Who Qualifies For A Va Loan
In order to get this loan when you’re looking to buy a home, military personnel have to meet the VAs specific service requirements.
Generally, youre eligible if you fall into one of these three categories:
- Youre an active-duty service member or an honorably discharged veteran who has 90 consecutive days of active service during wartime or 181 days of active service during peacetime.
- You have served more than six years in the National Guard or the Selected Reserve.
- Youre the spouse of a service member who died in the line of duty.2
Va Mortgage Loan Options
Purchase loan:
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.
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Our mortgage reporters and editors focus on the points consumers care about most the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more so you can feel confident when you make decisions as a homebuyer and a homeowner.
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Va Loans Close At Similar Rates To Conventional And Fha Loans
Want further proof that VA loan offers are worth considering? These loans tend to close as often as FHA and conventional loans.
In fact, according to the most recent ICE Mortgage Technology report, the percentage of VA purchase loan applications that have closed in the previous 90-day cycle was 75.0%, compared to 76.9% for conventional loans and 75.1% for FHA loans.
The inconveniences sellers typically associate with VA loans are not only minor but they are often offset by the above-average closing success rate exhibited by most VA buyers. If nothing else, preapproved VA buyers are more likely to bring a deal to the closing table than their civilian counterparts, explained Than Merrill, founder and CEO of FortuneBuilders.com.
You may be thinking that 75% is not a very high closing rate. But this statistic doesnt mean that your sale has a one in four chance of falling through. These numbers include applicants who dont close because they choose another lender after applying or dont close within 90 days for another reason. The pull-through rate is incredibly high for buyers who apply then get an accepted offer.
The single greatest reason sellers should strongly consider entertaining VA loan offers is their success rate. The lack of a down payment is in no way reflective of the buyers financial standing and shouldnt be viewed as a red flag. In fact, many of todays VA loan borrowers are highly qualified with pristine credit histories.
Than Merrill
Example Of When Youd Have More Than One Loan At A Time
Lets consider a hypothetical: Alex received PCS orders and now has to move herself and her family across the county.
She has a VA loan on her current home and plans to buy a second home using a VA loan as well. In the process of moving, Alex has a hard time selling her home. Or maybe she just doesnt want to sell her home and would prefer to hold onto it and rent it out.
In this situation, as long as her credit and finances qualify her for a loan, shed be able to get a VA loan for her new primary residence while retaining her current home. If shes earning rental income on that home, she may also be able to use that income to offset the cost of the mortgage for her current home when she applies for a new, second VA loan.
However, Alex might be limited in how much she can borrow without having to make a down payment on that second VA loan, depending on how much of her entitlement is left.
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How To Make The Best Decision For Your Needs
The decision as to whether you should make a VA loan down payment ultimately comes down to your financial situation. If you can afford to do so, then making a down payment could save you thousands of dollars over the life of the loan. However, if putting money down towards your home comes at the expense of having an emergency fund or freeing up cash flow for moving-related expenses, then its better to wait or purchase the home without a down payment. Take a close look at your budget to understand what your payments will look like with and without a down payment, and use Bankrates home affordability calculator to get a clearer picture of how much you can spend on a home.
Can I Use A Va Loan For A Second Home
The VA home loan program exists to help active duty and retired military members buy homes to use as primary residences.
Because of this intent, borrowers cant use their VA loan benefits to buy a vacation home or rental property.
But it is possible to buy a second home if you have enough remaining entitlement and if you plan to move into the second home after buying it.
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Youll Be A More Competitive Buyer
Lenders care about minimizing their risk, and contributing a down payment toward your home purchase can help this cause. A down payment can strengthen your mortgage application and may even get you a slightly lower interest rate.
You can also use some of the funds you deposit toward overall closing costs for earnest money, which is an upfront deposit you pay when submitting an offer on a home. Earnest money shows sellers that youre serious about the purchase, which might be helpful in a competitive market where homes get multiple offers.
NOTE:
Who Is Eligible For An Irrrl
You have to meet the following qualifications for an IRRRL:
- You have a VA-backed mortgage. The IRRRL program is only for people served by the VA, and that includes veterans, service members, surviving spouses, the National Guard, Reserves, and anyone whod qualify for a Certificate of Eligibility .
- Youll use the IRRRL to refinance the VA-backed mortgage, and not any other home loan.
- You can offer proof that you currently live or have previously lived in the home with the VA-backed mortgage. If the property has only ever been for investment purposes, then you wont qualify for an IRRRL.
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A Note On Va Property Appraisals
Because of the MPRs and the VA appraisal rules, VA loans have gotten a reputation for being harder to close.
Some sellers prefer offers with conventional loans because they assume the sale is more likely to go off without a hitch. They worry that accepting a VA offer means theyll need to make costly repairs or settle for a lower sale price.
But thats not necessarily true. VA borrowers are qualified buyers, especially those who come to the table with underwritten preapprovals. As for the MRPs, the VA wants to ensure the home is in good, livable condition. If a property is well-maintained, with no hazards or glaring issues, it has a good chance of passing the appraisal.
If you opt for a VA loan, its critical that you work with both a real estate agent and a lender that have a record of working with VA borrowers. They will help you navigate the VA property guidelines, and a good real estate agent can help you craft a winning offer with a VA loan.
Related reading: How to Get a VA Offer Accepted: 7 Tips to Stand Out in a Hot Market
Some sellers prefer offers with conventional loans because they assume the sale is more likely to go off without a hitch. They worry that accepting a VA offer means theyll need to make costly repairs or settle for a lower sale price.
