Learn About VA Loans
When it comes to buying a home, there are many options available to you. One option that is often overlooked is a VA loan. VA loans are specifically designed to help veterans and active-duty service members achieve the dream of home ownership. If you're considering using a VA loan to purchase a home, we have provided some of our most asked questions below.
What is a VA Loan?
A VA loan is a mortgage loan that is guaranteed by the Department of Veterans Affairs (VA). This means that if you default on the loan, the VA will cover a portion of the lender's losses. Due to this guarantee, VA loans have more flexible credit standards and require no down payment, making them an attractive option for many home buyers that qualify.
Who is eligible for a VA Loan?
VA loans are available to a variety of service members including veterans, active-duty personnel, reservists, and members of the National Guard. To be eligible for a VA loan, you must have served at least 90 days of active duty during wartime or 181 days of active duty during peacetime. If you are a spouse of a service member who died in the line of duty or because of a service-related disability, you may also be eligible for a VA loan.
What are the benefits of a VA Loan?
There are many benefits to using a VA loan to purchase a home. Perhaps the most significant benefit is that VA loans require no down payment. While the benefit of a VA loan allows you to purchase a home with no down payment, you will still have closing costs associated with your home purchase. Sellers can give up to 4% of the purchase price in closing cost assistance to a buyer, making this a true no out of pocket cost loan! Additionally, VA loans have more flexible credit standards than traditional loans, making them easier to qualify for. VA loans also offer competitive interest rates and do not require private mortgage insurance (PMI), which can save you hundreds of dollars per month. The VA loan is the best loan in the market place and typically you will see a much better interest rate with a VA loan compared to conventional.
What if I've used a VA Loan Before?
If you have used a VA Loan before, you are eligible to use it again. This is because the VA does not have a limit on the number of times you can use this benefit. You can use it multiple times to purchase different properties if you meet certain eligibility criteria. The VA has specific rules and regulations that govern their loan programs. You do not need to sell or pay off your current home to purchase a new home with the VA loan, you can hold multiple VA loans at the same time but there are some requirements that have to be met and your trusty loan officer at MORTGAGEinc will be able to walk you through that. The VA does also requires that you have enough financial stability to cover the proposed loan amount.
Q&A
What is a certificate of eligibility - COE?
A VA certificate of eligibility (COE) is evidence that you meet the requirements for a VA loan. Having a COE does not guarantee loan approval. COEs can be obtained by active-duty military, veterans, National Guard and Reserve members and surviving spouses of military members who meet eligibility requirements. Your loan officer will be able to access your COE if you cannot obtain it. Your COE will also let your lender know if you will need to pay a funding fee or are exempt from it. The funding fee is rolled into your loan and does not affect the dollar amount you will need to close
Is my DD214 Required?
You will need to have your DD214 on hand for your loan application. This is a requirement of most lenders.
Can I pull equity out of my home using a VA loan?
Yes and No. In Texas, the constition states you cannot have a TX50(a)6, or home equity cash out, with a VA loan. Most other states are allowed. You would either need to apply for a Home Equity Line of Credit HELOC, or transition from a VA loan to a conventional loan to take equity out of your home as a lump sum.
Is there a minimum credit score for VA loans?
Depending on your lender, you will have varying answers to this. The correct answer is that the VA loan has no minimum credit score requirement, some lenders have used risk management to place overlay’s on certain loan types and cap the credit score at a certain level. Mortgage Brokers, like MORTGAGEinc do not have a minimum credit score requirement. Additional information will be necessary for each and every customer.
Is there a maximum Debt-To-Income ratio (DTI)
No, there is not a maximum DTI ratio for VA loans. There is, however, a residual income requirement for every VA loan and this plays an enormous role in purchasing using your VA benefits.
What is a good rule of thumb for closing costs on a VA loan?
A good rule of thumb for closing costs, for any loan, is 2-3% of your LOAN amount.
VA loans are an excellent option for veterans and active-duty service members who are looking to purchase a home. If you're interested in using a VA loan to purchase a home, contact MORTGAGEinc today, info@mortgage-inc.com!