VA Loan Eligibility for Members of the Guard and Reserves

Members of the National Guard, Air National Guard, and Reserves have special VA loan eligibility requirements before they can use the VA Loan to buy a home. But there is much more to actually qualifying for a VA Loan than simply being eligible. Let’s look at the VA Loan eligibility requirements, including the necessary forms and paperwork you will need before you can apply for a VA Loan.

Guard and Reserve VA Loan Eligibility

National Guard and Reserves VA Loan EligibilityCurrent or former members of the National Guard, Air National Guard, and Reserves are eligible to apply for a VA Loan if they meet one of the following:

  • Served at least 90 consecutive days on active duty during wartime.
  • Served at least 181 consecutive days on active duty during peacetime.
  • Completed six years of in-service time with their Guard or Reserve Unit (These must be “Good Years” to qualify).

Note: These requirements are only to be eligible to apply for a VA loan; they do not guarantee your loan will be approved. You still must meet the financial requirements set by the lender.

Proof of Service

After meeting minimum service requirements to be eligible for a VA Loan, servicemembers and veterans must provide the VA with Proof of service so they can acquire a Certificate of Eligibility, which they will furnish to the actual lender.

Proof of Service: Members of the Guard and Reserves who have active duty time should have received a DD Form 214 when they were transitioned back to their Guard or Reserve status. Your DD Form 214 should state the total number of days they served on active duty. Here are instructions for getting a copy of your DD 214 if you do not currently have a copy.

If you are currently serving on active duty and have met the service requirements, you can also send a Statement of Service signed by your unit commander, his/her adjutant, or a personnel officer.

A Statement of Service must include the following information:

  • Full name, date of birth, and Social Security Number
  • Date entered into military service
  • Total number of Creditable Years of Service (also known in the Guard and Reserves as “Good Years”)
  • Duration of Lost Time
  • Unit Command information, including name, location, and contact information

Discharged Members of the Guard and Reserves: If you do not meet requirements for time served on active duty, and you are no longer in the Guard or Reserves, then you can send copies of your separation paperwork or other accepted forms. These include:

  • National Guard: NGB Form 22, Report of Separation and Record of Service, for each period of National Guard service, or, NGB Form 23, Retirement Points Accounting, and proof of the character of service
  • Reserves: Copy of your latest annual retirement points statement and evidence of honorable service.

Once you have your proof of service, you will provide this to the VA, which will issue you a Certificate of Eligibility.

Certificate of Eligibility

A Certificate of Eligibility (CoE) is a requirement for every VA Loan application. Many lenders can now process these forms for you if they have access to the VA Web LGY system. If the lender has access to the system, they may be able to obtain a Certificate of Eligibility in a few minutes. However, the VA may not have all servicemembers’ records in their system, and you may apply for the CoE through another method.

  • Apply online: To get your Certificate of Eligibility (COE) online, visit the eBenefits portal. If you already have login credentials, click the Login box, and if you need login credentials, please click the Register box and follow the directions on the screen.
  • Apply by Mail: Use VA Form 26-1880, Request for Certificate of Eligibility (pdf). Instructions and the mailing address are on the form.

The turnaround time for a manual request can take anywhere from a couple days, to a couple weeks, depending on whether your have your paperwork in order, how backed up the VA is, and other factors. The VA can often rush a CoE if you have the proper documentation. I believe it took less than a week for me to receive my Certificate of Eligibility when I applied for a VA Loan a few years ago.

Eligibility Does Not Guarantee a Loan

Meeting the above criteria will establish eligibility to apply for a VA Loan, but it will not guarantee your application will be approved. Lenders look at multiple factors before approving loans, including your income, credit score, debt to income ratio, and other factors. We cover these topics in the following article about getting approved for a VA Loan.

If you are planning on buying a home with a VA Loan, then check out our VA Loan interest rate page which lists current interest rates from a variety of lenders. This will give you an idea of what current interest rates are in your area.

VA Loan Limits – How Much House Can You Buy with a VA Loan?

The VA does not set a limit on how much you can borrow for a house purchased through a VA Loan. However, the VA does have limits for the amount of liability they can assume for any given loan. This can affect the amount of money lenders will allow veterans to borrow when buying a home. (This is why some lenders state there is a VA Loan limit – the reality is the lender limits the amount they will lend to match the amount the VA will guaranty).

The maximum amount the VA will guaranty for 2014 is $417,000, for most locations. However, there are some high-cost counties where the VA will guaranty a home loan for larger amounts. Read through this article to get a full understanding of VA Loan limits, the maximum amount you can borrow without a down payment, and other information you may need to know to secure a VA Loan.