But thats not necessarily true.
Our Top Picks For Best Va Loan Lenders
- Quicken Loans by Rocket Mortgage – Best Online Loan Lender
- USAA – Best for Low Fees
- Veterans First Mortgage – Best for Online Loan Accessibility
- Lending Tree – Best for Comparing VA Loan Rates
- Freedom Mortgage – Best for Streamline Refinancing
- Borrow money to pay for energy-efficient improvements
- No-obligation credit counseling service
- Access to over 6,000 real estate agents
- In-person service in 18 states
- Minimum Down Payment
- $0 for qualifying borrowers
Veterans United offers every mortgage loan product available under the VA loan program fixed and adjustable loans, IRRRL loans, cash-out refinance loans, and jumbo loans except home equity loans and HELOCs. The lender also offers VA energy efficient mortgages, allowing veterans to borrow additional money to pay for qualified improvements like solar heating, cooling systems and storm or thermal windows.
Lender fees and rates are slightly higher than other lenders. To get a rate quote, you can fill out an online form or call Veterans United to speak to a loan specialist. You can also check your eligibility for $0 down payment on the lenders Complete Guide to VA Home Loan section one of the many educational features available on the website.
Why we chose it: We chose Veterans United for its wide array of loan products, online approvals and 24/7 help over the phone.
- Minimum Down Payment
- 0% on VA loans
- $0 for qualifying borrowers
USAA charges no fees, except for the VA-mandated 1% origination fee on home loans.
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Va Loans And Rental Properties
Though the US Department of Veterans Affairs does not provide loans for rental or investment properties, it does provide mortgages for multi-unit properties.
So, if you are planning to live in one unit and rent the others, you can use your VA homes to earn a rental income with up to four total units.
In addition to meeting the departments and lenders requirements, you must also take care of the occupancy requirements if this is the route you want to take.
Some lenders might expect you to prove that youll be living in the house for at least 12 months after the loan closing.
For multi-unit homes to qualify for VA loans, they must meet unique guidelines that differ from single-unit homes.
All units must have separate utility services or joint water, sewer, gas, and electricity lines. The house must also have individual shut-offs for all units.
Should I Accept A Va Loan Offer
VA home loans, which are backed by the U.S. Department of Veterans Affairs, provide several advantages to qualified borrowers who meet the eligibility requirements, including active-duty servicemembers in the armed forces, veterans, and some surviving spouses.
Thats because if they have full entitlement benefit available, they may qualify for a VA loan with 0% down payment, no loan limits, and no annual mortgage insurance requirement . VA loans also typically have competitive interest rates.
But whats in it for sellers? Quite a lot, actually.
Some home sellers view VA loan requirements as a hindrance and more hurdles to go through compared to other types of financing such as a conventional loan. This is mostly a myth among home sellers because VA loan requirements have eased up in recent years.
Jason Gelios, a REALTOR® in Southeast Michigan.
Related reading: VA Loan Limits: No Maximum Loan Amounts in 2021
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Things Veterans Should Know About Va Loans
Heres what youll want to keep in mind as you go into the process:
S To Buying Your Home
Once youve found the house you want to buy:
Work with your agent to put together and sign a purchase agreement
Be sure the sales contract includes the VA escape clause or VA option clause. This provides an option to void the contract if the property doesnt appraise for the contract price.Ask your real estate agent for advice on other options for voiding the contract you may want to include, such as if the property fails a home inspection. These options are called contingencies.To learn more, watch this helpful video:Using your VA home loan benefit: working with a Realtor and lender
Have the house inspected and appraised
We strongly recommend that you get an inspection to check for any major defects before you purchase your home. A VA-approved appraiser will also appraise the house to make sure it meets basic property condition requirements , and will provide an opinion of value on the house. Please note that an appraisal isnt the same as an inspection.If the property doesnt appraise at a value thats high enough to get the loan, you have a few options. You can:
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Youll Be Helping Military Borrowers Reach A Milestone
Financial peace of mind is important to sellers. But for some, so is the opportunity to honor our military members.
One of the most rewarding things about accepting an offer with a VA loan is knowing that you are showing a veteran that you appreciate his or her service, Serviss said. It can seem like a small gesture, but it can have a huge impact on that service member or veteran.
Consider that, as a seller, you can help a vet, active-duty service member, or surviving spouse purchase a home and put down roots.
It might be this persons first entry into homeownership, enabling them to start a family. They may have recently returned from a deployment and look forward to homeownership as a way to ground themselves and start a new chapter. Whatever is driving them to buy a home, you can honor their military service by considering their VA loan offer.
Reasons Military Veterans Should Use A Va Loan To Finance Their Home
As a veteran, you have worked hard and made unimaginable sacrifices to protect our country and our freedom. It’s only fair that you receive some benefits in return! One of the major benefits of your service to our country is the opportunity to use a VA Mortgage Loan to purchase or refinance a home. Here are five great reasons to use a VA loan to finance your home:
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How To Find My Level Of Remaining Entitlement
Your Certificate of Eligibility from the VA should list your level of entitlement, but heres where a lot of the confusion comes from: the numbers youll see on your COE dont show the size of the loan youre eligible for.
Instead, these numbers tell your lender the level of insurance the VA will provide on your behalf.
The VA insures only 25% of your home loan enough to cover the lenders losses if you were to default and enter foreclosure. So you can borrow, roughly, four times more than your level of entitlement.
