What You Need to Know to Apply for a VA Loan
The VA loan program was created as part of the original Servicemen’s Readjustment Act, passed by the U.S. Congress in 1944 for service men and women returning home from World War II. Like the GI bill, it was designed to help returning veterans make up for the time they’d lost and to thank them for their sacrifices.
VA loans are meant to make home-buying easier and more affordable for veterans. These loans are constructed to overcome the traditional roadblocks encountered during the mortgage process–like less than perfect credit, coming up with the funds for a down payment, and paying closing costs.
And, because VA home loans are guaranteed by the federal government, much of the risk for the lender is completed eliminated–which in turn, allows the lender to offer better rates and terms.
How to Qualify for a VA Loan
A VA loan offers veterans, surviving spouses, and military service members a government home loan with excellent features and benefits.
You’ll want to be sure to have the proper discharge paperwork on hand when you speak with a loan officer. Requirements for Certificate of Eligibility (COE) include:
- 90 consecutive days served during wartime
- 181 days to two years during peacetime
- Minimum of 6 years in the National Guard or Reserves
- Must be honorably discharged
- The spouse of a service member who died in the line of duty or as the result of a service-related injury that never remarried
Features & Benefits of VA Loans
VA loans are available for veterans with less-than-stellar credit, provided you have no outstanding collections, liens, or judgments against you. You should also have a steady form of income, and a credit score of 580 or higher.
VA Home Purchase
Veterans purchasing a new home enjoy competitive rates and flexible terms. Other benefits include:
- 100% financing may be available on loan amounts up to $453,100, depending on the county loan limits for the subject property location.
- No down payment
- No monthly mortgage insurance
- Gift funds acceptable for closing costs
- No cash reserve requirement
- Reduced cost for disabled veterans
- No pre-payment penalty
- Not limited to first time homebuyers
- Minimum FICO score of 580
- Eligible property types: Single family attached/detached, Condo and Planned Unit Development (PUD)
VA Refinance Cash-out
Veterans can also refinance to a lower interest rate by tapping into the equity in their home with a loan-to-value (LTV) of up to 100%. A cash-out refinance is great for debt consolidation, making education payments, or energy-efficient improvements to the home. In addition to getting a lower rate and/or shortening the term of your current mortgage, an appraisal in generally not required, saving you the additional cost.
The Interest Rate Reduction Refinance Loan (IRRRL)
The IRRRL is a streamlined refinance program that enables veterans to obtain lower and/or shorter terms with no appraisal and no income or asset documentation required. While there’s no cash-out option, the IRRRL requires no private mortgage insurance (PMI), a minimum credit score of 580 and an LTV of up to 150%. And, all closing costs can be rolled into the loan.
The Bottom Line About VA Loans
The VA loan program was designed to make it easier for veterans to afford their piece of the American Dream. The requirements to borrow are minimal, and the process is simpler than a traditional home loan. If you’re a veteran, the spouse of a deceased vet, or are currently serving in the U.S. military and meet the COE qualification, you owe it yourself to take advantage of these great benefits. Thank you for your service.