How to Get a Veterans Affairs Home Loan
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UPDATED: May 17, 2022
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For individuals who have served in the military, there are additional benefits to help in financing mortgage loans. The Veterans Affairs (VA) Home Loan Program is a government service that puts veterans in the homes they need by offering financial assistance.
How to Get a Veterans Affairs Home Loan: Eligibility
To be eligible for the Veterans Affairs program, a borrower must be a veteran, in active duty, a reservist, or a National Guard member. The VA has defined certain timelines veterans have to meet to qualify depending on if they’re active duty, reservist, etc.
In addition, surviving spouses of members of the military who have died on active duty or as the result of a service-related disability are eligible, as well as some spouses of servicemen or women on active duty who are missing in action, captured, or detained.
Under the program, a veteran can obtain a home loan without paying a down payment and does not need to buy private mortgage insurance. VA loans insure a certain amount based on the veteran’s current holdings and history.
The service also can limit closing cost charges and can even facilitate a closing cost paid by the seller. Finally, if after obtaining the mortgage the veteran has trouble making the payments, he or she may be eligible for assistance from VA.
VA home loans are helpful for veterans who need extra help, but penalties for bad credit or insufficient income are still present. A veteran still must qualify for the loan.
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What Are VA Loan Terms and Limits?
As far as the size of the home loan for which a veteran may receive, there is no specific loan limit. More specifically, if you still have full entitlement (ie you haven’t purchased a home before or sold the home and went through the process to reclaim your full entitlement), the VA imposes no home loan limit. However, there are limits on the liability that VA is permitted to assume on the veteran’s behalf. As a result, the loan amount is determined based on the veteran’s income.
It also never hurts to keep a close eye on what you can personally afford. Turning to resources such as a home affordability calculator will be an important first step in determining the amount of the loan.
The VA does charge a funding fee for the loan, although this cost can often be folded into the loan. So technically, military personnel who qualify can have a loan to value over 100% without paying private mortgage insurance. Some veterans may be exempt. This can be done in certain circumstances for a disabled veteran loan. Veterans with VA loans will also need to pay interest over time, as with any home mortgage. The rates are often better than you’d see with conventional mortgage loans.
How Do You Apply for A Veterans Affairs Loan?
To apply for a VA home loan, a veteran first needs to find a real estate agent and a lender to work with who supports the program. A certificate of eligibility is available online or in hard copy form. Finally, after finding a home to purchase, the veteran must ensure that the sales agreement includes a VA option clause, apply to the lender for the loan, and go through the sale process.
While the requirement is extremely low, there is a credit score requirement. Lenders may have their own requirements for borrowers in general.
What If A VA Loan Recipient Wants to Refinance?
Depending on what the market looks like when you buy, a veteran may end up with what seems like a high-interest loan. Maybe your interest rate is just higher than you’d like. The VA has stricter rules to prevent predatory lending practices.
When offering a VA IRRRL refinance, lenders have to prove the benefits to the borrower meet a set standard. Whether it’s a bank, credit union, or other lender, the VA does not require a credit report or appraisal, but the lender can still require one or both. A certificate of eligibility is also not required for an IRRRL. Keep in mind, IRRRLs can only be done for properties that are currently financed under VA loan terms with the veteran’s entitlement.
Keep in mind, this is only for mortgage loans. VA entitlements cannot be used for an unsecured debt consolidation loan, auto loan, etc. If you have student loans, or if you’re planning on going to school, the military may offer other options to pay for your school.