How do you get started with a VA home loan? The first step is to establish your eligibility for the program, which means serving a minimum time in uniform on active duty or as a member of the National Guard or Reserve with qualifying military service.
Military veterans, certain surviving spouses of vets, and certain members of the National Oceanic and Atmospheric Administration are all eligible to apply for VA loan benefits. Veterans and non-veterans are permitted to apply for a VA loan together, but the VA will guarantee only the veteran’s portion of the loan. This is known as a “joint loan” in the industry and you may need to ask for a joint loan by name. Your eligibility for the VA home loan program is reflected on a document required by your lender.
This is known as the VA Certificate of Eligibility (COE), which is provided when you have met the minimum time-in-service requirements.
Qualifying surviving spouses of military members who died as a result of military service must request their COE from the Department of Veterans affairs, but all others may be able to request the COE online using a VA benefits portal, by mail, or using the assistance of a participating lender.
Qualifying for Veteran Loans
Veteran loan eligibility will greatly vary depending upon the length of service, the military branch of service, as well as the dates of service.
Usually, eligible recipients have to have served for a minimum quantity of time, as well as have to be either active service members or received honorable discharge. Those who serve today or join today are likely eligible after 90 days of continuous active duty service. Basic training time does not count.
The quantity of time in which you need to have served will depend on your responsibilities within the services. For instance, reservists generally have to have served for a minimum of 6 “creditable years” during peacetime, those who have been on active duty for 90 days or more in present times may also qualify.
Uses For VA Home Loans
Qualifying borrowers can use VA mortgages to purchase single family residences meant to be owner-occupied.
These can be anywhere from one to four units, and may include mixed use property that is primarily residential and that will be occupied by the owner or qualifying family members. Business or commercial properties cannot be purchased with a VA mortgage.
Nor can intermittent-occupancy enterprises or related businesses be run out of a house purchased with a VA mortgage, which means no bed-and-breakfasts, no time shares, and no frathouses or sororities.
Where to Apply
VA home loans are offered by a network of participating lenders and you can use any VA lender to establish your eligibility, obtain a VA COE, and move forward with your mortgage.
The Department of Veterans Affairs in most cases does not lend money–that is reserved for the Native American Direct Loan program for purchases made that meet certain VA requirements including that the purchase be on tribal lands. You can Google “Participating VA Lender” or you can search for military friendly lenders.
VA Home Loan Details
VA home loans feature no required down payment in most cases, but making a down payment reduces your VA loan funding fee, which as of Jan. 1, 2020 changed to reflect the following new requirements:
The VA loan funding fee for forward loans (not refinance or reverse mortgages) is lowest for first-time VA loan borrowers who make a down payment of at least 10%. There is usually no down payment requirement, but borrowers who choose to make one get the benefit in lower VA loan funding fees.
All VA home loan borrowers will be required to pay the VA loan funding fee unless they are exempt because they receive (or are eligible to receive) VA compensation for service-connected disabilities. The amount of the funding fee for non-exempt applicants is based on the following scale for VA purchase loans:
- First-time use with no money down – 2.3%
- 5 percent down – 1.65%
- 10 percent down – 1.4%
Second-time use VA loan funding fees are as follows:
- Less than 5 percent down – 3.6%
- 5 percent down – 1.65%
- 10 percent down or more – 1.4%
What You Need To Know About How To Get Started With A VA Mortgage
Before you get started applying for a VA mortgage, you’ll need to do three important things. The first is to (very early in your planning stages) pull your credit report and review it for errors, indications of identity theft, outdated information, etc.
Disputing items on your credit report takes time, often months, to resolve. You may be required to fill out police reports in the case of stolen identity issues, you may have to communicate with creditors, etc. Don’t put off doing this step, it’s crucial for planning, budgeting, and saving.
Budgeting And Saving For Your VA Mortgage
And that leads to the next issue–even though you won’t generally have a down payment requirement in typical VA loan cases, you will need to save money for other closing costs, moving expenses, inspection fees, and more. Don’t fill out loan paperwork until you know what to expect in closing costs, fees, and expenses. You’ll need to make a mortgage budget and plan accordingly.
And remember the first step mentioned above, pulling your credit report? You’ll want to plan on taking a minimum of 12 months to establish a record of on-time, every-time payments on all financial obligations.
Because your loan officer will use your payment history as a way to determine whether or not you are a good risk for a home loan.
When Saving For Your VA Home Loan
Keep in mind that you’ll need to anticipate certain fees and expenses such as termite inspections, appraisals, and the lender’s fee. It’s a very good idea to compare closing costs among VA lender as these expenses are not standardized and will vary from lender to lender.
How much is the lender you’re looking at now going to charge you for your VA home loan? How much would another lender charge by comparison? Shop around.
Anything less than 12 months of on time payments on all financial obligations leading up to your home loan application puts your ability to qualify for the mortgage in jeopardy. A single missed payment might not be the kiss of death on a mortgage application, but remember that buying a home means operating in a competitive marketplace.
That means some borrowers are viewed as being better credit risks than others. You’ll want to do everything you can to help your loan officer decide you are a good risk.
VA mortgages do have more forgiving credit requirements than other types of home loans, but you’ll still be required to credit qualify like any other mortgage. And with VA home loans, there is no VA-defined FICO score approval range. It’s up to the lender to decide if your FICO scores make you a good risk or a bad credit risk.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
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