Home Loans Secured by the United States Department of Veterans Affairs
What is a VA Loan?
Protecting your country in good times and bad should come with some benefits beyond sleeping on a cot and eating MREs. The United States Department of Veteran's Affairs (VA) guarantees a home loan product made just for you. Let us help you find the VA Loan that’s right for you, right now. Don’t want to wait? Go ahead and contact us at home.loans and we’ll do this thing together.
VA Mortgage Basics
VA loans are one of the perks of honorable military service, giving vets a chance to own a home of their own after a certain amount of service during war or peace time. Although not made by the Department of Veterans Affairs, the department does insure a large percentage of the value of each of these notes. This allows vets to get a break on terms like interest, down payments and even mortgage insurance, saving them a bundle over the life of their loans.
Both active duty and retired military are eligible for a VA loan after a set period of time, based on their service period. For example, Gulf War vets are required to serve at least 90 days of active duty or to fully complete the term they were ordered to active duty for without a dishonorable discharge. That group includes vets that were in service from August 2, 1990 until the present. There’s a full list of VA loan eligibility for the curious here.
What can a VA loan be used for?
VA loans are designed to provide those who serve(d) the military with good homes. The VA loans may be used for the following purposes:
- Purchase a home
- Build a home
- Purchase and improve a home
- Adapt a home for disability access or
- Refinance an existing mortgage.
There is no limit on the amount that you can borrow, but there is a limit on how much of the loan the VA loan program can guarantee. How much the VA loan program can guarantee is dependent on the county limits.
VA Loan Calculator
If you’re considering getting a VA home loan, and want to estimate your potential monthly payments, try our VA mortgage calculator. By simply inputting the loan amount and interest rate, and setting the loan program, you can get a look at what your monthly payments may look like over time. While our calculator doesn’t factor in everything (like closing costs), it’s a great way to see if a VA home loan is the mortgage solution that works best for you (and your budget!)
Since VA loans come in adjustable-rate and fixed-rate variations, our VA mortgage calculator can help you look into both of these options. And, if you’re considering refinancing your current VA loan, or refinancing a non-VA loan into a VA loan, our calculator can also give you the deets.
The home.loans VA loan calculator is a tool designed to help you get a handle on your potential monthly payments. For ease of use, it breaks your monthly estimates into principal and interest portions. Plus, you can use the VA loan calculator to help you determine other monthly expenses, like property taxes, homeowners insurance, and monthly HOA dues.
Helpful Terms for VA Mortgage Applicants
- Amortization: This is a way of paying off debt using payments that consist of both principal and interest. In most cases, a fixed repayment schedule is agreed upon by both the borrower and the lender, and the amount of interest paid during each interest paying decreases over time. That means that as you go on, a higher percentage of each payment goes to paying off the principal.
- Loan to Value (LTV): This is a way that lenders calculate risk before deciding to give you a loan. To calculate LTV, a lender will usually take the amount of a potential mortgage and divide it by the appraised value of a home.
- Loan Term: The term of a loan, or loan term, is the amount of time for which a loan agreement remains in force. At the end of a the loan term, the loan should either be fully repaid or refinanced into a new loan.
- Principal: This is the amount of money originally borrowed from the lender. Monthly payments consist of principal payments combined with interest (as well as the payment of fees, taxes, and other expenses.) As the borrower pays off the principal, it will grow smaller over time.
- Interest: Interest is a specific percentage of the principal that is paid to the lender. For fixed-rate loans, this stays the same throughout the entire loan term, but for adjustable-rate mortgages, it can vary based on changes in the market.
- Annual Percentage Rate (APR): This is a calculation of interest, plus the other costs, like points, broker fees, and other charges, that you’ll pay during a year of your loan, expressed as a percentage. Because of this, your APR will almost always be more than your interest rate.
- Down Payment: This is the initial cash payment you’ll make towards buying a home. Fortunately, in many cases, you can get a VA loan without any down payment.
Pros and Cons of VA Mortgages
VA loans are one small show of thanks from the government to the veterans that defend it, and because of that, there are very few drawbacks to procuring one. In fact, if you’re a vet and you’re thinking about buying a home, a VA loan is likely your very best option. But, let’s break down the pros and cons of the VA loan anyway.
