VA home loans have been helping military members and their families achieve the dream of homeownership since 1944. Currently, "...nearly 90% of all VA-backed home loans are made without a down payment. (va.gov)" which makes the path to homeownership free from many of the obstacles traditional loans can encounter. So, no matter which branch of service, whether you’re active service, a veteran, or their spouse, VA Loan programs are an amazing benefit to members of the Armed Forces. Don't let the loan process scare you away from buying your new home, let's learn a little more about this and how to qualify.
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What is a VA Loan?
The VA loan benefit is a mortgage offered through a Department of Veterans Affairs loan program and is available to active duty service members and veteran military service personnel and their families. These loans can be used for any purpose, including buying or refinancing your home and it does not require you to put down 20% as with other types of loans. In fact, it's one of the few loan types that remain to offer zero down payment options. VA loans are backed by the federal government, but issued through private lenders such as mortgage companies or private banks.
What are the benefits of a VA Loan?
1. Lower Interest Rates
The annual percentage rate on VA loans may be less than traditional mortgage loans by as much as a percentage point or more. These favorable terms can mean savings of tens of thousands of dollars over the life of a typical 30-year mortgage. These competitive interest rates make VA Loans very attractive to military members who are first-time homebuyers looking to keep their monthly mortgage payments to a minimum.
2. No Down Payment or Low Down payments
With a VA loan, it's possible for your loan application to be approved without putting anything down toward the purchase of the home depending on the size of the loan. The VA grants all eligible borrowers a "basic entitlement" of $36,000, which can be used for a down payment. In fact, most lenders will issue a loan for up to four times the basic entitlement without the need for a down payment.
You may be required to put up to 20% down if you're looking to borrow more than the above but the upfront costs will still be much lower than with conventional loans.
3. No PMI (Private Mortgage Insurance)
With traditional mortgages, down payments of less than 20% will usually require you to purchase PMI or private mortgage insurance. This protects lenders from the possibility that you might not repay your loan and provides a safety net for the lender. However, VA loan recipients aren't required to purchase PMI because the VA guarantees every loan. With this benefit, you're able to save those costs and apply them to a higher monthly payment if you wish.
4. Get VA Loans in Succession
Best of all, VA home loans are a lifetime benefit to military members, veterans, and their families - they can be used multiple times.
As long as you continue to meet the VA loan income and borrowing requirements, you may apply for and receive additional loans if you've paid off one loan and sold the property associated with it.
You may also be approved for a second VA loan even if you're the owner of a home that's been purchased and paid off with a previous loan via a special one-time dispensation.
5. Transfer VA Loans
As long as the transferee meets the eligibility criteria and accepts the original loan terms (Interest rate, repayment schedule, etc) - You're able to transfer the remainder of your loan to another qualifying veteran, service member, or spouse instead of selling the property.
Once this process is complete, you're then able to apply for another VA loan.
Get a COE or Certificate of Eligibility
Ok, so now you know all about the amazing benefits of a VA Loan - how do you go about starting the loan process? Let's start with getting a COE or a Certificate of Eligibility.
A COE proves your VA loan eligibility to a private lender. It's not necessary to have one when you apply, but the lender will pull it anyway so having one in hand can speed up the process. The COE is in essence your pre-approval letter before you begin the search for a new home.
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What are the eligibility requirements for a VA Loan?
Not everyone who has served in the Armed Forces will qualify for a VA mortgage. To be eligible for a VA Loan, you do have to meet some minimum service requirements for Veterans and service members on active duty. Review the table below to see where your benefits eligibility falls:
Between September 16, 1940, and July 25, 1947 (WWII)
• 90 total days, or
• Less than 90 days if you were discharged for a service-connected disability
Between July 26, 1947, and June 26, 1950 (post-WWII period)
• 181 continuous days, or
• Less than 181 days if you were discharged for a service-connected disability
Between June 27, 1950, and January 31, 1955 (Korean War)
• 90 total days, or
• Less than 90 days if you were discharged for a service-connected disability
Between February 1, 1955, and August 4, 1964 (post-Korean War period)
• 181 continuous days, or
• Less than 181 days if you were discharged for a service-connected disability
Between August 5, 1964, and May 7, 1975 (Vietnam War), or February 28, 1961, to May 7, 1975, if you served in the Republic of Vietnam
• 90 total days, or
• Less than 90 days if you were discharged for a service-connected disability
Between May 8, 1975, and September 7, 1980 (post-Vietnam War period), or Between May 8, 1975, and October 16, 1981, if you served as an officer
• 181 continuous days, or
• Less than 181 days if you were discharged for a service-connected disability
Between September 8, 1980, and August 1, 1990, or Between October 17, 1981, and August 1, 1990, if you served as an officer
• 24 continuous months, or
• The full period (at least 181 days) for which you were called to active duty
Between August 2, 1990, and the present (Gulf War)
• 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 hardship, a reduction in force, or for convenience of the government, or
• Less than 90 days if you were discharged for a service-connected disability
You separated from service after September 7, 1980, or After October 16, 1981, if you served as an officer
• 24 continuous months, or
• The full period (at least 181 days) for which you were called or ordered to active duty, or
• At least 181 days if you were discharged for hardship, a reduction in force, or for convenience of the government, or
• Less than 181 days if you were discharged for a service-connected disability
I'm on active duty now
• 90 Continuous Days
Source: va.gov
There are additional opportunities to receive a COE depending on specific situations. Consult VA.Gov or your loan officer for more details.
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What if I don't meet the minimum requirements?
If you've been discharged before one of the above stipulations, it's still possible to get a Certificate of Eligibility if a discharge was for one of the following reasons:
• Hardship
• The Convenience of the Government
• Early Out
• Reduction in Force
• Certain Medical Conditions
• A Service-Connected Disability
• Check with your loan officer to confirm your loan eligibility if you fall into one of these categories.
Do First Responders Qualify for VA Loans?
Many law enforcement officers and other first responders have served in the Military and meet the loan requirements above. Unfortunately, unless a first responder has served in the Military under the above eligibility criteria, they and their spouses do not qualify. Luckily, there are a variety of services and homebuyer programs available for first responders so GET IN TOUCH with us or your mortgage lender to discuss your options.
Do National Guardsmen Qualify for VA Loans?
In order to qualify, you will need to have served 6 years or more with the National Guard or Reserves. GET IN TOUCH to discuss whether or not you meet the requirements under your current situation.
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What Else Should You Know About VA Loans?
A few final things to remember about VA loans you may not know. The closing costs of VA loans are typically less than with the use of traditional loan methods.
VA guidelines don't state a minimum credit score to qualify and are usually more lenient toward lower credit scores, bankruptcy, and foreclosure situations, as well.
With a VA Loan there is no loan limit, meaning the VA doesn't limit how much you can borrow but they do have a cap on their guarantee. In order to qualify for a no down payment loan, there is a loan limit of $548,250 or less in most of the country.
There are various loan options within the VA home loan program so GET IN TOUCH with us today to learn more about your choices.
As a retired member of the military (Ret. USAF) serving for 22 years, we know the stress that can come from trying to navigate the home buying and selling process while trying to relocate. We know from a first-hand perspective! So, we're confident that we can help you navigate the VA Home Loan process with ease. And if you're wondering where to start now that you want to buy a home, we can help you through every step of the process, as well.