VA Loan Limits & What Lenders Will Actually Lend

Veterans are eligible for a basic VA Loan entitlement, which amounts to $36,000. Lenders will normally allow veterans to borrow up to 4 times the basic entitlement ($144,000) without a down payment, provided they have the income and credit to qualify for the loan, and provided the property appraises for at least the purchase price.

This means that provided you qualify for the loan, and the house appraises for at least the purchase price, lenders will often lend you up to $144,000 without a down payment. You still may need to come up with the VA loan funding fee, which the VA charges for guaranteeing your loan. However, some disabled veterans are eligible to have the funding fee waived. Alternatively, you can often roll the funding fee into your loan.

A note about homes costing more than $144,000: According to the VA: “The maximum guaranty amount for loans over $144,000 is 25 percent of the 2014 VA county loan limit shown below. Veterans with full entitlement available may borrow up to this limit and VA will guarantee 25 percent of the loan amount.” This means that if your home costs more than $144,000, the VA will only guaranty 25% of the loan, up to the $417,000 limit, or the limit for high-cost counties. This affects the lender more than the borrower, but it is important to note.

How to Buy a House that Costs More than the Max VA Loan Guaranty

If you want to use the VA Loan to buy a house that costs more than $144,000, you will need to put make a down payment on the loan. The amount of the down payment will depend on your lender and the cost of your home. But generally, you will be required to put down anywhere from 10-20% of the purchase price on the home (your down payment will depend on your lender’s policies, your income, credit profile, debt to income ratio, and other factors).

You can always make a larger down payment if you have the available funds, and there are some benefits to doing so. For example, a larger down payment reduces your outstanding balance on your home, reduces your monthly payments, and reduces the amount of interest you pay over the life of the loan.

Why Use a VA Loan if Your Home Costs More than The VA Will Guaranty?

This is a great question. The answer comes down to interest rates. Because VA loans are guaranteed by the VA, they often have slightly lower interest rates than conventional loans (all things being equal, including credit score, income, assets, debt to income ratio, etc.). That said, it pays to shop around. A mortgage is often the largest purchase you will ever make, and even a few decimal points on your interest rate can save you, or cost you thousands over the life of your loan.

If you are interested in finding the best interest rates, you can view our list of VA Loan providers to shop and compare interest rates.

VA Loan Limits for High-Cost Counties

Below is the table for VA Loan limits for 2014. The VA bases these amounts on the county median home values reported by the Federal Housing Administration.

NOTE: For all counties not listed below, the limit is $417,000.

