What is a VA Loan?
The VA Loan was implemented by President Franklin D. Roosevelt in 1944 through the original Servicemenʼs Readjustment Act also known as the GI Bill of Rights. The purpose of the bill was to provide housing and assistance for veterans and their families through a federally guaranteed program that allowed veterans to purchase a home with
no, down payment. As a result of this program, home ownership has become a reality for millions of veterans and their families.
VA guaranteed loans are made by private lenders, such as mortgage companies or banks, to eligible veterans for the purchase of a residence they must occupy. This guarantee protects the lender from loss and replaces the protection the lender generally receives by requiring a down payment. This guarantee protects the lender and allows
for more favorable financing terms for the veteran!
Who qualifies for a VA Loan?
In general, a service member may be eligible for a VA home loan if any one of the
following are true:
• Served 181 days during peacetime (Active Duty)
• Served 90 days during war time (Active Duty)
• Served 6 years in the National Guard or Reserves
• You are the spouse of a service member who died while in service or from a service-connected disability
Veterans who served on active duty must have a discharge other than dishonorable to
be eligible for a VA Loan.
Who should use a VA Loan?
First-time homebuyers are finding greater difficulty in qualifying for traditional loans because more and more banks are requiring that buyers come to the table with large down payments. A Conventional loan requires a minimum of 5% of your purchase price down to purchase a home, and in some instances as much as 10-20% down!
A VA loan is a great alternative to a traditional loan because it helps qualified veterans purchase a home with little or even no money out of pocket. This benefit opens the doors to homeownership sooner for many veterans who may have put off purchasing a home because they struggled to obtain financing or come up with the large down payments required.
What is the amount I qualify for?
As a rule, the purchase price of the property, or the fair value of the property, whichever is less, plus the funding fee may be borrowed. The VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250. This means the maximum loan amount for a VA home loan is $417,000.
What are the benefits of a VA Loan?
No Down Payment
A VA loan allows you to finance 100% of your homeʼs value. This means you can purchase your home with $0 down. This is possible because your loan is backed by the federal government. The VA Loan is one of the few loans that allows this, which puts home ownership in reach of many veterans today!
The chart below shows you how much you would be required to put down at closing with a traditional loan and what you can save with the no-money-down benefit of the VA Loan at closing:
Lower Monthly Payment
Private Mortgage Insurance, or PMI, is not required on a VA loan since your loan is guaranteed by the federal government. PMI is required on a Conventional loan when the borrower finances more than 80% of the homeʼs value to protect lenders in case the borrower defaults. Again, since your VA loan is backed by the federal government, you will not find this added monthly expense in a VA loan, potentially saving you thousands of dollars each year and allowing you to buy more house for your dollar!
Better Interest Rates
Interest rates are determined by the amount of risk the bank must assume to finance a loan. Since a VA Loan is guaranteed by the federal government, banks assume less risk and, as a result, VA borrowers often benefit from a lower interest rate!
Easier to Qualify
Most first-time homebuyers havenʼt established a strong credit history, making it more difficult for them to qualify for a traditional loan and receive a competitive interest rate. Since VA loans are guaranteed by the federal government and the bank assumes less risk, it is easier for a veteran to qualify for the loan at a competitive interest rate.
No Pre-Payment Penalty
When you pay off some traditional loans before they mature, you are often hit with a pre-payment penalty by your lender to recoup some of the interest it missed out on over the life of your loan. This penalty can be thousands of dollars. With a VA loan, there is NO pre-payment penalty when you pay your loan off early or refinance your loan for a
better interest rate.
Apply Basic Allowance for Housing
Lenders will include an active military memberʼs Basic Allowance for Housing (BAH) as effective income, which means you can use your BAH to pay your monthly mortgage!
Loan is Assumable
In the military, families are always on the move. When a loan is assumable, this means when you sell your house, the buyer can assume your loan. Basically, the loan stays with the house! With rates at all-time lows, this is a very attractive selling point if you need to move and sell your house down the road.
Are there any Fees associated with a VA Loan?
The Veterans Administration collects a funding fee on your VA loan. This amount is added to your loan. The first time you take out a VA loan, the funding fee is 2.15% of your loan. Each time thereafter, the fee is 3.3% of your loan, unless you put 5% down, in which case it is only 1.5%. If you have a service-related disability of 10% or greater, the funding fee is completely waived.
Can I use a VA Loan to purchase a vacation home or land?
A VA Loan can only be used for the purchase of your primary residence.
How do I get started?
Complete an online application or give us a call so we can get you pre-qualified and lock in a historically low-interest rate for you today!
Certificate of Eligibility
If you do not have a copy of your Certificate of Eligibility (COE), we can help acquire it for you during the loan process. This is the document you need that certifies you as the veteran and proves your eligibility for a VA guaranteed home loan.