Va Mortgage Loan Options
If you are a conventional home buyer, you will most likely be looking to secure VA-backed purchase loans. This loan will help you buy, build, or improve a home with a competitive interest rate and the option to put no money down without restriction.
Interest Rate Reduction Refinance Loan :
If you already have a VA home loan and would like to reduce your monthly mortgage payment or interest, an Interest Rate Reduction Refinance Loan could be the right choice for you.
Cash-out refinance loan:
A VA-backed cash-out refinance loan can help you take cash out of your home equity. This loan will replace your current loan with a new VA loan under different terms. You can also use a VA cash-out refinance to refinance a non-VA loan into a VA-backed loan.
We would also like to mention that the VA offers a Native American Direct Loan . If you are veteran, and either you or your spouse is Native American, you may qualify for this loan. Because the VA directly backs this loan, you do not need to contact a private lender the U.S. Department of Veterans Affairs will serve as your lender.
If You Have To Do A Hard Pull Mix It Up
Having a different mixture of credit will also help you in obtaining a higher credit score.
Loans, credit cards, lines of credit, home loans and auto loans are all seen as different types of credit and having a good mixture will aid in helping your score.
If you are going to have a few hard hits on your credit, make them worth it.
Hopefully these few tips will help you with increasing your score in the immediate future.
How Does A Va Loan Work
On the surface, a VA loan works like any other home loan program. You fill out a loan application, provide proof you can repay the loan based on your earnings and credit history and verify you have enough money saved up to cover closing costs.
However, there are some big differences between VA loans and conventional or FHA loans, especially when it comes to how costs and fees are charged and paid.
You have to verify your military service history. The VA home loan benefit is only for military borrowers that have served enough time to meet eligibility requirements.
You dont pay any mortgage insurance. Most low- or no-down-payment loan programs require mortgage insurance, which covers lenders in case you default on your payments and they have to foreclose. The VA doesnt require mortgage insurance on any of its loan types.
Youll pay a VA funding fee. One of the downsides to a VA loan is having to pay the VA funding fee cost of 0.5% to 3.6%. The funding fee is charged to offset the cost of the VA loan program to taxpayers and is typically rolled on top of the loan amount, even if you make no down payment.
Your lender cant charge you more than 1% in closing costs. VA lenders are limited to charging 1% of your loan to cover their fee. That saves you money at closing and makes VA closing costs more affordable than other government-backed loan programs.
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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.
What Are The Benefits Of A Va Loan
Here are some of the key features and benefits of a VA mortgage:
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Why Your Dti Is Important For Affordability
Your debt-to-income ratio is the relationship between your income and how much you spend each month on debt. For example, if your total monthly debt is $720 and your monthly income is $2,000, your DTI would be 36 percent.
You determine your DTI by dividing your total monthly debt by your total gross income.
Here is a quick example of how lenders calculate your DTI
Total monthly debt / Gross monthly income = Debt-to-income ratio .
Keep in mind most VA lenders only use active consumer debts that show up on your credit report to calculate your total monthly debt. In almost every case, VA-backed lenders wont use debt such as your cellphone bill, car insurance, health insurance premiums or utility bills to calculate your DTI.
The VA recommends that lenders cap your DTI at 41 percent. However, the VA doesnt provide the actual financing, so it’s up to lenders to use their own ratios to make loans.
If your DTI exceeds 41 percent, you may pay a higher interest rate or pay more fees. By paying more than 41 percent of your gross income on monthly debt, a slight downward shift in your pay could severely damage your long-term housing budget.
Is Getting A Loan To Build A House Hard
For a construction loan, Moralez and Thomas tell me its tough for people to qualify for a mortgage like a conventional one, but for the same amount of money. This is because the bank is placing enormous risk during the building phase as there is no asset to back a mortgage. 20% is a typical down payment.
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Mortgage Approval Chances: Fannie Mae And Freddie Mac
Freddie Mac and Fannie Mae loans allow FICO scores as low as 620. They also approve mortgages with loantovalue ratios as high as 95 or 97 percent. In addition, the two corporations will buy mortgages with maximum debttoincome ratios of 45 percent under their standard guidelines.
However, this does not mean that you can get approved with a low down payment and a high DTI and a poor credit score. For example:
- You are eligible with a 620 FICO if you put at least 25 percent down and get a fixedrate mortgage and your DTI is 36 percent or lower
- With less than 25 percent down, youll need a 680 FICO and a maximum DTI of 36 percent
- If your DTI exceeds 36 percent, youll need a 640 FICO with 25 percent down or a 700 FICO with less than 25 percent down
The illustration below shows the scores of approved conforming financing in December 2018 according to mortgage data firm Ellie Mae. Yes, there are approvals with FICOs below 620, but the data includes special programs like HARP refinancing that do not consider credit scoring.
Most approved loans under these programs had FICO scores over 700.
Best Va Loan Rates For 620 To 629 Credit Score
One positive about qualifying for a VA Loan is that there is no down payment required.
Even if you have a credit score of 620, 625 to 629, so long as you are active military, a veteran or a reservist, you should qualify for a VA mortgage.
This is something that you will want to discuss with the Wendy Thompson Lending Team as they will be able to explain all the benefits of obtaining a VA home loan.
For sample rates, see the section below:
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How Much Income Is Needed For A 250k Mortgage +
A $250k mortgage with a 4.5% interest rate for 30 years and a $10k down-payment will require an annual income of $63,868 to qualify for the loan. You can calculate for even more variations in these parameters with our Mortgage Required Income Calculator. The calculator also gives a graphical representation of required income for a wider range of interest rates.
