VA Loans are a benefit for veterans, members of the Reserve and National Guard, and sometimes surviving spouses. They provide 100%financing with flexible underwriting guidelines if you’re eligible. Here’s everything to know about VA loans.

 

How VA Loans Work

The VA guarantees VA loans for lenders. This means if a borrower defaults, they pay the lender up to25% of the loan amount. This makes up for the lack of down payment required for the loan and is why lenders can offer flexible guidelines. You can apply for a VA loan with any VA-approved lender, and like any loan, you are free to shop around to get the best rates and terms.

Eligibility of VA Loans

To be eligible for a VA loan, you must meet the following guidelines:

• Have at least 24 continuous months of service
• Have an honorable discharge
• Have your Certificate of Eligibility or
• Be a surviving spouse of a military member who lost their life in service

You can have one VA loan at a time. For example, if you buy a house with your VA benefit, it’s tied up in that house until you sell it and pay the loan off in full. If you sell the house and repay the loan in full, you can ask for a reinstatement of your benefits to use on another home.

Qualifying for a VA Loan

Qualifying for a VA loan is different than being eligible. To be eligible, you must meet the following requirements:

• Minimum 620 credit score (this varies by lender)
• Maximum 43% debt-to-income ratio
• Proof of stable income and employment for two years or an employment letter if you’re just leaving the military
• Proof you’ll occupy the home as your primary residence
• The appraisal must prove the home is worth at least as much as the agreed-upon sales price

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The VA Loan Funding Fee

VA loans don’t have mortgage insurance but charge an upfront funding fee. You pay this fee once you close. The cost is usually 2.3% of the loan amount for most borrowers but can range from 0.5 – 3.6% depending on the type of loan and the number of times you’ve used your benefit.

Benefits of VA Loan

Like all loans, there are benefits of the VA loan to consider:

You don’t need a down payment

You can get a VA loan with no money down. You’ll need money for closing costs, which can be 3% - 5% of the loan amount, but you don’t have to worry about money for the house. You can borrow 100% of the cost.

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Closing costs are limited

The VA limits the closing costs buyers pay, so you don’t need as much money to buy a house and may be able to buy sooner.

 

No mortgage insurance

Even though you don’t need a down payment, VA loans don’t charge monthly mortgage insurance like FHA and conventional loans charge.

 

Competitive interest rates

The interest rates on VA loans are usually competitive to conventional and FHA loans to help veterans afford a home.

 

No loan limits with full entitlement

You can borrow as much as your qualifying factors allow if you have full entitlement. The VA doesn’t have a limit for your loan amount.

VA loans are a great option for veterans with eligibility. The 100% financing, flexible guidelines, and low closing costs are all great reasons to consider it.

 When using your VA benefits, you must buy a primary residence and have enough entitlement to cover the down payment. If you’ve never used your entitlement or used it but had it reinstated, there’s no limit to how much you can borrow as long as you prove you can afford the loan.

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