If you are a veteran of the armed forces and are looking to apply for a mortgage for a new home or refinance an existing loan, you may be eligible for special benefits and favorable terms from your lender.

When you see the letters “VA” in VA Home Loan, it means that this benefit is offered by the Department of Veterans Affairs. The VA Home Loan program is designed to assist service members, veterans, and surviving spouses in obtaining loans to help them secure homes for their own use.

With the VA Home Loan, the VA provides a guarantee for a portion of the loan. This guarantee helps borrowers secure loans from private lenders, banks, or mortgage companies with favorable terms, all without the need for a down payment. The VA will guarantee up to 25% of a home loan, which can go up to a maximum of $113,275. This means that the maximum loan amount can be as high as $453,100.

Since it was introduced as part of the GI Bill in 1944, more than 22 million VA loans have been approved.

VA Home Loan – Benefits

• Equal opportunity guaranteed to qualified veterans
• Loan can be reused
• Typically no down payment, unless the lender specifies it or if the purchase price exceeds the reasonable value of the property
• Does not require mortgage insurance
• Loan can include one-time Funding fee
• Veterans getting the VA Disability compensation do not have to pay the funding fee
• Limited closing costs for the veterans
• If veterans face difficulties in keeping up with their loan payments, they can seek help from the VA staff for assistance.

How to Apply?

In order to get approved for a VA Home Loan, lenders require a Certificate of Eligibility (COE). The COE serves as confirmation that an applicant has served the necessary time and has an honorable service record. There are three ways to apply for a COE: through a VA-approved mortgage lender, through the VA’s eBenefits website, or by mail using VA Form 26-1880.

When applying for a VA loan, there is a two-part appraisal process involved. The first part is a valuation of the property, while the second part is an assessment of its condition, known as Minimum Property Requirements (MPRs). The VA assigns the appraiser for this process, and any party involved in the transaction can request it.

Generally, VA loans have a relatively quick closing time, typically taking around 30-45 days to complete.

Who is Eligible?

The people mentioned below are eligible for a VA Loan program.

• Those veterans who fulfil the minimum service period requirement.
• Active service members who have fulfilled the minimum service time period.
• National Guard members and reservists who meet with the requirements
• Surviving spouses of deceased veterans who meet with the requirements

To be eligible for a VA loan, you usually need to have served for a minimum period of time. This includes 90 consecutive days of active service during wartime, 181 days of active service during peacetime, more than six years of service in the National Guard or reserves, or being the spouse of a service member who passed away in the line of duty or due to a service-related disability.

VA Home Loan Rates

In December 2017, the average interest rate for a 30-year fixed-rate VA home loan was 4.05%, as reported by Ellie Mae, a software company that handles a significant portion of mortgage applications in the United States. In contrast, the average interest rate for a conventional mortgage was slightly higher at 4.32%.

When obtaining a VA-approved loan, there is a one-time funding fee that needs to be paid. For most borrowers, this fee is 2.15% of the loan amount. However, members of the National Guard or reserves pay a slightly higher fee of 2.4%. The VA offers reduced fees for those who make a down payment on the home: 1.5% (or 1.75% for National Guard or reserves) for a 5% down payment, and 1.25% (or 1.5% for National Guard or reserves) for a 10% down payment. Surviving spouses and disabled service members are exempt from paying the funding fee.

Risks Involved

• Repair: While the Minimum Property Requirements (MPR) process aims to ensure that a home is safe, clean, and structurally sound, it doesn’t guarantee that the buyer won’t need to make repairs shortly after closing.
• Rejection: Some veterans and service members have shared experiences of sellers turning down their offers in favor of non-VA buyers who offer a lower price. This could be because some sellers mistakenly believe that a buyer without a down payment is not qualified and may face difficulties in completing the transaction.
• Waiting Period: The appraisal process usually takes about 10 days, but this can vary depending on the location. In some cases, people may experience longer waiting times for their appraisal to be completed.
• Under Appraisal: If the appraisal value is lower than the loan amount, the buyer has a few options. They can ask the seller to reduce the purchase price and make up the difference with their own cash. Alternatively, they can request a new appraisal to reassess the property value. In some cases, the buyer may have no choice but to withdraw their offer to purchase.

How to Find the Right Lender?

Please consider the factors mentioned below to find the right lender:

• Experience in the market with VA loans
• Efficiency
• Customer services
• User testimonials and tools available
• Fees (origination, inspection and closing)
• Your credit score

Just like with any loan, the rates for VA loans can differ between lenders. It’s a good idea to explore different VA home loan lenders and compare their rates and terms. By shopping around, you can find the best options that suit your needs.