About VA Home Loans
The VA Home Loan was created for veterans by the US Government in 1944 to assist returning service members and their families when purchasing a home during or after their term of service. If you have either served, are currently serving the country or your spouse has served, you could qualify for a VA Home Loan. The VA Home Loan is usually issued by a qualified lender and backed by the U.S Department of Veteran Affairs and can be used for both purchasing a home and refinancing.
How To Apply For a VA Home Loan
Get your COE
Getting your COE is the quickest and most important step when applying for your VA Home Loan. The three main ways to get your COE are:
- Through the VA eBenefits portal.
- Talking to a VA Educator.
- By filling out and mailing in an VA Form 26-1880 (not recommended)
To learn more about your COE check out our “All about your COE” article.
Where Can I Use My VA Loan?
You can use your VA Home Loan Benefit to purchase a home anywhere in the United States, and its territories and possessions including Puerto Rico, Guam, Samoa, The Northern Mariana Islands and the Virgin Islands.
The Benefits of a VA Loan
No Down Payment Required
2020 brought some exciting changes to the VA Home Loan. The VA Home Loan now allows for zero down payment up to any loan amount, but some lenders do restrict the amount you can borrow with no money down. Currently The Veteran’s Mortgage Source has no restriction on the loan amount with no money down as long as you can qualify for it and you have a clear VA entitlement. If you have a portion of your VA entitlement used you will have to follow your VA County conforming limit and the necessary entitlement calculations to decide you max no down payment financing amount. Please consult with a loan officer if you currently have a portion of your entitlement used for your specific calculation to decide your available no down payment loan amount, or overall qualifying power on loan amounts with a down payment.
Flexible Underwriting
The VA Home Loan has very flexible underwriting compared to conventional and other types of home loan financing. Credit scores can go as low as 40 points lower than conventional loans, meaning you don’t have to have a perfect credit score to qualify for a loan. VA loans allow for a higher debt to income ratio than other types of home loan financing. In some areas this could mean borrower can qualify for tens of thousands more in a home than conventional financing.
No Closing Cost Options Available
There is usually a rate option that will allow for the lender to cover your closing costs. The only closing cost that a lender can not cover is the VA funding fee. If you are a disabled veteran, you may qualify to have the fee waived completely. You will have an option to pay points or fractions of a point to buy down your rate, pay zero points at a higher rate, or take a higher rate with rebate pricing that allows the lender to provide lender credits for closing cost credits.
No Monthly Mortgage Insurance
In low down payment situations, Conventional, FHA and USDA loans all typically require monthly mortgage insurance premiums. Mortgage Insurance does not help you as a borrower in anyway. It insures the lender against your default and you pay a monthly fee as basically an insurance payment.
For a conventional, you can get away from the Monthly Mortgage Insurance by either putting 20% down or coming up with a down payment and second mortgage combination. Here are a few differences between a conventional home loan and a VA Home Loan:
Conventional Vs. VA Home Loan
Conventional Home Loan Financing:
- 3% – 5% lowest down payment options
- No upfront funding fee
- Monthly mortgage insurance / typically to 20% down
- FInanced lender credits for closing costs but rate adjustment is generally worse than a VA Home Loan
VA Home Loan Financing:
- Zero down payment available
- Upfront funding fee may be financed (If you are a disabled veteran, you may qualify to have the fee waived completely)
- No monthly mortgage insurance
- Possible financed lender credits for closing costs and no high increase in interest rates
