with 100% financing, your
funding fee would be 2.15 percent, or $5,375. This amount would normally
be due at closing but, to conserve cash at closing, you can also add it to the
$250,000 loan amount.
lenders are required by federal law to disclose these fees to you within three
days of your application. The disclosures must be in a specific format so they
will be easy to read and understand, and if you’re shopping lenders, you’ll get
the same forms from all lenders to compare:
can ask for these disclosures by name after you submit your application to a
VA appraisal is used to determine whether the home is worth what you’re willing
to pay for it. It’s also used to assess the condition of the property, with
focus on verifying the following items:
lender will order a VA appraisal on the property you’re in contract to buy.
Even though your lender orders the appraisal, the VA appraiser isn’t a lender
employee, but rather an independent, licensed, VA-approved appraiser who is
randomly assigned by the nearest VA regional loan center. This ensures that the
appraisal won’t be biased in any way.
repairs are required by the appraisal, they must be fixed before the loan can
close. The buyer and seller must negotiate who is going to pay for the required
the seller won’t pay for the repairs, and the buyer is unwilling to take the
risk of paying for the required repairs, the buyer can exit the contract and
find a new home to buy. In a case like this, the appraisal is nonrefundable.
the appraisal is lower than the sale price of the home, the lender will make
the loan based on the lower of the purchase contract price or appraised value.
if someone was in contract to buy a home for $250,000 using 100-percent VA
financing and the appraisal came in at $225,000, the borrower could still
choose to buy the home for $250,000, but they’d need to bring in an extra
$25,000 at closing. Or they can negotiate with the seller to lower the price.
If the seller won’t lower the price and the buyer won’t bring in extra cash at
closing, the buyer can exit the contract and find a new home to buy. In a case
like this, the appraisal is nonrefundable.
has detailed resources expanding on the topics above are available here:
To Get A VA Loan: Step-By-Step Process
Get 100% Financing on Home Loans up to $1 Million
Loan Eligibility Requirements
– VA Loan Closing Cost Guide
Is a VA Certificate Of Eligibility?
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