Benefits of the VA Loan
- Flexible qualifications. Both the debt-to-credit ratio and the credit score requirements of the borrower are incredibly flexible and largely at the discretion of the lender. VA encourages them to “review the entire loan profile to make a lending decision.”
- Low down payment. For the most part, VA loans are zero down. If you want to provide a down payment, you certainly can, since it’ll reduce your overall payment, which can be great for a lot of other reasons.
- No mortgage insurance. VA loans don’t have mortgage insurance. They do have funding fees, which are typically from 1 to 4 percent of the total loan amount, depending on several factors including how long you served and in what branch.
Drawbacks of the VA Loan
- Providing Certificate of Eligibility. This is really more of a minor inconvenience, but you still have to do it. You’ll need a Certificate of Eligibility to show how much of a benefit you qualify for. Often, your lender can get this for you, but you may have to contact the VA directly. Do it before you apply because it can take a while.
- May be subject to lender overlays. Although the VA just wants to give you a loan, some of the lenders it insures are less free with their money. They may impose additional rules on top of the very flexible rules of the VA. It might make financial sense to shop this loan around a bit.
- Subject to upper loan limits. For many vets, the upper loan limit of $453,100 in most areas will be far more house than they intend to purchase. Still, if you’re in an area where prices are rising faster than the VA’s formulary, it could be an important factor to keep in mind.
Who’s the Ideal Borrower for the VA Loan?
There are only two kinds of borrowers who can get a VA loan: active duty military and retired military. However, there's on exception -- surviving spouses can also use the benefit if it hasn’t been used yet and they never remarried. So, the ideal borrower for a VA loan:
Has dedicated a significant portion of their life to the United States military.
Wants to buy a home and put much of their payment toward principal.
Does not necessarily have much saved for a downpayment.
Intends to stay put for a while, since the VA loan rate is pretty amazing.
VA Loan Eligibility Requirements:
The loans are available to military personal that are currently serving and those who have retired. Your eligibility for a VA loan is determined by the length of service and character of your service. In general, the following criteria qualifies you for a VA loan;
Active personnel who have actively served for at least 90 days during wartime
Personal who have served actively for at least 180 days during peacetime
Personal who have 6 years of service in the National Guard or Reserves
If you are a spouse whose partner died in active service or from an injury acquired during service
If you are a military man or woman who doesn’t fit into the descriptions above do not be discouraged, you may still qualify. The VA loan program has an extensive list of beneficiaries with varying qualifications. If you would like to know if your service or your spouse’s service (even a former spouse) qualifies you for a VA loan then fill in the form below and a home.loans specialist will assist you.
What if I Want to Move After Getting a VA Loan?
Once you’ve used your Certificate of Eligibility, it’s used. You can get it back, but you either have to sell the home that’s tying it up or find another veteran who is willing to assume your loan and transfer their entitlement, freeing up yours. When you’re ready to set down roots for a while, that’s when it’s time to whip this loan out. If you still have some traveling to do, or you’re on active duty, it might be wise to wait a little longer to use it.
VA Loan Refinancing Options
VA home loans also come with unique refinancing solutions. These refinancing packages are specifically meant for VA-guaranteed mortgages, with benefits that can't be found for other home loan refinancing packages. Learn more about these below.
VA Streamline Refinancing
Also known as the Interest Rate Reduction Refinance Loan (IRRRL), the VA streamline refinancing solution is designed to reduce the interest rate and monthly payment on a VA loan. Benefits include no required credit or appraisal underwriting, and often no out-of-pocket expenses.
VA Cash-out Refinancing
Convert home equity into cash with the VA-secured cash-out refinancing option. It keeps the benefits attached to standard VA loans, and allows non-VA loans to be refinanced into VA loans.
The VA Mortgage: In Review
VA loans are designed to do one thing, and do it very well. They’re in place to ensure military veterans are at least partially protected from the whims of the housing market after they’ve done their duty. VA loans are great mortgages, so get one if you can.
Despite the advice we may give here at home.loans, not every loan is perfect for every borrower. There are definitely special cases and lots of “what ifs” that rattle around the edges. When you hit one, just contact us. It’s free and we’re always happy to help!