VA Loans
A VA (Veterans Administration) guaranteed home loan is the preferred loan program for active, non-active, Reserve, National Guard, and retired military of the armed forces. This is because there is no down payment needed and no private monthly mortgage insurance required. A VA home loan can be used to purchase a home or refinance an existing mortgage.
VA Does Not Offer Loans Directly and Does Not Guaranty You Will Qualify: VA does not lend you money directly. They offer a guarantee to a lender like InstaMortgage that should you default on the loan, and they will pay the lender a percentage of the loan balance. The word GUARANTY does not actually guarantee that you, as a veteran, will qualify for a VA home loan.
Primary Benefits of a VA Home Loan
- 100% Financing
- No monthly private mortgage insurance is required
- There is a limitation on buyers’ closing costs
- The loan is assumable, subject to VA approval of the assumer’s credit. This means when you sell the home, the new buyer can take over the same loan if they qualify.
- The 30-year fixed loan is available.
- The seller can pay up to 4% of the veterans closing costs and even pay down your debt to help lower your debt-to-income ratio.
- Interest rates are typically lower than Conforming Loans
- You don’t need perfect credit
Eligibility for a VA Home Loan:
Veterans with active duty service that was not dishonorable during World War II and later periods are eligible for VA loan benefits. World War II (September 16, 1940, to July 25, 1947), the Korean conflict (June 27, 1950, to January 31, 1955), and the Vietnam era (August 5, 1964, to May 7, 1975) veterans must have at least 90 days of service.
Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 days of active service. Veterans of enlisted service, which began after September 7, 1980, or officers with service beginning after October 16, 1981, must, in most cases, have served at least two years.
National Guard members and reservists are eligible for a VA home loan if they have completed at least six years of honorable service, are mobilized for active duty service for a period of at least 90 days, or are discharged because of a service-connected disability.
VA Documentation Needed
The three specific pieces of documentation a lender will need to determine your eligibility are a DD214 (request it here) for discharged veterans, a statement of service for active military personnel, and a certificate of eligibility (COE) to determine you have VA entitlement.
Because each lender has different qualifying guidelines, a good next step is to contact your lender to find out if you meet their qualifying criteria, such as minimum FICO/credit scores, debt-to-income (DTI) ratios, and find out what your county’s maximum loan amount is. Your lender can help you attain your certificate of eligibility on your behalf.
VA Funding Fee
The funding fee can be paid by you and added to your cash to close, or you can have the funding fee added to your loan amount. So, if you are borrowing $300,000 and your funding fee is $6,450 (calculated at 2.15% for first use with less than 5% downpayment), then your total loan amount will be the base loan amount of $300,000 + funding fee of $6,450 = $306,450.
Loan Fee Rates for Loans Closing on or After April 7, 2023 and prior to November 14, 2031
VA Purchase or Construction Loans
|
Down Payment Amount |
Funding Fee Percentage |
|
|
First Use |
Less than 5% |
2.15% |
|
5% or More |
1.5% |
|
|
10% or more |
1.25% |
|
|
Subsequent Use |
Less than 5% |
3.3% |
|
5% or more |
1.5% |
|
|
10% or more |
1.25% |
VA Cash-Out Refinance
|
Funding Fee Percentage |
|
|
First Use |
2.15% |
|
Subsequent Use |
3.3% |
Other VA Home Loan Types
|
Loan Type |
Funding Fee Percentage |
|
Interest Rate Reduction Refinance Loan (IRRRLs) |
0.5% |
|
Manufactured Home Loans (not permanently affixed) |
1% |
|
Loan Assumptions |
0.5% |
|
Native American Direct Loan (Non-IRRRL) |
1.25% |
If you have some service-connected disability, you might be exempt from paying the funding fee.
Frequently Asked Questions
Q: Are the children of a living or deceased veteran eligible for the home loan benefit?
No, the children of an eligible veteran are not eligible for the home loan benefit.
Q: How can I obtain proof of military service?
Standard Form 180, Request Pertaining to Military Records, is used to apply for proof of military service regardless of whether you served on regular active duty or in the selected reserves. VA does NOT process this request form.
Rather, Standard Form 180 is completed and mailed to the appropriate custodian of military service records. Instructions are provided on the reverse of the form to assist in determining the correct forwarding address.
Q: Is the surviving spouse of a deceased veteran eligible for the home loan benefit?
The unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability is eligible for the home loan benefit.
