Get a home loan for up to $453,100 with the VA Loan.
Did you know that if you are currently in the military or are a military veteran that you may be eligible to participate in the VA Loan program?
VA Loans are one of the best benefits programs that are available to almost all veterans – and one of the best kept secrets!
What is a VA Loan?
The VA Loan Guaranty program was created over 65 years ago to honor the service and sacrifice of the nation’s military members.
The VA home loan program was created to spur homeownership among a deserving demographic that has at times struggled to find financial stability — current military members and veterans of the US armed forces.
Since the close of World War II, the US Department of Veterans Affairs has helped more than 18 million veterans and their families become homeowners.
A VA Loan is a home loan that is guaranteed by the Department of Veterans Affairs and can be used to purchase or refinance a home. VA Loans come with a guarantee from the U.S. government.
Basically, the VA agrees to repay about a fourth of a borrower’s mortgage if he or she winds up defaulting.
That guarantee gives a greater degree of confidence to lenders, who in turn can typically offer qualified borrowers excellent mortgage rates and loan terms.
No Downpayment Required! This is probably the single most popular benefit of VA loans.
In fact, over the past few years, VA loans are the only true mortgages offering 100% financing. Other mortgage types work with a first and second mortgage combination and are typically limited to low-income borrowers.
But with a VA loan, both active duty service members and eligible veterans are allowed to purchase a home with virtually no money down.
You can even do a refinance for up to 100% of the appraised value of your current home.
This benefit is a major advantage for active duty service members, as well as recently discharged veterans.
There’s often a need to provide shelter for your family, but little opportunity to save money for a down payment.
If this describes your situation, a VA loan is the perfect home financing option for you.
But that’s not the only benefit of VA loans.
Uses and Benefits of VA Loans
VA loans can be used just like other types of mortgages.
They can be used to purchase or refinance a single-family home or VA approved condominium. They can even be used to buy a farm residence, or a multi-family home (up to a four-plex).
But they also have several benefits over other types of mortgages.
As mentioned above, perhaps the biggest benefit of a VA loan is that you can purchase or refinance a home with 100% financing.
That means that you can either buy a house with zero down payment or even refinance up to 100% of the value of a home you already own.
VA loans also enable property sellers to pay up to 4% of the purchase price of a home toward closing costs.
By contrast, conventional mortgages allow only 3% seller paid closing costs on properties purchased with a down payment of less than 20%.
This is another example of how VA loans save veterans money on upfront cash for the purchase of a home.
Private mortgage insurance, or PMI, is another unique benefit of VA loans.
Like FHA mortgages, VA Loans require an upfront mortgage insurance premium. This is called the VA Loan funding fee. But that can be added to your loan amount and financed over the term of the mortgage.
More significantly, unlike either FHA mortgages or conventional mortgages, VA loans do not require monthly PMI premiums. Those premiums can be significant, making it more difficult to qualify for a loan or manage a house payment.
But with the VA loan, no monthly PMI is required.
It’s also generally easier for a veteran to qualify for a VA loan based on income and credit than he or she would be for a conventional mortgage.
VA Loan Eligibility and Financing
VA loan eligibility is restricted to veterans only.
There’s a misconception that the loans are actually made by the Veterans Administration.
But in fact, the loans are made by private lenders, and only insured by the VA.
In the event of a loan default, the house will be sold to enable the lender to recover the remaining balance of the mortgage.
But if the proceeds from the sale are insufficient to pay the remaining loan balance, the VA will pay up to 25% of the loan amount.
It’s this insurance coverage provided by the VA that encourages lenders to make loans to veterans.
In most areas of the country, VA loans are available for up to $453,100, as of 2018.
However, there are more than 200 counties in the US that are considered to be high-cost areas. In those counties, VA loan amounts are even higher.
To be eligible for a VA loan, you have to meet one or more of the following criteria:
- You’ve served at least 90 consecutive days of active service during wartime
- You’ve served at least 181 days of active service during peacetime
- You have at least six years of service in either the National Guard or the Reserves
- You are the spouse of a servicemember who has died in the line of duty, or as a result of a service-related disability
If you’re not sure if you qualify, check with a VA approved mortgage lender.
They’ll be able to make the determination quickly.
And even if it turns out you’re not eligible for a VA loan, you can still apply for either a conventional or FHA mortgage.
Applying for a VA Loan
Applying for a VA loan may seem complicated, but it’s no more so than any other type of mortgage.
For the most part, you won’t be dealing with the Veterans Administration itself, but instead with the mortgage lender.
The only time the VA will come into the picture is when you need to get your VA Certificate of Eligibility, and even that can be easier than it seems.
The loan process starts with finding a VA approved lender.
Not all lenders are approved, nor do all choose to participate in the program.
Once you do make application, it will include completing the standard mortgage industry documentation, plus a few forms specific to VA loans.
Apart from completing the application paperwork, you’ll need to supply certain documents, like recent pay stubs, W-2s, and bank statements.
An application fee is usually collected upfront, which is used to pay for the credit report and appraisal.
You’ll also need to obtain your VA Certificate of Eligibility, but the mortgage lender will usually be able to help you with this process.
