How Do Va Loans Work
Basically, you fill out paperwork from the VA that verifies your eligibility for the program. You also receive whats known as your entitlement, which is the dollar amount guaranteed on each VA loan. Lenders might be willing to loan up to four times the amount of your entitlement.
With all of that in place, its possible to get a VA loan with no money down. VA loans also dont require private mortgage insurance , but you will pay a VA funding fee when you close, which will be a percentage of the loans total value. That fee helps keep the program running for future borrowers.
What Are Va Loan Underwriting Requirements
Each lender has its own criteria for deciding whos a good risk for a mortgage. However, there are some basic things to keep in mind:
- Borrowers need to show they have the income to make the mortgage payments.
- They shouldnt have a huge debt load.
- While there is no minimum credit score requirement, borrowers might have a hard time getting approved by a lender if they dont have at least a 620 FICO Score.
Its also possible to use home loan benefits after bankruptcy, as long as sufficient time has passed, typically two years after filing for Chapter 7 bankruptcy or 12 months after Chapter 13 bankruptcy.
How To Qualify For A Va Home Loan
To qualify for a VA home loan, you must be active duty military, an honorably discharged veteran, or a military service member of the reserves or National Guard. Eligible surviving spouses of service members may also apply for a VA loan. To get approved, you must purchase a primary residence and obtain a valid Certificate of Eligibility from the VA. This form confirms your VA loan eligibility.
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Va Loan Entitlement And Max Va Loan Amounts
It’simportant to understand that there’s nomaximum amount on a VA loan. You can get as much as the lender is willingto give you without the need for a down payment, provided you qualify and have your full VA loan entitlement.
Someof the country’s most expensive areas have loan limits that exceed theconforming loan limit. Think parts of California, New York, Virginia, Hawaiiand a handful of other states.
TheVA has higher loan limits in those high-cost counties that can range up to $970,800.
Going Beyond The Basic Entitlement
Doesn’t sound like much? Not to worry. For homes over $144,000, the VA will guarantee up to one quarter of purchase price up to the local loan limit determined by the Federal Housing Finance Agency for a single-family home. That ranges from $417,000-$625,500 depending on local real estate values, and even higher in parts of Hawaii .
You can still use a VA loan to buy a home that exceeds those limits but if you do, you’ll need to make a down payment equal to 25 percent of the excess. So if you buy a home for $517,000 in an area with a loan limit of $417,000, you’d need to make a down payment of $25,000, or 25 percent of the difference between the two. Your VA guaranty on the loan would be $104,250, or one-quarter of $417,000.
The great thing about a VA guaranty is that it takes the place of a down payment. If you buy a $300,000 home with a $75,000 guaranty, the VA is guaranteeing it will repay up to $75,000 to the lender in the event of a default. So the lender would have to recover less than $225,000 in foreclosure before it would suffer any loss.
From a lender’s perspective, that’s similar to the security provided by a $75,000 down payment. So it’s willing to offer you its best terms. That’s also why VA loans don’t require mortgage insurance, which is required on conventional mortgages with less than 20 percent down.
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Your Home Must Qualify For Va Loan
This is one of the harder aspects of VA loan restrictions to explain. Before you can purchase your home using VA loans, your property must qualify. The VA will send a specially appointed VA appraiser to assess the house. Here is a good breakdown of the VA property requirements but in general, your home must be a conventional home in good working condition.
Down Payment Calculation When The Loan Exceeds The Va Limit
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- $800,000$46,937
Though a down payment of several thousand dollars isn’t insignificant, consider the benefit VA loans offer compared to conventional loan products. With conventional loans, borrowers often must make a down payment equal to 20 percent of the purchase price to secure competitive home loan terms and rates, and no mortgage insurance. In the scenario described above, you would be required to make a $100,000 down payment for a conventional loan compared to the $20,750 down payment of a VA loan.
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Va Loan Limit Table By County
VA loan limits determine how much a Veteran with reduced entitlement can borrow before needing to factor in a down payment. VA loan limits vary by county and currently range from $647,200 to $970,800.
The table below breaks out VA loan limits by county. If you’re unsure of your county, use our calculator above and input a city or zip code.
Keep in mind, if you have full VA entitlement, VA loan limits won’t apply. If you’re unsure if you have remaining entitlement, Veterans United is here to help. Contact a home loan specialist today.
