VA Loan Information
By Daniel Duffield
Veterans who qualify are eligible to take advantage of the VA mortgage loan program, a specialized loan type provided exclusively to veterans of the US Armed Services. These loans are backed and guaranteed by the Department of Veteran Affairs (VA) and offer highly beneficial financial advantages to veterans who qualify.
See Current VA Mortgage Rates at Lender411.
VA Mortgage Loan Information | What is a VA loan?
The VA loan program is a nationwide initiative that helps veterans purchase homes and refinance their mortgages. The goal of the program is to enable veterans who have served this nation bravely and selflessly to transition into homeownership and build stable wealth.
The VA itself does not provide any of the loans. VA loans are funded through private lenders, and with this additional guarantee, VA rates are some of the best mortgage rates available in the entire mortgage marketplace to the veterans they work with. The government takes on some of the risk associated with a VA loan, and this allows lenders to provide multiple unique, favorable terms to veterans that are otherwise unavailable to other borrowers.
For more indepth information, visit Lender411's article on the VA Loan Process.
What are requirements for a VA loan?
In order to be eligible to receive a VA loan, you must be either an honorably discharged veteran or currently involved in active duty for the U.S. military.
- For veterans who served during wartime, a minimum of 90 days in service is required to qualify.
- For veterans who served during peacetime, a minimum of 180 days of service is required to qualify.
In addition, veterans who enlisted after September 7th 1980 must be involved for at least two years.
Other people who qualify for VA loans include members of the National Guard or Reserves who have served for a minimum of six years and surviving spouses of veterans who died in or as a result of service. To verify eligibility, borrowers must acquire a Certificate of Eligibility (COE).
Visit Lender411's in-depth article on VA Loan Eligibility.
Visit Lender411's in-depth article on VA Loan Qualifications.
In addition to being eligible, borrowers seeking VA mortgage loans must also meet requirements in terms of current income, credit history and score, past bankruptcies, and debt-to-income ratio. While these considerations are much less strict than other types of loans, lenders ultimately have the final decision when trying to secure a loan.
For comprehensive information on VA loan requirements, visit Lender411's guide on VA Loan General Requirements.
Who should get a VA mortgage loan?
Generally, any borrowers who are eligible for a VA mortgage loan and are looking to buy a home should take advantage of the numerous benefits. While conventional mortgages and FHA home mortgages may have some advantages over VA mortgages, the veteran-specialized benefits typically outweigh these advantages. If you are considering a VA loan, here is a list of questions that may help you determine whether it is the best option for you:
Am I eligible?
- Before considering a VA loan, ensure that you are eligible by reading the VA Loan Application overview.
Do I have a low credit score?
- VA loans have low credit score requirements, enabling many eligible borrowers to obtain a home mortgage loan with poor credit or even lack of credit. Even borrowers who have undergone foreclosure or bankruptcy may still qualify in many circumstances.
Do I want to invest?
- Unlike other types of loans, VA mortgages only cover primary residences. As such, borrowers hoping to acquire funds for real estate investment should consider an alternative.
What are the advantages of a VA loan?
To eligible borrowers, VA loans offer a plethora of benefits, making these loans preferable over almost any other type of loan. For instance, VA loans are easy to acquire for eligible borrowers and first time home buyers, having forgiving qualifications in terms of credit and income. Additionally, VA loans require no down payment or mortgage insurance, making them exceptionally affordable. Furthermore, with no prepayment penalties VA borrowers need not worry about any additional charges when paying off a loan early to save on interest rates.
- No down payment on a VA Loan
- No mortgage insurance for a VA Loan
- No prepayment penalty
- VA Loan Closing Costs are negotiable
- Lenient credit and income requirements
- Mortgage transfer available
More indepth information regarding the Advantages of a VA Loan.
What are the disadvantages of a VA loan?
Most borrowers will never be eligible for a VA loan due to military exclusivity. For eligible borrowers, the biggest disadvantage for VA loans is the inclusion of a 1.25% to 3% funding fee. While the funding fee may be added to the loan balance in order to reduce up-front costs, this can vastly increase a loans total cost when including accrued interest over the term of the loan.
- 1.25% to 3% VA Funding Fee
- Eligibility requirements
- Maximum loan amount
- Some property type restrictions
More indepth information on the Disadvantages of a VA Loan.
What is VA entitlement?