You’ll need to provide a copy of your discharge papers, showing that you are honorably discharged (you won’t be eligible if you were dishonorably discharged).
If you don’t have a copy of your discharge papers, you’ll need a copy of your DD214, proving your military service.
You can apply directly to the VA to obtain your Certificate of Eligibility, but if you provide the above documentation to your mortgage lender, they’ll be able to obtain it quickly.
How to Qualify for a VA Loan
Once you have your Certificate of Eligibility, it’s just a matter of qualifying for a VA loan.
Qualifying for a VA loan is similar to the way you would qualify for any other type of mortgage, but it can be even easier since the loan comes with the guarantee from the VA.
It’s important to understand up front that having a Certificate of Eligibility doesn’t guarantee loan approval.
It only means you’re eligible to participate in the VA loan program.
You’ll have to qualify on the basis of your credit, your employment, your income, and your overall debt level.
On the credit side, you’ll generally have to have a credit score of at least 620.
Some lenders may accept lower, but you’ll need to have strong offsetting factors.
Just as is the case with any other type of loan, it’s always best to clean up any credit issues you can before making the application.
The better your credit score, the better the loan application process goes.
You should be prepared to demonstrate a minimum of two years of stable employment, which can include your time in the military if you are recently discharged.
You could even qualify for a VA loan as an active member of the military, based on your service related income.
Other mortgage types use debt ratios to determine your qualification.
VA loans use what’s known as a residual income method. It subtracts your living expenses from your income – including your new house payment – and requires that there’s a residual income amount remaining.
There are different requirements for the residual amount based on the size of your family.
For that reason, the lender will have to go through the income qualification process to determine how much loan you can afford.
Refinancing with a VA Loan
Refinancing with a VA loan works just as it does with other mortgage types. But VA loan refinances can be even more generous than either conventional or FHA financing.
You can do a VA loan refinance to lower your interest rate and/or monthly payment.
But you can also do a cash-out refinance.
One of the big advantages of a cash-out refinance using a VA loan is the potential to borrow 100% of the value of your home, up to the maximum loan amount in your area (once again, generally up to $453,100).
You apply for a refinance just as you would for a purchase, but the amount of the loan will be based on the value of your property.
If you currently have a $300,000 outstanding mortgage balance, and your property appraises for $400,000, you can borrow any amount up to $400,000.
That would include paying off your existing mortgage, plus taking cash out for other purposes.
And just as is the case with a VA loan for the purchase, you will have to qualify for a refinance.
That will include the usual qualifications for credit, income, employment, and debt levels.
But there is an exception to the usual qualification rules…
The VA IRRRL Refinance
If you’re going to do a simple rate and term refinance, the guidelines on VA loans are relaxed.
By doing what is known as a VA Interest Rate Reduction Refinancing Loan (IRRRL) you can avoid many of the qualification hurdles required in an ordinary refinance.
You can use an IRRRL to refinance to a loan with a lower interest rate or convert an adjustable-rate loan to a fixed rate.
It must be used to refinance another VA loan (if not, you’ll have to do a regular VA refinance, with full qualification requirements).
The one restriction on these loans is that you cannot take cash out, over and above paying off your existing mortgage and associated closing costs on the new loan.
But in exchange for that restriction, you won’t need to be qualified based on your income and credit.
Since the new loan will be lowering your monthly payment or moving you into a more stable loan type, your credit and income won’t be factors as long as you have been able to make regular payments on your current loan.
VA Loan Refinance – Potential Savings You may be able to save hundreds of dollars per month by refinancing your VA loan, and tens of thousands of dollars over the course of your loan.
To determine how much you can save, you can find a mortgage refinance calculator online and enter your current loan details (interest rate, term, and loan amount) and compare it to the terms of your new loan.
The calculator will show you how much you can save over the course of refinancing your loan.
View VA Loan Interest Rates or Apply for a VA Loan
It’s best to shop around when applying for a VA Loan. Not all companies are created equal, and some VA Loan Lenders are better than others!
We recommend contacting a company that specializes in originating VA Loans. They are generally better able to field your questions, obtain the proper paperwork on time, and coordinate the requirements of a VA Loan.
Use this form below to contact VA Loan specialists who can help you obtain the information you need to apply for a VA Loan or to refinance your current VA Loan.
You can also visit one of our trusted partners for more information on VA Loans, such as USAA Federal Savings Bank.
Finally, there are companies such as LendingTree, which provide quotes from multiple lenders, which reduces the footwork on your end.
Use the chart to directly apply for a VA Loan purchase, or for a Streamline Refinance from one of our trusted partners.
Current VA Loan Rates
If you are shopping for VA Loan rates, you can use the chart below to give you a good idea of what kind of rates you may be eligible for.
Keep in mind that rates vary based on many factors, including your region, the price of your home, your credit score, your income, and other factors.
You will need to contact a lender and apply for a loan to get an accurate quote.
See our VA Loan refinance calculator below this chart.
Keep in mind the rates in the above chart aren’t a guaranteed offer at that rate.
A loan you will be offered will depend on your location, credit score, home value, amount of loan, size of down payment, and other factors.
If the numbers work out in your favor, you may consider refinancing.
Thank you for your service!