STATE COUNTY 2014 VA LIMIT
AK ALEUTIANS EAST $625,500
AK ALEUTIANS WEST $625,500
AK ANCHORAGE $625,500
AK BETHEL $625,500
AK BRISTOL BAY $625,500
AK DENALI $625,500
AK DILLINGHAM $625,500
AK FAIRBANKS NORTH $625,500
AK HAINES $625,500
AK HOONAH-ANGOON $625,500
AK JUNEAU $625,500
AK KENAI PENINSULA $625,500
AK KETCHIKAN GATEWAY $625,500
AK KODIAK ISLAND $625,500
AK LAKE AND PENINSULA $625,500
AK MATANUSKA-SUSITNA $625,500
AK NOME $625,500
AK NORTHWEST ARCTIC $625,500
AK NORTH SLOPE $625,500
AK ST. PETERSBURG $625,500
AK PRINCE OF WALES-HYDER $625,500
AK SITKA $625,500
AK SKAGWAY MUNICIPALITY $625,500
AK SOUTHEAST FAIRBANKS $625,500
AK VALDEZ-CORDOVA $625,500
AK WADE HAMPTON $625,500
AK WRANGELL CITY/BOROUGH $625,500
AK YAKUTAT CITY $625,500
AK YUKON-KOYUKUK $625,500
CA ALAMEDA $1,050,000
CA CONTRA COSTA $1,050,000
CA EL DORADO $437,500
CA LOS ANGELES $687,500
CA MARIN $1,050,000
CA MONTEREY $500,000
CA NAPA $575,000
CA ORANGE $687,500
CA PLACER $437,500
CA SAN BENITO $827,500
CA SAN DIEGO $527,500
CA SAN FRANCISCO $1,050,000
CA SAN LUIS OBISPO $518,750
CA SAN MATEO $1,050,000
CA SANTA BARBARA $643,750
CA SANTA CLARA $827,500
CA SANTA CRUZ $681,250
CA SONOMA $500,000
CA VENTURA $556,250
CA YOLO $437,500
CO ADAMS $425,000
CO ARAPAHOE $425,000
CO BOULDER $422,500
CO BROOMFIELD $425,000
CO CLEAR CREEK $425,000
CO DENVER $425,000
CO DOUGLAS $425,000
CO EAGLE $587,500
CO ELBERT $425,000
CO GARFIELD $781,250
CO GILPIN $425,000
CO JEFFERSON $425,000
CO PARK $425,000
CO PITKIN $781,250
CO ROUTT $423,750
CO SUMMIT $462,500
CT FAIRFIELD $556,250
DC DISTRICT OF COLUMBIA $692,500
FL MONROE COUNTY $437,500
GU GUAM $625,500
HI HAWAII $625,500
HI HONOLULU $750,000
HI KALAWAO $625,500
HI KAUAI $625,500
HI MAUI $625,500
ID TETON $630,000
MA DUKES $715,000
MA ESSEX $511,250
MA MIDDLESEX $511,250
MA NANTUCKET $1,094,625
MA NORFOLK $511,250
MA PLYMOUTH $511,250
MA SUFFOLK $511,250
MD ANNE ARUNDEL $500,000
MD BALTIMORE $500,000
MD CALVERT $692,500
MD CARROLL $500,000
MD CHARLES $692,500
MD FREDERICK $692,500
MD HARFORD $500,000
MD HOWARD $500,000
MD MONTGOMERY $692,500
MD PRINCE GEORGE’S $692,500
MD QUEEN ANNE’S $500,000
MP ANA ISLANDS $418,750
NH ROCKINGHAM $511,250
NH STRAFFORD $511,250
NJ BERGEN $978,750
NJ ESSEX $978,750
NJ HUDSON $978,750
NJ HUNTERDON $978,750
NJ MIDDLESEX $978,750
NJ MONMOUTH $978,750
NJ MORRIS $978,750
NJ OCEAN $978,750
NJ PASSAIC $978,750
NJ SOMERSET $978,750
NJ SUSSEX $978,750
NJ UNION $978,750
NY BRONX $978,750
NY KINGS $978,750
NY NASSAU $978,750
NY NEW YORK $978,750
NY ORANGE $978,750
NY PUTNAM $978,750
NY QUEENS $978,750
NY RICHMOND $978,750
NY ROCKLAND $978,750
NY SUFFOLK $978,750
NY WESTCHESTER $978,750
PA PIKE $978,750
RI BRISTOL $431,250
RI KENT $431,250
RI NEWPORT $431,250
RI PROVIDENCE $431,250
RI WASHINGTON $431,250
TN CANNON $417,500
TN CHEATHAM $417,500
TN DAVIDSON $417,500
TN DICKSON $417,500
TN HICKMAN $417,500
TN MACON $417,500
TN MAURY $417,500
TN ROBERTSON $417,500
TN RUTHERFORD $417,500
TN SMITH $417,500
TN SUMNER $417,500
TN WILLIAMSON $417,500
TN WILSON $417,500
UT SUMMIT $606,250
VA ALEXANDRIA $692,500
VA ARLINGTON $692,500
VA CLARKE $692,500
VA CULPEPPER $692,500
VA FAIRFAX COUNTY $692,500
VA FAIRFAX CITY $692,500
VA FALLS CHURCH $692,500
VA FAUQUIER $692,500
VA FREDERICKSBURG $692,500
VA LANCASTER $475,000
VA LOUDUON $692,500
VA MANASSAS CITY $692,500
VA MANASSAS PARK $692,500
VA PRINCE WILLIAM $692,500
VA RAPPAHANNOCK $692,500
VA SPOTSYLVANIA $692,500
VA STAFFORD $692,500
VA WARREN $692,500
VI ST. CROIX $625,500
VI ST. JOHN $625,500
VI ST. THOMAS $625,500
WA KING $500,000
WA PIERCE $500,000
WA SAN JUAN $425,000
WA SNOHOMISH $505,000
WV JEFFERSON $692,500
WY TETON $630,000

Shop around to save thousands: As mentioned above, shaving a couple percentage points off your VA loan can save you thousands of dollars over the course of your loan. You can interest rates, you can view our list of VA Loan providers to shop and compare interest rates.

How a Higher Interest Rate on a VA Loan Can Cost You Thousands

One of the decisions that we all make at some point is whether to rent a home or to buy a home. If you decide to buy a home, there is a great program for military veterans. The VA loan program is specifically designed to help you buy a house.

high VA Loan interest rates cost thousands moreHowever, it’s important to get the best possible VA loan rate when you apply. Just like other home loans, the rate you end up paying depends on your credit situation and other factors. Getting the best possible rate can mean a savings of thousands of dollars over the life of your home loan.

How Much Could You Save with a Good Interest Rate?

One of the best resources you can use is a mortgage calculator. A good mortgage calculator can help you figure out how much you can afford, as well as provide you with information about what you will pay in interest.

It may not seem like much, but a 1 percent difference in your VA loan interest rate can go a long way over the usual 30-year term of a mortgage. Consider that you borrow $200,000 for 30 years.