VA entitlement is a representation of what the VA guarantees to repay the lender when a borrower defaults on his or her loan. The specific entitlement of any given borrower can be found on the Certificate of Eligibility. The Department of Veteran Affairs entitles a maximum amount of $36,000 for basic entitlement on loans up to $144,000 and up to $68,250 for bonus entitlement on loans greater than $144,000.VA entitlement can be somewhat tricky in terms of reusability and additional home loans. When a borrower pays off a VA loan, full entitlement is restored if he or she would like to secure another VA loan. However, in the event of a foreclosure, entitlement will be diminished until the loan is paid in full. If a VA home loan is transferred, the original borrower cannot get another loan or restore his or her entitlement until the loan is paid off, unless the buyer is an eligible veteran who would agree to substitute his or her entitlement for the same amount as the original borrower.
What are the VA limits on loan amounts?
For VA home loans, there is no maximum limit and borrowers can secure as much as a particular lender is willing to provide. However, the VA only guarantees a portion of the loan, depending on the location of the property. These limits on the VA guarantee are set by relative housing costs in the county where the borrower’s intended property is located. Basically, in lower value home areas, limits for VA loans cap at $417,000, while limits may be up to $625,500 in areas with high valued homes. When a borrower secures more than the loan limit for a particular area, the VA only covers a portion of the loan limit, not of the overall mortgage. Thus, on a $700,000 loan, the VA would guarantee $156,375, which constitutes one quarter of the $625,500 loan limit rather than one quarter of the $700,000 loan.
More information on VA Loan Limits
What are the basic types of VA loans?
VA loans can be divided into several basic types, including fixed rate mortgages, hybrid adjustable rate mortgages, construction loans, graduated payment mortgages, and growing equity mortgages. Each type generally suits different types of borrowers. For instance, borrowers who might not be able to afford initial monthly payments on a mortgage but expect a gradual increase in income over the next five to ten years should consider a graduated payment mortgage or a growing equity mortgage, rather than a standard VA fixed rate mortgage. Here is a list of different types of VA Loan options available:
- VA Fixed Rate Mortgage
- Hybrid Adjustable Rate Mortgage
- VA Construction Loans
- Graduated Payment Mortgage
- Growing Equity Mortgage
- Energy Efficient Mortgage
If you are unsure of which type of VA loan best fits your situation, visit Lender411's information on VA Loan Programs.
What refinance options are available with VA loans?
There are two types of VA Refinance loans: VA Cash-Out Refinance and VA Streamline Refinance (Interest Rate Reduction Refinance Loan). The major difference between the two types of refinance loans is that a VA Cash-Out Refinance lets borrowers take cash out of their home equity, whereas a VA Streamline Refinance is quite simply reducing a borrower’s interest rate down from their original mortgage. In addition to these options, qualified VA borrowers may also refinance pre-existing conventional loans into VA loans to achieve fairer interest rates when applicable.
Click here for more information on VA Loan Refinancing Options.
What types of property are included by the VA?
VA loans are typically designed for single-family homes and only cover primary residences. Condominiums and townhomes may also qualify for VA funds if they are VA-approved; for properties of this type not already approved, borrowers may fill out forms to submit to the VA to find out whether the property will qualify. In terms of manufactured homes, some may be financeable if they are classified and taxed as real estate and affixed to a permanent location and foundation. In addition, manufactured homes must conform to building codes and zoning requirements. However, even though the VA presents guidelines for condominiums, townhouses, and manufactured homes, individual lenders have their own guidelines and may not offer VA loans for all types of property.
- Single-family residences
- Condominiums and Townhouses (with restrictions)
- Manufactured Homes (with restrictions)
Frequently Asked Questions about VA Loans
Lender411 has a comprehensive VA Loan FAQ available which gives peace of mind to any questions that may arise regarding the loan process. Feel free to submit your own questions, and have them answered by qualified and trusted VA lenders. Visit our comprehensive VA Loan FAQ .
Foreclosure or Short Sale VA Loan Information
If you are looking for information on VA Loans regarding Foreclosures or short sales, Lender411 has two in-depth articles to read:
Find A VA Mortgage Lender
When searching for a VA mortgage loan, borrowers should always compare rates and lenders before making a commitment. While loans insured by the Department of Veteran Affairs tend to have lower interest rates than most other types of loans, anyone considering a VA loan should shop around for the best rates, as even small fractional differences between lenders could translate to thousands of dollars over the term of a loan. If you are considering a VA loan, start shopping today by simply filling out Lender411's VA Request a Quote form on the top of the page.