Unless you’re a mortgage professional, you’re likely unaware of many of the countless mortgage programs that are only available to those who meet certain criteria. One such program that is sometimes overlooked is the U.S. Department of Veterans Affairs (VA) loan program. Qualifying veterans or their spouses can purchase a home without a down payment using a VA loan. Here are the features, eligibility requirements and approval process for this program.
Despite its name, VA loans are supplied by mortgage lenders, not the VA. These loans do receive the VA’s backing, however, allowing lenders to be more flexible with this kind of lending.
VA mortgage features include:
- Financing for as much as 100 percent of a home’s value. The national conforming loan limit was recently increased to $424,100, but it can reach up to $1,000,000 in high-cost areas. To find the VA loan limits for your area, visit this webpage, or speak with a licensed VA lender.
- The option to finance most of your closing costs, including the appraisal, credit report, title insurance, lender origination fee, recording fees and survey fees. These are the majority of the closing costs for most home purchases.
- The option to finance the VA funding fee that’s present on all VA loans, and the option to have the fee waived in some circumstances, such as disability or injury.
- No monthly mortgage insurance. This can save as much as hundreds of dollars per month in comparison to other government-backed programs such as FHA loans, which include substantial mortgage insurance fees.
- No prepayment penalty if you pay off the loan early.
- Only available for a primary residence.
- A range of fixed- or adjustable-rate mortgage loan programs.
As one would expect, eligibility for VA loans is tied to military service.
To be eligible for a VA loan, you must be one of the following:
- Active duty service member
- Current or former National Guard or Reserve member who has been activated for federal active service
- Current National Guard or Reserve member who has never been activated for federal active service
- Discharged member of the National Guard or Selected Reserve who has never been activated for federal active service
- Surviving spouse receiving Dependency & Indemnity Compensation (DIC) benefits
- Surviving spouse who isn’t receiving DIC benefits
If you fulfil any of these categories, a licensed VA lender can help you find a loan. You will be required to provide your lender with a Certificate of Eligibility (COE) to confirm eligibility. There are different requirements for the COEs for each category of eligible VA borrowers. An experienced VA lender can also help you obtain the necessary COE.
Getting approved for a VA loan is similar to getting approved for a non-VA loan. Your proposed monthly housing costs plus other monthly debt (such as credit, car and student loan payments) may usually be no more than 43% of your income, although limits as high as 50% are sometimes available. Your credit score will also be considered, with a minimum score of 620 usually being required to qualify for a VA loan. Condo purchases must be in a VA-approved condo project, otherwise, you’ll have to work with your lender to get the project approved.
Borrower must meet full program guidelines and receive underwriting approval. Draper and Kramer Mortgage Corp. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, US Department of Veterans Affairs, the US Department of Agriculture or any other government agency. Contact Draper and Kramer Mortgage Corp. for full program details.