If you have an interest rate of 4.37 percent, over the course of 30 years you will pay $159,273.08 in interest. What happens if you pay just 1 percent more, or get an interest rate of 5.37 percent? The result is that your total interest paid is now $202,954.89.

A slightly higher interest rate results in you paying $43,681.81 extra over the course of a 30-year loan. Plus, your monthly payments are higher. With the larger interest rate, you pay $1,119.32 a month in principal and interest, and with the lower 4.37 percent interest rate your monthly payment is $997.98. That’s a difference of $121.34 in your monthly cash flow.

If you take advantage of the VA home loan program, make sure that you do what it takes to improve your credit score ahead of time so that you qualify for the best interest rate. Just think about what a difference more than $43,000 could make in your lifetime finances!

Tips for Improving Your Credit Score

Even if you decide that buying a home is the right move for you, and that you want to use the VA loan program to help you, it’s important that you plan ahead. Your first step is to figure out your credit score, and then take steps to improve it so that you qualify for the best interest rate available.

Some of the basic things you can do to improve your credit score include:

  • Pay all of your bills, especially your loans and credit cards, on time and by paying the full amount required.
  • Reduce your debt by paying more than the minimum on your credit cards. It’s best if you pay off your credit card purchases at the end of each billing cycle.
  • Don’t apply for new credit if you plan to seek approval for a mortgage within a few months.

You can also qualify for the best possible VA loan rate by saving up for a good-sized down payment, and taking steps to show that you have a regular income that matches with the mortgage you want to get. With a little planning and effort, you can get a good deal on your VA loan, and save tens of thousands of dollars over your lifetime.

Should You Buy a Home After Separating from the Military?

Transitioning from the military to civilian world is a big deal – you are leaving your job and the way of life you have known for the last few years, or even the last few decades. The transition is a big one, but with a little planning, you can make a successful transition back into the civilian world.

There are many things most veterans need to consider, including their next job, where they will live, and how to take care of their families while they make the transition. We have covered the topics of writing your post-military resume, finding work, and getting health insurance after separating from the military. We haven’t looked at post-military housing yet, but it’s an important topic. The following reader question is a good example.

Should You Buy a Home Immediately After Leaving the Military?

Buy a home after military separationA reader recently wrote in and asked about buying a home right after separating from the military. I can understand the desire to do so, but is it a good idea? Let’s take a look at the options:

Hi Ryan, I am planning on getting out of the Marine Corps in April, and I am looking at buying a home. Can you share with me the tools I need to obtain a good home and utilize all of my military benefits?  Thank you in advance.

Thanks for sending your message. This is a great question, and the answer is probably more involved than it first appears. Let’s start with the basics – the benefits of VA loans and how to buy a home with one:

VA home loans are one of the best ways for military members and veterans to buy a home because the government will guarantee the loan – often making it easier to get your loan approved. A government loan guarantee doesn’t mean every veteran is guaranteed to get a loan – this means the government will back the loan if the buyer defaults and the home goes into foreclosure. Borrowers still have to qualify for the loan based on their eligibility, credit score, income, debt to income ratio, and other factors.

You will need to get a VA Certificate of Eligibility, then you will need to go through the VA loan approval process. The process similar to a conventional mortgage loan, but there are a few small details that VA loans require, such as a VA home appraisal, and a few extra forms. Here are more tips on how to qualify for a VA Loan.

Should You Buy a Home During a Career Transition?

Now that you have a little more information about the benefits of a VA Loan, we can get to the heart of answering your question. As we mentioned in the opening paragraph, separating from the military is a major life transition. In many cases, it is better to rent first, then buy. This is true for servicemembers who are PCS’ing or separating from the military.

Why? Because your focus will be on 100 things at once – out-processing, transitioning from the old way of life to a new way of life, finding a new career, potentially relocating to a new area, taking care of your family, and more. At the same time, your finances may be in a flux. You will no longer have the cushion of a tax-free housing allowance, and unless you are retiring from the service, you won’t have free medical care for you and your family. Unless you have a large cash cushion set aside, you may find things getting a bit tight during the transition.

Home ownership can be more expensive than renting over a short time period due to expenses such as buying a home, furnishing it, paying taxes and maintenance, homeowners insurance, homeowner’s association dues, and other expenses.

My recommendation is to sit down and look at your budget before deciding to buy a home. Sometimes it’s better to wait until you have made the transition, have be at your new job a few months, and have given it a few months to see how the change will affect your budget. Then decide when it makes sense to buy a home based on your budget, career, family, and other factors.