How We Chose The Best Va Mortgage Lender
Experience in VA Loans
We prioritized VA mortgage lenders that process many VA loans. The home buying and mortgage application processes can be complicated. Having a VA mortgage lender who is familiar with this process ensures that every step is taken care of in a timely manner.
We highlighted VA mortgage lenders that excel in customer satisfaction and provide first-time homeowners step-by-step guidance throughout the pre-approval, application, and loan closing process.
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Can I Get A Certificate Of Eligibility For A Va Direct Or Va
You may be able to get a COE if you didnt receive a dishonorable discharge and you meet the minimum active-duty service requirement based on when you served.
|When did you serve?||You meet the minimum active-duty service requirement if you served for at least this amount of time:|
|When did you serve?||Between August 2, 1990, and the present||You meet the minimum active-duty service requirement if you served for at least this amount of time:||90 days of active-duty service|
|When did you serve?||Any time period||You meet the minimum active-duty service requirement if you served for at least this amount of time:|| 6 creditable years in the Selected Reserve or National Guard, and one of the descriptions below is true for youAt least one of these must be true. You:
When Is The Best Time To Get A Va Home Loan
When shopping around for a mortgage, many people wonder if there is a “good time” to apply. For some mortgage products, there is no doubt that key market conditions affect how much they’re going to pay. However, there is no tried and true advice for when you should – or shouldn’t – apply for a VA home loan. The things that affect the interest rates that are attached to the typical VA home loan are so varied and complex that there is no hard and fast rule to refer to.
If you are considering a VA home loan, contact a number of qualified lenders and ask them what the current rate is. Try to get a feel for whether rates have recently crept up or gone down, and act accordingly. Either way, you’re going to be paying a lot less than those who don’t qualify for VA loans are going to. Also, without the worry of private mortgage insurance and without having to make a down payment, you’re going to be ahead of the game financially anyway. In fact, the relaxed conditions for VA home loans makes any time a good time to get one. The VA loan benefit is flexible and widely used across the country. Here are usage stats for fiscal year 2018.
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How To Prepare For The Va Coe Application
The VA has a comprehensive COE application page that will list out exactly which documents you will need to have present depending on your status within the military. If you are a veteran or surviving spouse, youll need a copy of you or your veteran spouses discharge or separation papers . If you are currently serving on active duty, you will need a statement of service signed by your commander or a personnel officer.
S To Acquiring A Va Home Loan
Acquiring a VA home loan involves a relatively straightforward, simple process. Before going ahead with it, though, you should familiarize yourself with what you’re going to be expected to do. Below, the basic steps for acquiring a VA home loan are outlined for your convenience. Although everyone’s experience is going to vary slightly, you can expect yours to go in roughly the following order:
Qualify – First, you need to make sure that you are actually qualified to receive a VA home loan. Look over the eligibility requirements as outlined in the previous section. If you are still unsure about whether or not you qualify, you should use the Veteran Affairs Eligibility Center to see what they have to say. Covering this base is important if you want to proceed with obtaining a VA home loan.
Apply For A COE – Next, you’re going to need to apply for a COE, or Certificate of Eligibility. You will need this certificate when you approach a VA-approved lender for a home loan.
Find A Lender – Not all lenders offer VA home loans. You should check around to see what your available options are. Lenders must be approved by the U.S. government, so double check that the one you’re interested in working with does participate. Otherwise, you will end up wasting a lot of time.
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Can I Get A Coe In Any Other Situations
You may be able to get a COE if you meet at least one of the requirements listed below.
At least one of these must be true. You:
- Are a U.S. citizen who served in the Armed Forces of a government allied with the United States in World War II, or
- Served as a member in certain organizations, like a:
- Public Health Service officer
- Cadet at the United States Military, Air Force, or Coast Guard Academy
- Midshipman at the United States Naval Academy
- Officer of the National Oceanic & Atmospheric Administration
- Merchant seaman during World War II
About Our Va Loan Mortgage Affordability Calculator
Figuring out how much home you can afford is a great first step when you want to buy a home with a VA loan. Thats why we offer this VA loan calculator. It will help you understand the price of houses that fit your budget.
VA loans are a great choice for homebuyers who qualify. VA loans have competitive interest rates, $0 down payments for many homebuyers, and no mortgage insurance. Veterans, active-duty military personnel, and surviving spouses can all be eligible for VA loans.
Our VA loan calculator estimates affordability starting with your annual gross income. Then it adds in these important financial factors.
These are payments for things besides your mortgage like car loans, student loans, and credit cards. Lenders want to feel confident you will be able to afford all your monthly bills not just your monthly mortgage payment before they approve your VA loan.
We often do this with your debt-to-income ratio . Debt-to-income ratio is calculated by dividing your total monthly debt by your monthly income and making the result a percentage. For example, pretend you have a monthly income of $7,000. Then pretend you have monthly debt payments that total $800 and you want to buy a home with a $2,000 monthly payment. That means your total monthly debt would be $2,800.
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What Are The Rules For Down Payment Mortgage Insurance And Other Fees
VA loans do not require you to put down any money to obtain a loan, and dont require you to pay mortgage insurance. However, youll owe a funding fee, with the amount based on
- Whether youre in the military, are in the national guard, are a qualifying spouse, or are a veteran of the military or national guard
- The amount of your own down payment, if any
- The type of loan
- Whether youre a first-time borrower or youve had a past VA loan
Funding fees vary depending on whether youre buying or refinancing and other factors. This funding fees table on the VA website will help you figure out what youll owe.
Surviving spouses of deceased veterans who died because of their service dont have to pay a funding fee, nor do certain eligible veterans entitled to compensation for service-connected disabilities. When owed, the funding fee can be paid upfront or financed.
Lenders may also charge additional fees, including any of the following:
- Discount points to reduce your interest rate
- Loan origination fees
Fees and costs vary by lender.