The Bottom Line: Entitlement Helps You Understand How Much You Can Borrow With Zero Down
Your VA loan entitlement amount tells you how much of your loan the VA will guarantee.
If youre a first-time VA borrower or youve paid off a previous VA loan and sold the property you used the loan to purchase, you should have full entitlement, which means that the VA will guarantee up to 25% of your loan, with no loan limit.
If you have entitlement tied up in another loan, your entitlement amount will be limited by your countys loan limit and how much of your entitlement has already been used. If you want to borrow beyond this, youll need to bring a down payment to the closing table.
No matter how much entitlement you have available, youll ultimately only be able to borrow as much as a lender is willing to give you. Plus, you want to ensure youre getting a loan your budget can comfortably handle. Rocket Mortgage® has a few different tools you can use to get an idea of how much you can afford.
Ready to start the home buying process? You can apply online with Rocket Mortgage.
Get approved to refinance.
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Compare Top Va Purchase Lenders
Take the guesswork out of finding a VA Loan provider. Veterans United Home Loans created this site to educate and empower military homebuyers. Regardless of what lender you pick, it’s always a good idea to compare and know your options.
- NMLS #1907 Loading Reviewsâ¦
- Veterans United ranks No. 1 in Customer Ratings for VA purchase lenders, according to ratings and reviews collected by TrustPilot.
- In 2021, Veterans United closed 68,763 VA Purchase Loans.
Requirements For A Va Home Loan
Essentially, anyone who has served in the U.S. armed forces and was not dishonorably discharged may be eligible for a VA loan, although the specific requirements depend on when you served and what branch of the military you served in.
Heres a quick look at how VA loan requirements compare to typical conventional loan requirements:
Even though the VA will guarantee up to 25% of your loan, the lender is still taking on most of the risk. As a result, lenders often have tighter borrowing requirements than the minimums allowed by the VA.
For example, even though the VA doesnt have a , you shouldnt expect to qualify with a rock-bottom credit score.
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Whats A Va Loan Partial Entitlement
VA entitlement isnt a one-time benefit. If you havent used your full loan entitlement, you may be able to use the remaining portion for a second VA loan in the future. This is called a VA partial entitlement and can allow you to purchase another home without selling your first one. This is common with military members making a PCS.
An important thing to remember with partial entitlements is that theyre often not enough to cover a homes full price. When this is the case, your lender may require a down payment to offset this risk.
You should also prepare for a higher VA funding fee on your second loan. The exact amount will depend on your down payment size, but it will generally fall between 1.4% and 3.6% of the loan total.
Documents Required For Coe:
You can apply for a Certificate of Eligibility through your private lender, by mail or online using the eBenefits portal. Documents needed to apply include a copy of discharge or separation papers if youre a veteran or a former National Guardsmen or Reservist. Current active duty service members, National Guard members and Reservists must provide a Statement of Service signed by their commander.
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Va Home Loan Closing Costs Faqs
Does a VA loan cover closing costs?
You may be able to roll the VA funding fee into the loan to reduce the amount of closing costs you need to buy a home with a VA loan. Sellers can pay up to 4% of the loan amount toward your closing costs, and you can also apply for closing cost assistance if its available in your area and you meet the eligibility requirements .
What are the average closing costs on a VA loan?
Closing costs usually total between 2-5% of the loan. On a $200,000 loan, closing costs might range from $4,000 to $10,000.
How can I avoid closing costs with a VA loan?
You can negotiate with the seller to pay some of the closing costs . Your lender may also be able to roll your VA funding fee into the loan.Additionally, the lender can give you a credit in exchange for taking a higher interest rate. Sometimes, you only need to take a slightly higher rate to receive a substantial amount from a lender credit.
When You Might Need A Second Va Loan
There are a few situations where you might need a second VA loan:
- If youre a service member who receives permanent change of station orders and you have to move to a new duty station. This would allow you to have two primary residences.
- If youre a previous VA loan borrowers who lost your home due to foreclosure, you can still use your VA benefit again after waiting a certain amount of time after your foreclosure. This is usually two years. However, if youre in financial hardship, you may qualify for financing sooner. Each lenders guidelines may be different.
- A VA loan assumption can restore your VA loan entitlement to full. An assumption means that someone else takes over your loan, assuming the interest rate, monthly payments and loan balance. This person must meet VA loan requirements themselves and be willing to transfer their own VA loan benefits, so your entitlement is restored.
