VA LOAN

The VA Loan is a government-sponsored mortgage backed by the U.S. Department of Veteran Affairs (VA) and offered through VA-approved lenders. It is available to all active-duty military, Veterans, reservists, National Guard, and surviving military spouses.

The most notable benefits of the VA Loan include no down payment, no mortgage insurance, flexible underwriting requirements, streamlined refinancing, and often a lower-than-average interest rate. 

VA Loan Eligibility 

VA Loans are available for active-duty military, Veterans, reservists, National Guard, and surviving military spouses. To apply, you must meet the following requirements:

• Provide a Certificate of Eligibility (COE)
• A debt-to-income ratio (DTI) of 41% or less (exceptions apply)
• The home must be your primary residence and the property must meet HUD guidelines
• Meet the conforming loan limits set by the Federal Housing Finance Agency (FHFA)

VA Loan Credit Score Requirements

While the VA has no minimum credit score, different lenders can have different minimum credit score requirements. Contact a loan officer for more details. 

VA Loan Down Payment Requirements

The VA Loan is one of two home loans that doesn’t require a down payment (the other being a USDA Loan). As long as the purchase price does not exceed the home’s appraised value, you can get up to 100% financing.

VA Loan Debt-to-Income Ratio (DTI) Requirements

Similar to USDA Loans, you should try to get your DTI no higher than 41% when applying for a VA Loan. Your DTI is your total recurring monthly debts (student loans, credit card payments, etc.), divided by your monthly pre-tax income, expressed as a percentage.  For example, if your rent is $1,000 per month, your car payment is $500 per month, and your monthly credit card payment is $800, your total monthly debt is $2,300. If your gross income is $6,000 per month, then your DTI is roughly 38% (2,300 ÷ 6,000 = 38.3).

Mortgage Insurance for the VA Loan

Typically, when you put less than 20%* down on a home, you are required to pay mortgage insurance, in the form of upfront and ongoing mortgage insurance premiums. The VA Loan, however, requires no mortgage insurance, so you will not be responsible for ongoing Private Mortgage Insurance (PMI) or Mortgage Insurance Premium (MIP) payments.

*Payment example: If you choose a $250,000, 30 year loan at a fixed rate of 3.3% (APR 3.5%), you would make 360 payments of $1,122.61. Payment stated does not include taxes and insurance, which will result in a higher payment. 

Properties Eligible for an VA Loan

Homes financed or refinanced with a VA Loan must be a 1 – 4-unit primary residence. Condos and townhouses are also eligible for VA financing, but they must be located in a community that is approved by the VA. If you choose to use your VA Loan benefit to finance a manufactured home, it must be on a permanent foundation and sold with land. VA Loans cannot be used to solely purchase land however, they can be used to finance new construction. Additionally, eligible properties will have to pass a VA Loan appraisal and meet the Department of Veterans Affairs’ minimum property requirements (MPRs), which are in place to help protect borrowers.

VA Loan Funding Fee 

A VA Loan includes a small, one-time funding fee of between 0.5% and 3.6% of your loan amount. This fee can typically be rolled into the loan or paid in full at closing. There are certain exemptions to the VA funding fee, such as Veterans who are receiving compensation for a service-related disability, active-duty service members who have received the Purple Heart, and more.

How to Apply for an VA Loan

To apply for an VA Loan you will need to provide the following:

• Your Certificate of Eligibility (COE) (To apply for your COE, you can submit an application online at va.gov.
  
• Proof of income and employment (pay stubs, tax returns, W-2 statements etc.)
• Documentation of financial assets (bank statements, etc.)
• Residential history (previous two years’ worth)
• Your credit history (it’s also a good idea to check your credit report - not score - click here
  
• Identity information like your driver’s license, Social Security card, and date of birth in order to apply