A VA (Veterans Administration) guaranteed home loan is the preferred loan program for active, non-active, Reserve, National Guard, and retired military of the armed forces because there is no down payment needed and no private monthly mortgage insurance required.
VA mortgage loans can be used towards purchasing a home, building a home, or refinancing an existing mortgage.
We will discuss what role the VA plays in a VA guaranteed mortgage, the benefits of a VA home loan, who is eligible for a VA loan, and the documentation you will need to present to your lender in order to apply.
Did you know that more than 27 million veterans and service personnel are eligible for VA financing, yet many aren’t aware it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement?
VA Does Not Offer Loans Directly and Does Not Guaranty You Will Qualify.
The VA does not actually lend the money to you directly. They offer a guaranty to a lender that if you should default on the loan, they will pay the lender a percentage of the loan balance.
*The word GUARANTY does not actually guarantee the veteran will qualify for a VA home loan.
Primary Benefits of a VA Mortgage:
- 100% financing
- No monthly private mortgage insurance is required
- There is a limitation on buyers’ closing costs
- The loan is assumable, subject to VA approval of the assumer’s credit
- 30 year fixed loan
- Seller can pay up to 4% of the veterans closing costs and even pay down they buyer’s debt to help lower their debt-to-income ratio
- Interest rates are similar to FHA rates
- You don’t need perfect credit
Frequently Asked Questions:
Q: My parent is a veteran. Can I obtain a VA loan if I have not served in the military myself?
No, the VA loan benefit does not extend to a veteran’s children.
Q: What is required to prove my record of military service?
You will be required to us Standard Form 180, Request Pertaining to Military Records, to apply for proof of military service.
Q: My spouse who has passed away was an eligible veteran. I am eligible for the home loan benefit myself?
A surviving spouse is eligible if they have not remarried, and the eligible veteran died during active duty service or as a result of a service-related disability.
Q: Is a VA loan better than a conventional mortgage?
In many cases, yes. VA guaranteed loans often offer a lower interest rate than conventional mortgages, they do not require monthly private mortgage insurance when borrowing more than 80% of a home’s value, and they can be easier to get approved for.
Q: How long does it take to get approved for a VA loan?
It varies depending on the current workload of your lender, but it is typically the same as for conventional mortgages – 3 weeks to 45 days.
VA mortgage loans allow you to refinance your home to take advantage of lower interest rates that can ultimately save you sizable sums of money in both the long-run and the short-run by lowering your monthly payment.
If you currently have a conventional loan, you can refinance into a VA loan if you are an eligible veteran or member of the armed services. Transferring from a conventional mortgage to a VA mortgage is known as a “Conventional to VA Refinance Loan” and is a very straightforward process.
The “Conventional to VA Refinance Loan” process is described in detail in our article Can I Qualify For A VA Refinance If I Currently Have A Conventional Loan?
A common question related to VA refinancing is whether or not you can get a refinance on a VA loan if you are currently upside down on your mortgage. The answer is…you can!
Just to be clear, being “upside down” on a mortgage is when you owe more on your mortgage than the current value of your home. This is a highly unfortunate situation that many American home owners are facing today.
In 2008 a law titled the “Veteran Benefits Improvement Act” was passed to assist veterans who were upside down on their mortgage. This law created the opportunity for eligible veterans to get a VA refinance and improve their financial circumstances.
The enhancements made to the VA home loan program are described in our article Can I Refinance My VA Loan If I Am Upside Down On My Mortgage?
Of course, you are also allowed to refinance your home if you currently have a VA mortgage. An Interest Rate Reduction Refinancing Loan (IRRRL) is considered a VA Streamline Refinance. This is a quick and easy way to either lower your monthly mortgage payment or take money out of your home with minimal work, at no cost to you!
Some of the additional benefits of a VA Streamline Refinance or IRRRL include:
- In some cases, you may not need to have an appraisal of your home.
- Limited income verification.
- An extremely low VA Funding Fee – only 0.5%
Taking out a VA mortgage loan on a new home purchase is a fantastic way to finance a property with a low interest rate, with little to no required downpayment.
Purchasing a home with a VA loan may seem like a daunting task at first glance, but it is actually pretty straightforward.
The basic process is as follows:
- Find the property you would like to buy and arrange the purchase with the seller. You’ll then sign a purchase contract conditional upon approval of a VA guaranteed loan.
- Choose your lender, present your Certificate of Eligibility, and finish the loan application. Your lender will determine your credit and submit a request to the VA to dispatch a licensed appraiser to evaluate the value of the property.
- If the determined value is acceptable to all involved parties, and the lender determines that your loan application meets the VA loan requirements, your mortgage can be approved.
- You (and co-borrower, if applicable) will then attend the loan closing and sign the related papers. The closing escrow agent or attorney will explain loan terms and requirements and monthly payment details.
After these steps are completed, you will own your own home with a low-interest VA purchase mortgage, with no private monthly mortgage insurance required!
Please note that when the VA receives report of the loan, the Certificate of Eligibility is adjusted to reflect use of entitlement and is then returned to the veteran.
No further actions are required to get your COE back, which just makes the overall process easier for veterans.
