The U.S. Department of Veteran Affairs (VA) Home Loans exist to help active duty service members, veterans and their spouses become homeowners. In order to be eligible for a VA home loan you will need show satisfactory credit, income and a valid Certificate of Eligibility (COE).
The VA home loan is provided by a private lender such as Title Mortgage Solution however a portion of the loan is guaranteed by the VA. The guarantee can sometimes allow the lender to provide the borrower with more favorable loan terms. This guarantee is similar to mortgage insurance because it reduces the risk for the lender in the event that the borrower was to default on their loan or go into foreclosure. The borrower is charged an up-front funding fee. This fee can be financed and a veteran who is receiving VA compensation for a service-connected disability is exempt from this fee requirement. The fee amount varies depending on if the buyer is a first time VA borrower or repeat borrower, if they are eligible because of regular military time or reserves or national guard, and the down payment amount.
The funding fee for a first time VA borrower who was in the regular military is 2.15% of the loan amount. This number would go up if this is a second VA home loan or if the borrower was in the reserves or national guard. The number would go down of they were making a down payment of more then 5% of the purchase price.
The Benefits of a VA Home Loan
There are many benefits of a VA home loan. Ultimately this loan type helps service members obtain loans at a competitive interest rate even if they don’t have a down payment. The borrower also will not be required to pay private mortgage insurance. A VA home loan can help someone achieve the dream of homeownership when they may not easily qualify for other loan programs or other programs may be too costly.
The interest rates are not lower on VA home loans then traditional loan programs however a borrower may be able to qualify for a lower rate with the VA program then they would with another program. Lenders look for a 41% debt to income ratio when qualifying a buyer for a VA loan. This number includes fixed debt, and household living expenses including the new mortgage payment.
The VA Home Loan can only be given to an applicant who has a Certificate of Eligibility from the VA. You can get one directly online, through the lender online or by mail. A COE will only be given to a veteran or active duty member of the armed forces and their spouses. The COE will determine if the borrower is eligible for a loan with the full guarantee. The VA loan does not have a maximum loan amount however they will only guarantee 25% of the loan balance or 25% of the Freddie Mac limit, whichever is lower.
The VA home loan can be used again if the property has been sold and the VA loan has been paid in full.
If you are eligible for a VA Home Loan it is important that you speak with a professional loan officer to weigh all options available to you and ensure that the VA Home Loan is the best choice. At Title Mortgage we offer a variety of loan programs in order to ensure that we can give our clients the best loan option possible. Apply today to get started!