If everything is lined up and home ownership is the way you decide to go, then go for it! Just be sure to take your time finding the right house and the right lender. Buying a home is a very expensive process and you want to do it right the first time. Take some time to shop around and get multiple quotes before deciding on your lender.  Remember, VA Loan interest rates are usually very competitive to conventional mortgage loans, and sometimes lower because the loans are backed by the government. But they can also vary by lender, house price, location, and other factors. So it pays to shop around.

Photo credit: nikcname

How to Qualify for a VA Loan

VA Loans are one of the best ways for military members and veterans to buy a home. The benefits are many, and the downsides are few. For example, VA Loans allow veterans to buy a home with no money down. This is almost unheard of in the current real estate market place due to recent changes in lending laws. Interest rates on VA Loans are often slightly lower than conventional mortgage rates because the loans are backed by the U.S. government. If the borrower defaults on the loan, the government makes it up to the lender.

how to qualify for a VA loanThere is one misconception we need to clear up, however. Every person who is eligible for a VA Loan won’t necessarily qualify for a VA Loan. Borrowers must first meet eligibility requirements based on their service, then they must qualify for the loan based on their financial circumstances. Let’s look at these in more depth:

VA Loan Eligibility

To be eligible for a VA Loan, servicemembers and veterans must first obtain a Certificate of Eligibility (COA). The VA Loan COA is required by the VA and the lender. Servicemembers and veterans qualify for a Certificate of Eligibility based on their military service. These are free to obtain, and must be obtained through the VA. Please don’t let a company charge you to obtain your VA Loan COA! In fact, if a company wants to charge you for this, my recommendation is to look for another lender. Here are the requirements according to the VA:

In general, you must have been discharged under conditions other than dishonorable and meet the service requirements below:

  • Active Servicemembers: Serve at least 90 continuous days on active duty
  • Veterans: Served 181 consecutive days on active duty or 90 days during war time
  • Guard and Reserves: Served at least six years in the National Guard or Reserves, or 90 days on active duty during a period of war
  • Spouses: Be the unremarried spouse of a servicemember who was killed in the line of duty.

There are several other caveats, exclusions, and special circumstances, so be sure to check with the VA if you are unsure about your eligibility.

How to Qualify for a VA Loan

Once you establish your VA Loan eligibility, you need to qualify for the actual loan. This includes your credit score, income, debt to income ratio, fixed expenses, and other factors. These criteria are very similar for a conventional home loan.

Credit score: Your credit score is a record of how well you have used your credit in the past. In general, the higher your credit score, the lower your interest payments. It’s a good idea to know what your credit score is before buying a home so you know what kind of interest rate you will be approved for – or if you will even be approved for a loan based on your credit history. Here are some tips for getting a copy of your credit score for free.

If your credit score needs improvement, it’s a good idea to work on raising your credit score before applying for a loan. This will increase your odds of approval and help you get a better loan.

Income: Your income also affects your ability to get a VA Loan approval. The higher your income, the better your chances of having your home loan approved. Don’t let a low income prevent you from trying to buy a home though. Your loan application may be approved if you have a good credit score, don’t have any debt, and you are trying to buy an inexpensive home with affordable payments. Lenders may wish to see proof of income, including a copy of your pay stub or Leave and Earnings Statement if you are in the military. Lenders may also wish to see a copy of your tax returns if you are self-employed or if they need more information about your income. Don’t forget to include any additional income you may receive such as VA Disability Compensation, a military pension, income from a side job, etc.

Debt to Income Ratio and Fixed Expenses: Even if you have a great credit score, you may not be approved for a loan unless you can prove you can pay for it. Lenders will want to know more about your fixed expenses such as auto loans, student loans, child support or alimony, or other fixed payments. Lenders add up all your fixed monthly expenses into what they call your Debt to Income ratio, which shows them how much of your income each month goes to paying of debt and other fixed expenses. They want to look at the percentage of income your house payment will be, in addition to how much your total debt each month will be. This article explains debt to income ratio in more detail. In general, it’s best to reduce your bills as much as possible before applying for a loan.

Other factors: Each loan application is unique, so there may be other factors that affect your ability to get a VA loan approval. Some of these items include previous loan defaults, the value of the home you wish to buy, and other factors. It’s impossible to know or list every factor that could apply.

If you are planning on buying a home with a VA Loan, then check out our VA Loan interest rate page which lists current interest rates from a variety of lenders. This will give you an idea of what current interest rates are in your area.

Get a Free Flu Shot from the VA

Flu season is just around the corner, and it is better to get immunized sooner rather than later. While flu shots can be expensive, there are several ways to get your shot free or at a reduced cost.

For instance, did you know that US Military Veterans can get free flu shots at local VA hospitals and clinics? This is a free service provided by VA clinics and hospitals to all US military veterans, regardless of when they served.