- You can apply to have your VA loan entitlement restored in full once if you pay off your VA loan, but dont sell your home. This would allow you to purchase another home with a VA loan to be your primary residence, while keeping the other property to serve as a vacation home or rental property.
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Attorney Fees $400 Varies By Location
Lenders cant charge veterans for attorneys fees, but the VA does allow veterans to pay attorney fees for title work. The VA also allows veterans to seek independent legal counsel for such things as sales agreement and lending document reviews. Legal fees vary depending upon individual attorney or law firm rates.
What Is A Va Loan Entitlement
VA entitlement is one of the most important aspects of buying a home as a Veteran. Its a confusing topic for pretty much everyone who is new to it, especially when you consider how high the stakes are as a first-time homebuyer. Understanding the fundamentals of entitlement makes navigating the VA home loan process and getting the housing youre looking for much more straightforward.
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Can You Have Two Va Loans At Once
It is possible to have two VA loans at once for two separate primary residences. Having two VA loans at once typically applies to active service members who receive PCS orders.
Rather than sell the home, you could look to rent it out and buy again at the new duty station using your remaining VA loan entitlement.
It can be a confusing subject, and it’s best to talk to an experienced loan officer about the VA’s occupancy requirements and if your unique situation allows you to have two VA loans at the same time.
Using Your Full Entitlement
If youve got your full entitlement to use, great! This indicates that either youre a first-time VA loan user, or youve fully paid off a previous VA loan. This means you have that full $36,000 entitlement amount. Because theres no limit on how many times you can use your VA loan benefit, each time you pay off a VA loan, that $36,000 is restored.
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What Is A Va Home Loan
VA home loans can be used to refinance an existing mortgage with either the IRRRL Streamline Refinance or a cash out refinance. VA loans are one of the most popular choices among eligible first-time home buyers because of the exceptional benefits they offer military borrowers, including lower rates than most traditional banks.
A VA loan is a mortgage guaranteed by the U.S. Department of Veteran Affairs. VA loans are designed to help active duty military and veterans qualify for homeownership. They offer lower interest rates and better terms than conventional mortgages, and are offered exclusively to service members and certain military spouses.
VA home loans are issued by private lenders such as banks and mortgage companies and are guaranteed against default in case the borrower or a future owner is unable to repay the loan. The VA guarantee is usually up to a quarter of the total loan amount, with the current maximum conforming loan amount in 2020 being $510,400.
How Do I Find Out If I Have Entitlement Available
Your available entitlement is listed on your VA Certificate of Eligibility , which details your military status, dates of service, and entitlement benefit. Dont worry, we dont expect you to have this handy or to figure out your entitlement level yourself.
You can request your COE through the VAs ebenefits portal. But we suggest making it easy on yourself and asking your lender to request it for you. They can look it up when you apply for your loan, and it takes them just a few minutes. That way, you find out how much entitlement you have and whether you can buy a new home without a down payment.
Best case scenario, you have full entitlement. That allows you to put 0% down and exempts you from local loan limits.
But even if your COE shows partial entitlement or no entitlement available, you may still have options, as youll see in the next section.
For more on calculating your potential remaining entitlement, see our guide on buying an additional home with a VA loan.
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So How Many Times Can You Use A Va Loan
Eligible veterans and military service members are able to use there VA home loan benefits over and over again. There is no limit on how many times you can use your VA loan benefit. This is a benefit you have earned for serving our country, and once you have earned it, it is a life long benefit you can use over and over again. You can restore your entitlement as often as you need as long as you sell the previous property and pay the prior loan in full. In some cases you can even keep your first home and buy a second primary residence if you are required to move for a job or a PCS situation. Everyones circumstances are unique, so give one of our VA home loan specialists a call at 855-956-4040 to find out more. We are here to serve you!
Can I Use My Va Entitlement For The Construction Of A New Home
Although the primary purpose of a VA home loan is to assist a Veteran with purchasing a pre-built residence, the VA also offers its guaranty for construction loans for those looking to build a home for themselves. This means that you can put your Veteran entitlement toward building your new house. Although many lenders do not support VA construction loans, SoCal VA Homes enables you to buy your land and build your home with zero down and zero closing costs. Find out more about our VA home construction loans.
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