VA Loans are popular mortgage programs that are only meant for members of the Armed Forces, veterans, and their spouses. Even though VA loans are very popular, they are still not used as often as you would think. There are different reasons as to why that is the case but the main reason that comes up in a majority of the cases is the lack of awareness regarding VA loans.

What is a VA Loan?

The VA loan is a loan program created and backed by the Department of Veteran Affairs. It is meant for active, reserved, and retired veterans of the military and their spouses. Since the loan is guaranteed by a government office, it is confirmed to the lender that the VA promises to step in, in case that the borrower defaults on the loan. This allows lenders to be confident about extending the program to borrowers since the VA loan program has very flexible requirements for credit scores and DTI.

VA loans have a unique cost known as a VA Funding Fee which has to be paid as a closing cost or it can be added to the loan as well. This fee is added since there are a lot of administrative costs to the VA process and this fee is meant to cover those processing costs.

How do I qualify for VA loans?

To qualify for the VA loan the main eligibility is to be one of the following:
– Veteran
– Active Duty Member
– Current or Former Activated National Guard or Reserves
– Current National Guard or Reserves (Never Activated)
– Discharged National Guard (Never Activated)
– Discharged Reserves (Never Activated)
– Or a Spouse of the above

What is a COE and how do I get it?

COE stands for Certificate Of Eligibility and confirms to the lender that you have completed the relevant period of service and are eligible for the VA loan. It can be obtained by using the VA’s eBenefits portal or even by asking the lender to obtain it for you.

To obtain the COE documentation has to be submitted, the required documentation depends on the type of force you are a member of and your designation.

>>More: VA Loans – How it works

Is there any financial underwriting in the process?

Yes, the underwriting process for VA includes finances. The requirements for VA eligibility are quite strict and the underwriting process alone can take up to 14 days in some cases. The checks over the financial reports are thorough to make sure that the borrower will be able to afford the loan, especially since the loan is guaranteed by the VA office.

Can I get a VA loan with bad credit?

The guidelines of the VA loan don’t have a minimum requirement for credit score but the eligibility for credit score is left to the discretion of the lender. Because of this, it is possible that some lenders might accept a lower credit score but it is likely they will want a credit score of at least 620. So it is best to get your credit score checked before applying and follow steps to improve it and bring it up to a level that is attractive to lenders in the market.

What is the maximum amount for VA loans?

As of 2021 the standard limit for a VA loan was announced to be $548,250 in most counties. However, this limit only applies to borrowers with diminished entitlements. For a borrower with full entitlement, the VA office will guarantee the full amount. It is also important to note that the VA loan does not require any down payment from the borrower but it is still possible that the lender might require a down payment if the price of the property being purchased exceeds the VA loan limit.

What kind of property can be purchased with a VA loan?

The main requirement of VA guidelines is that the property is for the purposes of a primary residence. There is no requirement for the type of property. But generally accepted forms include a single-unit family home, a condominium, a townhouse, a mobile house, or new construction.

The VA however, does have strict requirements about the condition of the property. The appraisal process for VA loans is very strict and takes a long time, this is because the property is examined in great detail and has to be in excellent conditions and working order to meet VA requirements. Additionally, it must also match the local building codes.

Will I have to pay for Private Mortgage Insurance?

Private Mortgage Insurance is generally required for cases where the borrower has to guarantee the loan by paying for the PMI but in the case of VA loans, the mortgage is guaranteed by the Department of Veteran Affairs and hence no PMI is required.

Can VA loans be used more than once?

Eligible VA loan borrowers who have not used their entitlement before can get up to $144,000 however, depending on the area, it is possible to get an additional entitlement amount that goes up to 25% of the home loan amount. Using the entitlement diminishes it but as long as it is not completely used it is possible to tap into the amount again. It is also important to note that applying for a VA loan a second time the limits of conforming loans will apply.

Do VA loans have closing costs?

Yes, the VA loans do include closing costs since the process does require appraisals, title searches, mortgage discount points, etc. The closing costs for VA loans can range from 1% to 5% of the loan amount. Another fee involved in VA loans is the one-time non-refundable Funding Fee which ranges from 1.4% to 3.6% of the loan amount. This is a VA requirement and the exact amount calculated for the funding fee depends on multiple factors like the loan amount, years of service, etc.

Do VA loans allow co-borrowers?

Yes, since the VA loan was created to assist veterans and their spouses it is possible to have co-borrowers but this allowance only extends to the spouse of the military member and no one else in the family. The only exception to the spouse rule is if two veterans are living in the same house but are not spouses.

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