The Department of Veterans Affairs (VA) offers a mortgage loan that can be used by those who have served or are presently serving in the military. With no down payment required, and no mortgage insurance, this is one of the best loans available.
I’ll start out also by saying that if you are a servicemember, past or present, thank you for your service, and I would love to help you buy a home with this amazing program.
This was all due to the Department of Veterans Affairs which created this loan program in 1944 as part the G.I Bill to help returning service members purchase homes without having any money down. It’s helped more than 22 million veterans realize their dreams since! If you are a veteran or active duty military member interested in purchasing a home, here is what you need to know about VA loans.
Eligibility for a VA Loan
For current service members
If you’ve served for at least 90 continuous days (all at once, without a break in service), you meet the minimum active-duty service requirement.
For Veterans, you meet the minimum active-duty service requirement if you served for:
- At least 24 continuous months, or
- The full period (at least 90 days) for which you were called or ordered to active duty, or
- At least 90 days if you were discharged for a hardship, or a reduction in force, or
- Less than 90 days if you were discharged for a service-connected disability
National Guard & Reserves:
If you’ve served for at least 90 days of active duty, you meet the minimum service requirement.
Six years of service in the Selected Reserve or National Guard, AND
- Were discharged honorably, OR
- Were placed on the retired list, OR
- Were transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable, OR
- Continue to serve in the Selected Reserve
If you meet any of the above criteria, you may be eligible for a VA loan. The next step is to get a Certificate of Eligibility (COE) from the Department of Veterans Affairs to confirm your eligibility. Most often, your loan officer or someone on their team will request this from the VA, so don’t worry about getting this doc. You will need to make sure you have your DD214 available.
Once you have your COE, your DD214, and filled out an application with your lender, you’re ready to start shopping for a home! There is no technical minimum credit score required for a VA loan, but lenders may have their own minimum credit requirements. Typically, a lender will require a credit score of 580 or higher for approval.
Types of VA Loans:
There are two main types of VA loans:
1. Purchase Loans: These loans can be used to buy a home or build a home.
2. Refinance Loans: These loans can be used to refinance an existing VA loan or non-VA mortgage. There are several different types of refinance loans, including the Interest Rate Reduction Refinance Loan (IRRRL) and the Cash-Out Refinance Loan.
Purchase Loan. A Purchase Loan can help you purchase a home at a competitive interest rate. Generally, you do not have to make a down payment or buy mortgage insurance to obtain a purchase loan.
Streamline Refinance Loan. With the VA Streamline Refinance Loan (also called the “Interest Rate Reduction Refinance Loan” or IRRRL) you can obtain a lower interest rate by refinancing your existing VA loan. You can also refinance a VA adjustable rate mortgage (ARM) into a fixed rate mortgage.
Cash-Out Refinance Loan. If you want to cash out your home equity so you can pay other debt, pay for school tuition, or make home improvements, then VA’s Cash-Out Refinance Loan may be an option. The Cash-Out Refinance Loan can also be used to refinance a non-VA loan into a VA loan. VA will guarantee loans up to 100% of the value of your home.
The Benefits of a VA Loan
There are many benefits that come with getting a VA loan. Perhaps the most significant benefit is that you can buy a home with no money down. That’s right, a zero down payment! This can be especially helpful for first-time home buyers who may not have all the cash saved up for a down payment on their dream home. In addition, there is no mortgage insurance required with a VA loan, which can save you thousands of dollars over the life of your loan. Closing costs can also be covered by the seller, and there are limits on how much they can charge you. Lastly, interest rates on VA loans are often lower than conventional loans because they are backed by the government.
Fees & Limits
The VA Home Loan Program is a great benefit for Veterans, but there are some fees associated with the program. The funding fee for first-time Veterans and those who have used their eligibility already is higher if they don’t make a down payment.
There are some situations where the funding fee is waived. For example, if you have a service-connected 100% disability or are the surviving spouse of a Veteran who died in service or from a service-connected disability, you are not required to pay the funding fee.
Veterans with their full entitlement can get a loan for as much as their chosen lender is willing to give them without anything for their down payment. If you are a veterans with an existing VA loans or you defaulted on a previous VA loan, will encounter a limit for a zero down payment loan.
VA home loan limits are the same as the Federal Housing Finance Agency (FHFA) limits. These are called conforming loan limits. Check out the current list of county loan limits at https://www.fhfa.gov/DataTools/Downloads/Pages/Conforming-Loan-Limit.aspx
The national conforming loan limit for 2023 for a one-unit property is $726,200. In general, most areas will have that as their maximum, while higher cost of living areas can cap out at $1,089,300. Any difference will need to be made up for with a down payment.
If you are active duty, or a veteran, and you’re thinking about buying a home, you’ll want to take advantage of a VA loan!
With flexible eligibility requirements and generous benefits like no money down and no mortgage insurance, it’s easy to see why so many veterans and military members take advantage of this great program!
Contact us today and we can pull your certificate of eligibility, and see if a VA loan makes sense for you!