How to get your free flu shot from the VA

To receive your free flu shot from a VA clinic or hospital, you have to be in the VA’s medical system. If you are not already in their system, you will need to provide a copy of your DD Form 214 to prove your military service. After you are in their system, they will require you to fill out a standard health questionnaire and then you can get your shot. It’s that easy.

For more information about getting a free flu shot from the VA, or to find the nearest VA medical facility, contact your local VA facility.

Don’t qualify for the free VA flu shot? Try these tips

If you have family members how do not qualify for the free flu shots, try these tips for free and inexpensive flu shots:

  • Local hospitals and clinics – some charge as little as $10-20 per shot. Check in your local community for more information.
  • Insurance company – Many insurance companies provide free or reduced immunizations. Check your policy to see if you are eligible.
  • Grocery stores, drug stores, and retailers – Many stores that see a lot of foot traffic offer customers a way to get inexpensive flu shots. This is a great way for them to increase their traffic, and the stores’ management know that when people come for a flu shot, they are also likely to spend money shopping.
  • Employer – Many companies and employers provide free or discounted flu shots because the cost is much less expensive that the lost productivity of people missing several days for the flu.
  • Airports – Some airports now offer flu shots as a way to reach the travelers.

Flu season is fast approaching. Don’t forget to immunize yourself!

VA Loan Closing Costs – What to Expect

We recently discussed VA Loan funding fees, which are required of all veterans buying a home through a VA Loan, with the exception of those who receive a service-connected disability payment from the VA (or would receive it if they weren’t receiving retirement pay), and a surviving spouse of a veteran who died while in service, or of service connected disabilities. While that covers funding fees, it doesn’t cover all the associated VA Loan closing costs and fees you may be required to pay. Let’s cover a few other closing costs and fees home buyers using the VA Loan might experience.

VA Loan Closing Costs

The VA has strict rules regarding which fees veterans are required to pay, and which fees are considered non-allowable. Those fees which are considered “reasonable and customary” by each local VA office are considered allowable, otherwise they cannot be charged to VA Loan borrowers and are generally paid for by the seller. If you are applying for a VA Loan, you should be aware that some, or all, of the following fees may be applicable to your VA Loan application. Additionally, the lender may charge a fee equal to 1% of the loan, which can be used to cover expenses not on the following list:

  • VA Loan Closing Fees. These are generally minimal if non-existent, and are often rolled into the purchase price of the house.
  • VA Loan Funding Fees. Unless you are exempt, VA Loan funding fees are required by federal law.
  • VA required inspections and appraisals. The VA requires certain home inspections to be performed before they will fund the loan. The house must be in good repair, must match the description on all documentation, and it must appraise for the sale price or higher.
  • Credit report and score. This is charged by the lender, and is required. You can expect to pay around $15-$40 for this, but be sure to get it in writing before agreeing to pay – anything over $40 is excessive (note: you can get your own free credit score for personal use).
  • Title Insurance. This is essential, especially in our current economy. Many properties have been affected by foreclosures, fraud, and other serious problems – protect your investment!
  • Flood zone determination. Your lender will require you to carry flood insurance if your new home is in a flood plain or flood hazard area.
  • Survey. If required.
  • Taxes and assessments. Home buyers may be required to pay a portion of taxes or other assessments based on federal, state, and local laws.
  • Recording fees, documentation fees, and postage. Some lenders charge a variety of documentation and mortgage preparation fees. Be sure to get an itemized list in writing before going to closing so you have a good idea of what you are being charged, and whether or not the rates are reasonable.

Additional VA Loan Closing Fees

As mentioned above, the VA has strict rules regarding which fees cannot be charged to veterans. These fees are generally covered by the lender out of the flat 1% fee.

  • Documentation fees
  • Postage
  • Notary fees
  • Mortgage assignment and transfer paperwork
  • VA Loan application fees
  • and more

You should be aware that many of the fees associated with a mortgage are negotiable and should be discussed in advance of closing. Always review any associated fees and question them if you are in any doubt regarding the nature or cost of the fees. This is your home loan and your money, and no one cares about it as much as you do!

Do you know of any other VA Loan related fees?

Looking for a VA Loan? Check out VAMortgageCenter.com, which offers competitive rates on VA Loans and can help walk you through the entire application process.

Understanding VA Home Loan Funding Fees

VA Home Loans are one of the best ways for veterans to finance a home purchase. VA Loans offer veterans a chance to buy a house with little to no money down, and in many cases, the VA Loan interest rates are competitive with conventional mortgage rates, sometimes they are even lower. This was the situation my wife and I found when we recently used a VA Loan to purchase our home.