A common question we get is, “How long does the VA loan approval process actually take?” The overall period of time it takes for a VA mortgage approval varies depending on the amount of volume the lender has at that moment. It also depends on how quickly the VA borrower is able to respond to documentation requests.
As of late, getting full approval and closing your VA purchase mortgage has been taking between 3 weeks to 45 days. This time-frame is more or less the same as that for conventional loans.
There are some things you can do to ensure your loan process is as quick as possible, such as sending requested documents as soon as possible, working with a knowledgeable VA loan specialist, and making your hours of availability as flexible as you can.
For further advice on how to make sure your loan process goes as fast and smoothly as possible, please read our article titled VA Mortgage Approval – How Long Does It Take?
One of the main questions we receive in regards to VA loans is, “What is a VA mortgage loan entitlement?”
If you’re wondering this, don’t worry; you’re definitely not alone!
Rather than acting as a lending agent itself, the Veterans Administration simply guarantees the home loans of veterans. This means that if the borrower defaults on the mortgage, the lender has an insurance policy with the VA for the entitlement amount.
Because they are protected against losses, VA lenders can offer more favorable terms on VA loans. The VA is able to give a guaranty to applicants who fulfill the eligibility requirements, which include but are not limited to:
- Having a good credit score, typically above 620.
- Having enough income for monthly mortgage payments.
- Not having a bankruptcy or foreclosure within the past 24 months.
For the majority of veteran borrowers, the standard entitlement for a VA loan is $36,000 for a loan equal to or less than $144,000. However, if your loan amount is over $144,000, the Veterans Administration will offer a guaranty of up to 25% of your county limits.
County limits for VA loans vary greatly throughout different parts of the United States. You can determine what your limit is by looking at the list of specific VA county loan limits on va.gov.
It is important to note that the VA does not list every county. Counties that are not included in the official 2011 VA County Loan Limits website have a loan limit of $417,000.
After reading this you may be wondering to yourself, “Why does the Veterans Administration have different loan limits for different counties?” The long and short of it is that housing markets across the United States vary greatly.
For example, the average price of a house in California is close to double the average price for a house in Ohio! It would never work to have a set one-size-fits-all limit for all 50 states.
Keep in mind that while the VA does not set a cap for how much veterans can borrow, some VA mortgage lenders may not approve loans above $417,000. This is because lenders usually sell bundles of VA loans in secondary markets, where – you guessed it – the maximum loan limit can be $417,000.
It’s important to note that VA loan entitlements have also gradually risen over time. Because of this, many veterans who have previously taken out a VA loan might actually be qualified for more money today than they were originally.
If you have taken out a VA loan in the past, you can contact us to quickly determine whether or not you are indeed eligible for some portion of your VA loan entitlement now.
This all ties into the fact that veterans are allowed to take out more than a single VA loan as long as they are not concurrent, and that you can also refinance with a VA loan!
In other words, if you took out a VA loan on the house that you are currently living in, but have decided to sell it and move, you can take out another VA loan for the house that you want to buy.
However, you cannot have two VA loans at the same time.
In order to apply for a VA loan you will need a Certificate of Eligibility, or COE for short.
There are different steps required to receive a Certificate of Eligibility depending on your personal situation and branch of the military.
NOTE: You will need your DD214 Discharge papers no matter what route you take below. An honorable discharge and completion of your tour of duty are typically required in all cases. This will determine if you are eligible for this benefit, you will need to contact a VA lender to determine if you qualify.
Group 1: Veterans, Activity Duty, Reservists and National Guard Members Who Been on Active Duty
If you belong to one of the above categories then you have three different ways that you can receive a COE:
- Apply Through Mail: Fill out VA Form 26-1880, which you can find on va.gov, the official VA website. You can then mail it to the address that is listed on the form.
- Apply Through A Lender: Your lender may be able to acquire your COE for you online; if so, the process typically only takes a few minutes. Be sure to speak to your lender beforehand to determine whether or not this is an option.
- Apply Online: Visit the Veterans Information Portal at http://www.ebenefits.va.gov to request the certificate.
If for whatever reason you cannot print out Form 26-1880 you can contact the VA at 1-888-244-6711 and request a copy be mailed to you.
Group 2: Reservists and National Guard Members Who Have Not Been On Active Duty
Group 2 enjoys the same options as Group 1 above.
Group 3: Spouses of Veterans Who Either Passed Away During Service or As a Result of Service
Unlike the application options for Groups 1 and 2, you are required to mail your application.
If your spouse passed away during service, the process is relatively quick and straightforward. However, if your spouse passed away after service, the VA must first confirm that the death resulted from a disability connected to the service.
This process can take anywhere between 2 to 3 months depending on the current caseload of the VA.
To apply, download and fill out VA Form 26-1817, which you can find on http://www.va.gov, the official VA website. The address you should mail the form to is:
VA Loan Eligibility Center
PO Box 20729
Winston-Salem, NC 27120
Similar to above, if for whatever reason you cannot print out Form 26-1817, you can contact the VA at 1-888-244-6711 and request a copy be mailed to you.
Regardless of the category you personally fall into, you will have to provide some sort of evidence to prove you are eligible for a COE. The eligibility graph on the VA website (located at http://benefits.va.gov/homeloans/eligibility.asp) details exactly what kind of evidence will be required from you.