Q: I’m looking to purchase a home using a VA loan. What do I need to know?
A: Veterans Affairs (VA) loans are one of the most significant financial benefits the U.S. government offers military veterans. Here are answers to the most commonly asked questions about VA loans.
What are the benefits of a VA loan?
First, VA loans offer 100 percent financing to qualifying home buyers. This means you will not be required to make a down payment when you purchase your home through a VA loan. Second, a VA loan allows you to purchase a home without paying for private mortgage insurance (PMI) on your mortgage. Other benefits include lower interest rates, relaxed credit standards and the absence of a prepayment penalty. In addition, closing costs may come from a gift or be paid by the lender or seller.
How do I begin the application process for a VA loan?
To qualify for a VA loan, you’ll need a Certificate of Eligibility, or a COE. For that, you’ll need to meet ONE of the following service requirements:
- 181 days of service during peacetime
- 90 days of service during wartime
- 6 years of service in the Reserves or National Guard
- Surviving spouses of service members who have died in the line of duty may be eligible for a COE as well.
Does a COE guarantee that I’ll be approved for a VA loan?
Obtaining a COE does not guarantee you will receive a VA loan. You may be disqualified for other reasons, including being discharged from service under dishonorable conditions, having defaulted on a past VA loan or trying to purchase property that does not meet VA loan requirements.
Will a VA loan cover a mortgage of any size?
For years, VA loans have had strict maximums that varied by county. Veterans were permitted to take out larger loans but were required to make a down payment on them.
Effective Jan. 1, 2020, these limits are no longer in play for most VA borrowers. Qualifying veterans can now purchase more expensive homes without making a down payment.
VA loan limits are still in effect for veterans who have one or more active VA loans open, or who have defaulted on a VA loan in the past.
Are there any hidden fees associated with a VA loan?
The only fee unique to VA loans is the funding fee. This fee varies by loan size and increases with each subsequent VA loan you open. For veterans purchasing their first home through a VA loan, the funding fee is 2.3 percent of the loan. You can roll the cost of the fee into your loan or pay it upfront.
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