We would have easily qualified for a conventional mortgage since we have excellent credit scores, and since we put down over 2o% of the purchase price we would not be required to pay PMI, equalizing one of the benefits of using a VA Loan, since VA Loans are backed by the government and don’t require PMI. A conventional loan also would have been less work on our end – it would have required less paperwork and probably would have closed a few days more quickly. However, we were able to secure a lower interest rate, which saved us several hundred dollars per year and made it well worth applying for a VA Loan.

The final issue we had to consider, in addition to the interest rates, was the total amount of fees associated with the loan. This is where understanding how VA Loan funding fees work is important.

No closing costs with a VA Loan, but you have to pay a funding fee

Many veterans choose to use a VA Loan to finance their home is because they don’t have to pay any closing costs on their purchase and they don’t have to make a down payment. This can save home buyers several thousand dollars on the closing date. But VA Loans may be subject to a funding fee, which is required by federal law and is something that conventional loans don’t have. It’s important to be aware of these fees, and account for them when comparing a conventional and VA Loan.

VA Loan funding fees

The VA Loan funding fee is currently assessed at 2.15% of the purchase price of the home for veterans who are using a VA Loan for the first time and don’t put any money down.Veterans buying a home without a down payment and using a VA Loan for a second time are required to pay a 3.3% funding fee.

So a $200,000 house would have a $4,300 funding fee for a first time VA Loan user, and $6,600 for a second time VA Loan user. The VA Loan funding fee is required by federal law to have veterans help pay for the benefit of being able to buy a house with no down payment (this helps US tax payer dollars go further). This fee can be paid at closing, or it can be rolled into the purchase price – allowing the veteran to buy the house with no down payment.

VA Loan Funding Fee Reductions

Borrowers who make a down payment may be entitled to a reduction in their VA Loan funding fees. A down payment of 10% will result in a first time funding fee of 1.5%, greater than 10% will be 1.25% of the loan. The fess are 1.75% and 1.5% respectively for second time VA Loan users.

Members of the Guard/Reserves may pay a 2.4% fee for first-time use with no down payment, a down payment up to 10% requires a 1.75% fee, and a down payment of 10% or more comes with a 1.5% funding fee. Guard/reserve veterans using the VA Loan a subsequent time are required to pay a 3.3% funding fee if they are not making a down payment, a 1.75% fee for a down payment up to 10%, and a 1.5% funding fee for a 10% or greater down payment.

VA Loan Funding Fee Exemptions

There are some exemptions for the funding fee – for example, veterans may be exempt if they receive service connected disability compensation from the VA, and veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay. Additionally, surviving spouses of veterans who died in service or from service-connected disabilities may be exempt from paying VA Loan funding fees.

Be sure to speak with your lender if you believe you may be eligible to have the VA Loan funding fee waived. If you are eligible for this exemption, you will need to provide documentation of your VA disability to your waiver. You can accomplish this by contacting your regional VA center with your lender’s information and they will fax the appropriate documents to your lender. Allow for approximately 1 business week for this, though in some cases it can be accomplished within a day or two.

Being Aware of Funding Fees Helps You Compare

The VA Home Loan funding fees can make a big difference in the bottom line, and in some cases, might equalize the closing costs if you were to use a conventional loan. The best way to compare a VA Loan to a conventional loan is to list all associated costs, determine your down payment, and decide which option is best for your specific situation. If you are making a large down payment (20% or more), then you can probably make a case for either loan. If your down payment is small, or non-existent, then it may be best to go with a VA Loan. Again, run the numbers for your situation, and see which option is best.

Looking for a VA Loan? Check out VAMortgageCenter.com, which offers competitive rates on VA Loans and can help walk you through the entire application process.

Pros and Cons of Refinancing a VA Loan

One of the most popular military benefits is the VA Loan, which makes home ownership more easily attainable for thousands of veterans. Sometimes you can lower your monthly VA Loan payment by refinancing it at a lower interest rate, or by changing from an adjustable rate VA Loan to a fixed rate loan. Whatever the reason for refinancing your VA Loan, you should consider the pros and cons as they apply to your situation.

Benefits of s VA Loan Refinance

refinance a VA Loan

Should you refinance a VA Loan?

If your VA Loan is an Adjustable Rate Mortgage (ARM), you probably find that the interest rate tends to increase rather than decrease, which causes your monthly payment to increase.  It’s not unusual for homeowners with ARM loan payments to find themselves paying more than the current fixed mortgage rates. In this case, you will probably benefit greatly by refinancing your mortgage to get a lower, fixed interest rate.

If you have a first and second mortgage, refinancing into a single mortgage might help you consolidate your monthly bills to help you save money and make bill paying easier.

No matter what kind of mortgage you have, if the interest rates are at least a point lower now than they were when you obtained your loan, refinancing is probably worth the time and effort.  If you refinance for the same number of years you’ll extend your payment date, but end up with a lower monthly payment.  You can pay more than the monthly payment in order to reduce the number of years you owe on your home.

