Get Rid of PMI: Use Your VA Home Loan Benefits
Welcome to our comprehensive guide about PMI VA loan. This article contains all the information you need to know about this loan option, and we’ll answer all your questions in one place.
Audience for this Article
This article is for military veterans, their spouses, and active-duty service members who want to buy a home with no down payment while avoiding private mortgage insurance (PMI).
What is PMI VA Loan?
Private mortgage insurance (PMI) is a requirement for conventional home loans when the down payment is less than 20% of the purchase price. However, VA home loans don’t require PMI, even if the borrower puts down less than 20%. PMI is replaced by the VA funding fee, which is a one-time payment at closing that helps fund the VA home loan program.
VA home loans are guaranteed by the U.S. Department of Veterans Affairs (VA) and are available to eligible military veterans, active-duty service members, and surviving spouses.
How Does PMI VA Loan Work?
PMI VA loan works by guaranteeing a part of the loan amount, which means that lenders have less risk and can offer better rates and terms to borrowers. The VA funding fee replaces the need for PMI and helps maintain the VA home loan program.
The VA funding fee ranges from 1.4% to 3.6% of the loan amount and depends on whether the borrower is a first-time or subsequent VA loan user, the down payment amount, and the type of military service.
Advantages of PMI VA Loan
There are many advantages to using a PMI VA loan, including:
Advantages |
Explanation |
|---|---|
No down payment |
Borrowers can purchase a home with zero down payment. |
No PMI |
Borrowers don’t need to pay private mortgage insurance, which can save them thousands of dollars over the life of the loan. |
Lower interest rates |
Lenders can offer better rates to VA borrowers, as the VA guarantees a part of the loan amount. |
Easier qualification |
VA loans have less stringent credit and income requirements than conventional loans. |
How to Qualify for PMI VA Loan
To qualify for PMI VA loan, you must meet the eligibility criteria set by the VA. The following are the main requirements:
Military Service
To be eligible for a VA home loan, you must have served at least 90 consecutive days of active military service during wartime or 181 days during peacetime.
If you’re a National Guard or Reserve member, you must have served for at least six years or have been called to active duty for at least 90 days.
Credit Score
While there’s no minimum credit score required to qualify for a VA home loan, most lenders require a score of at least 620. However, some lenders may be more lenient if you have compensating factors such as a stable income, no debt, or a history of on-time payments.
Debt-to-Income Ratio
Your debt-to-income ratio (DTI) is one of the most critical factors lenders consider when deciding whether to approve your loan application. The VA doesn’t have a specific DTI requirement, but most lenders prefer a DTI of 41% or lower.
Certificate of Eligibility
To apply for a VA home loan, you need a Certificate of Eligibility (COE), which verifies your military service and shows you’re eligible for the VA home loan program.
PMI VA Loan FAQs
Q1. Can I use a PMI VA loan to buy a second home or investment property?
A1. No, PMI VA loans are only available for primary residences.
Q2. Do I need a down payment to qualify for a PMI VA loan?
A2. No, a down payment isn’t required for a PMI VA loan.
Q3. What’s the interest rate for a PMI VA loan?
A3. The interest rate for a PMI VA loan varies depending on the lender, market conditions, and borrower’s credit profile.
Q4. How much is the VA funding fee for a PMI VA loan?
A4. The VA funding fee ranges from 1.4% to 3.6% of the loan amount, depending on various factors.
Q5. Can I get a PMI VA loan if I’ve had a bankruptcy or foreclosure in the past?
A5. Yes, you can still qualify for a PMI VA loan even if you’ve had a bankruptcy or foreclosure in the past, as long as you meet the VA’s eligibility requirements.
Q6. Can I refinance my PMI VA loan?
A6. Yes, you can refinance your PMI VA loan using the VA’s streamline refinance program or cash-out refinance program.
Q7. Can I use a PMI VA loan to buy a manufactured home or condo?
A7. Yes, you can use a PMI VA loan to buy a manufactured home or condo, as long as the property meets the VA’s minimum property requirements.
Q8. What’s the maximum loan amount for a PMI VA loan?
A8. The maximum loan amount for a PMI VA loan is $548,250 in most areas of the country, but it can be higher in high-cost areas.
Q9. Can I get a PMI VA loan if I’m not a military veteran?
A9. No, PMI VA loans are only available to military veterans, active-duty service members, and surviving spouses.
Q10. Is there an income limit to qualify for a PMI VA loan?
A10. No, there’s no specific income limit to qualify for a PMI VA loan, but lenders will consider your income when deciding whether to approve your loan application.
Q11. Can I use a PMI VA loan to buy a multi-unit property?
A11. Yes, you can use a PMI VA loan to buy a multi-unit property, but you must occupy one of the units as your primary residence.
Q12. How long does it take to get approved for a PMI VA loan?
A12. The approval process for a PMI VA loan can take as little as a few days or as long as a few weeks, depending on the lender and how quickly you provide the required documentation.
Q13. Can I get a PMI VA loan with a low credit score?
A13. While there’s no minimum credit score required to qualify for a PMI VA loan, lenders prefer a score of at least 620. However, some lenders may be more lenient if you have compensating factors such as a stable income, no debt, or a history of on-time payments.
Conclusion
In conclusion, PMI VA loans are an excellent option for military veterans, active-duty service members, and surviving spouses who want to buy a home with no down payment and avoid private mortgage insurance. Using a PMI VA loan can help you save money and get better rates and terms than conventional loans.
If you’re eligible for a PMI VA loan, you should consider this loan option and explore your options with different lenders to find the best deal.
Disclaimer
This article is for informational purposes only and doesn’t constitute professional financial advice. Please consult with a financial advisor or lender for guidance on your specific situation.