VA Home Loans
VA home loans are mortgage loans guaranteed by the United States Department of Veteran Affairs (VA).
What are VA home loans?
A VA home loan is a particular type of mortgage for those who are veterans or are currently serving in the U.S. military. The VA does not lend money for these loans. Instead, these loans are issued by private lenders, such as banks and mortgage companies, but backed by the Department of Veteran Affairs.
There is no limit on how much you can borrow, but there are local county limits that determine how much the VA will guarantee on that loan. Additionally, VA home loans can only be used for a primary residence. Investment properties or vacation homes are not eligible.
Who is eligible for VA home loans?
VA home loans are intended for veterans and those presently serving in the U.S. military. These may include:
Military members who have served a minimum of 181 continuous days on active duty
Military members who have served a minimum of 90 days during wartime
Military members who have served a minimum of 6 years in the National Guard or Reserves
Spouses of those killed in the line of duty
For a detailed list of eligibility requirements, visit the U.S. Department of Veterans Affairs’ website.
To apply for the loan, you must obtain a Certificate of Eligibility (COE) from the VA. This document certifies that you have a VA entitlement, which is how much money the VA will guarantee on your loan. Furthermore, the COE proves that you are eligible for this home loan program.
There are also additional eligibility conditions to qualify for a loan, such as proper credit and adequate income to afford the home. The lender determines these requirements.
What are the benefits of VA home loans?
One significant benefit of a VA home loan is that a downpayment is not required if the property’s purchase price is within the local VA loan limit. Additionally, the mortgage interest rate is typically lower than the rate on a conventional loan. VA loans are also assumable mortgages, which makes you an attractive seller should you decide to sell your home. Furthermore, this program limits the expense of your closing costs and does not require private mortgage insurance.
It is important to note that although mortgage insurance is not required, there is a one-time VA funding fee that serves to protect the lender if the borrower defaults. The fee is customarily 1.25% to 3.3% of the loan balance. Even though a downpayment is not required for a VA loan, a downpayment of 5% or more will likely reduce your VA funding fee, and ultimately lower your monthly payment as well.
How to apply for a VA home loan?
- Confirm eligibility for the VA home loan by checking on the VA website.
- Find a VA lender.
- Obtain your Certificate of Eligibility from the VA by applying on their website, by mail, or through your lender using the Web LGY system.
- Apply for your VA loan with your lender.