🏠 Welcome to the World of VA Loans!
Are you looking to buy or refinance a home? As a military service member, veteran, or surviving spouse, you have access to one of the most attractive mortgage options in the market: a VA loan.
Getting a VA loan can be a game-changer, but it’s normal to have questions about the process and requirements. In this article, we’ll answer some of the most frequently asked questions about VA loans and arm you with the information you need to make the best decision for your unique situation. Let’s dive in!
☝️ What Is a VA Loan?
A VA loan is a type of mortgage that is guaranteed by the U.S. Department of Veterans Affairs (VA). The program was created to help veterans, service members, and their families become homeowners by offering flexible terms, competitive interest rates, and no down payment requirement.
Unlike conventional loans, VA loans come with several advantages that can make a big difference in your homebuying journey. For example, VA loans don’t require private mortgage insurance (PMI), which can save you hundreds of dollars per month. VA loans also have relaxed credit and income guidelines, making them more accessible to borrowers who may not qualify for other mortgage programs.
📜 What Are the Eligibility Requirements for a VA Loan?
To be eligible for a VA loan, you must meet at least one of the following criteria:
Active-duty service member
Served for 90 consecutive days during wartime or 181 days during peacetime
Honorable discharge after serving a minimum of 90 consecutive days (or less if discharged due to a service-connected disability)
National Guard or Reserve member
Six years of service or more, unless discharged earlier due to a service-connected disability, or called to active duty for a qualifying period
Unremarried spouse of a service member who died in the line of duty or as a result of a service-connected disability
It’s important to note that meeting the eligibility requirements doesn’t automatically mean you’re qualified for a VA loan. You’ll still need to meet the lender’s credit, income, and debt-to-income ratio (DTI) requirements and prove that you have a stable source of income to repay the loan.
👨💼 Who Can Co-Sign for a VA Loan?
If you’re having trouble qualifying for a VA loan on your own, you may be able to get a co-signer to help. VA loans allow spouses, family members, and non-military individuals to co-sign for the loan as long as they meet the lender’s requirements.
However, the co-signer’s income and credit will be factored into the approval decision, which means that they’ll share the responsibility of repaying the loan. If you fall behind on payments or default on the loan, your co-signer’s credit will also be affected, so it’s essential to choose your co-signer wisely.
🈁 How Much Can You Borrow with a VA Loan?
VA loans don’t have a specific loan limit, but they do have a limit on the amount of guaranty or protection the VA provides to the lender if you default on the loan. In general, the VA will guarantee up to 25% of your loan amount or the conforming loan limit for your county, whichever is less.
For 2021, the conforming loan limit for most areas is $548,250. However, in high-cost counties, the limit can go up to $822,375 or even higher. Keep in mind that your loan amount is also subject to the lender’s guidelines and your ability to repay the loan.
📏 What Are the Requirements for the Property?
VA loans can only be used to buy or refinance primary homes that the borrower intends to occupy as their main residence. The property must also meet the VA’s minimum property requirements (MPRs), which ensure that the home is safe, sound, and sanitary.
The MPRs cover various aspects of the property, such as the structure, mechanical systems, water supply, sewage disposal, and hazards. Some of the requirements include having a stable foundation, a roof that doesn’t leak, a working heating system, and safe drinking water.
It’s worth noting that the MPRs are different from the home inspection, which is an optional service that the buyer can request to assess the condition of the property. While the inspection can uncover issues that may not meet the VA’s standards, it’s up to the buyer to negotiate with the seller and determine if they want to proceed with the purchase.
📈 What Are the Interest Rates and Fees for a VA Loan?
VA loans typically have lower interest rates than conventional loans, but the exact rate will depend on your credit score, loan term, and other factors. As of June 2021, the average interest rate for VA loans is 2.75%, according to the VA.
In addition to the interest rate, you may also have to pay some fees associated with the loan, such as the VA funding fee, appraisal fee, title search fee, and closing costs. The VA funding fee is a one-time charge that helps the VA sustain the program and ranges from 0.5% to 3.6% of the loan amount, depending on your veteran status, down payment, and loan type.
🤔 What Are Some Common Misconceptions About VA Loans?
There are several myths about VA loans that can discourage borrowers from exploring their options. Here are some of the most common ones:
💭 Myth: VA loans take longer to close than other loans.
In reality, VA loans can close as fast as other loans, and sometimes even faster. The VA has a streamlined refinance program called the Interest Rate Reduction Refinance Loan (IRRRL), which requires minimal documentation and processing time.
💭 Myth: VA loans are only for first-time homebuyers.
There’s no requirement that you must be a first-time buyer to be eligible for a VA loan. In fact, you can use a VA loan to buy a home as many times as you want, as long as you meet the eligibility requirements and have enough entitlement left.
💭 Myth: VA loans have a lot of red tape and bureaucracy.
While it’s true that VA loans have some specific requirements and guidelines, they’re not necessarily more complex than other loans. In fact, many VA-approved lenders have experience working with VA loans and can guide you through the process with ease.
💭 Myth: VA loans are a last resort for borrowers with poor credit.
The VA doesn’t require a minimum credit score for VA loans, but most lenders do. However, VA loans may be a viable option for borrowers with less-than-perfect credit, especially if they have a stable income and can demonstrate their ability to repay the loan.
🤷♀️ What If You Have More Questions About VA Loans?
If you still have doubts or questions about VA loans, don’t hesitate to reach out to a VA-approved lender or a VA Regional Loan Center near you. They can provide you with personalized guidance and help you navigate the VA loan process from start to finish.
📢 Take the Next Step and Apply for a VA Loan Today!
Now that you have a better understanding of VA loans and their benefits, it’s time to take action and see if you qualify for a VA loan. Remember, VA loans are a great tool for achieving homeownership, and they can save you money, time, and stress in the long run.
So why wait? Contact a VA lender today and start the process of getting your dream home with a VA loan!
The information provided in this article is for educational and informational purposes only and should not be construed as legal, financial, or professional advice. The VA loan program and its requirements are subject to change, and you should consult with a VA-approved lender or VA Regional Loan Center for the most up-to-date information about VA loans. Additionally, not all borrowers may qualify for a VA loan, and other mortgage options may be more suitable depending on your situation. Seek the guidance of a qualified professional before making any decisions about your mortgage.