Disadvantages of a VA Loan Refinance

Refinancing a VA Loan usually involves fees, though in some cases you can roll the costs of the refinance into the new loan instead of paying anything out of pocket (you can do this with a VA Streamline refinance). Be sure to evaluate how the fees will affect your monthly payment and determine if it is worth your effort. If you know you will be moving within a few years it may not make sense to refinance because you won’t have time to recoup any savings.

Refinancing may cause you to pay more years on your mortgage.  For example, if you had only 15 years left on your 30 year mortgage, you may need to refinance for another 30 year term, which causes you an additional 15 years of payments. The only time this would make sense is if you could no longer afford your current payment and extending the loan for an additional 15 years will help prevent a foreclosure. Just keep in mind that if you do this, you will be paying thousands more in interest payments in the long run. Extending the duration of your loan should be a last resort.

Alternatively, sometimes a mortgage refinance will be a shorter period of time, which can increase your monthly payment drastically. Here is an example of refinancing a 30 year VA Loan into a 15 year loan.

If you are refinancing a mortgage in order to cash out your home equity (and use the money for home repairs, vacation, or something else) keep in mind that if home prices should drop you will owe more than the value of the home.  This is a problem if you try to sell your home before home values increase, again.

Run the numbers and apply them to your personal situation

In some cases, refinancing a VA Loan can save you hundreds of dollars each month, allowing you to quickly recoup the associated costs of refinancing your VA Loan. Additionally, refinancing into a fixed rate loan from an ARM can give you stability and certainty regarding your monthly VA Loan payment. In other cases, you may not save much with a refinance, and it may end up costing too much to be worth your time. Your best bet is to sit down and run the numbers based on how much you will save, how long you will live in the house, and any other relevant information.

Looking for more information about refinancing your VA Loan? Here are more options for refinancing a VA Loan and current VA Loan rates.

photo credit: nikcname.

What Credit Score is Needed to Refinance a VA Loan?

Many military veterans are considering refinancing their VA Loan due to mortgage rates being near historic lows. There are several benefits to refinancing your VA Loan, including a lower monthly payment, better terms, and potentially being able to pay off your VA Loan more quickly. Your credit score is one of the most important factors to consider when you apply to refinance your VA Loan, but it isn’t the only factor. Let’s take a look at what lenders look at when you apply to refinance your VA Loan.

What Credit Score do You Need to Refinance a VA Loan?

The first question that often comes to mind when considering a VA Loan refinance is what credit score is needed to qualify for the loan. This is an important factor to consider, but it isn’t the only factor you need to look at. Most mortgage lenders also take other factors into consideration when approving a refinance application. Some of these factors include your debt to income ratio, credit history, and the amount of home equity, or ownership you have.

You need a good credit score. Each lender has a different minimum credit score requirement for refinance approvals. However, you should assume that you need your credit score to be in a high credit score range. If your credit score isn’t high, hen you should work to improve your credit score before your apply for a refinance loan, which will help improve your chances of having your VA Loan refinance approved.

Debt to income ratio. Your debt to income (DTI) ratio represents the percentage of the monthly gross income that goes toward paying your fixed expenses such as debts, taxes, fees, and insurance premiums. Lenders us your DTI ratio as an indicator of cash flow to see how what percentage of your income is going toward fixed costs. Lenders use different standards for loan and refinance approvals, but the thing to remember is a lower DTI ratio is better than a high DTI ratio.

Credit history. Lenders use your credit history to verify how well you have handled credit in the past. Past performance isn’t always an indicator of future performance, but it has proved to be useful for lenders. A few blemishes may not hurt your chances of a VA Loan refinance, especially if they happened some time ago, since recent credit history is weighted more heavily. If you have problems with your credit history, then it may be best to try and clean things up for a few months before applying.

Home equity. The larger the percentage of your home yo own, the easier it may be to get approval for a refinance loan. Lenders typically prefer the owner to have around 20% home equity before they will approve a refinance loan, but this isn’t a hard rule with all lenders. There are also some government programs available for people who have less than 20% home equity.

What if Your VA Loan Refinance Application is Declined?

Lenders can approve or decline a refinance application for a variety of reasons, so your best course of action is to speak with the loan officer who declined your application and ask him or her to explain why your loan application was declined and if they have any recommendations you can use to improve your odds of being approved for a future VA Loan refinance application. You should also be aware that a new law will soon require lenders to give you a free credit score when they decline your loan application. This information can be helpful in determining your next steps to improve your credit score, or work on other areas, such as improving your debt to income ratio, improving your credit history, or increasing your amount of home equity.

Find current VA Loan Rates on our site, or visit VAMortgageCenter.com to see what your refinancing options are.