VA Loans: The Complete Guide
Get the most out of your hard-earned benefit with the necessary tools to navigate your VA home purchase or refinance.
Get the most out of your hard-earned benefit with the necessary tools to navigate your VA home purchase or refinance.
A VA loan is a government-backed mortgage option for veterans, service members, and surviving spouses. VA loans are made by commercial lenders, such as mortgage firms and banks, rather than the Department of Veterans Affairs.
VA home loans include competitive interest rates and terms, and they can be used to buy a single-family home, condominium, multi-unit property, mobile home, or new construction.
Since 1944, when the house loan program was first included in the original GI Bill of Rights, the VA has insured over 28 million loans. VA loans operate similarly to regular home loans but with major perks designed to make homeownership easier and more affordable for veterans and military members.
Here’s a look at a few of the main perks of VA loans:
The ability to buy a house without a down payment is a key perk of VA financing. This significant benefit has been part of the lending program since its inception. Qualified Veterans can purchase a home without a down payment, regardless of the size.
Most other loan options will demand a down payment, which is often 3% or more of the loan amount. Saving for such a large sum can take years for many veterans and military families. VA purchasers with a large down payment might opt to invest their money elsewhere.
VA loans have had the lowest average interest rate on the market for at least the last two years, according to data from Optimal Blue.
Getting a lower rate can help Veterans qualify for a larger loan. Lower rates also translate to greater savings in both monthly payment and over the life of the loan.
VA loans were established to increase access to homeownership, and one way they continue to do so is by implementing more flexible and forgiving credit underwriting rules.
Credit score minimums vary by lender, although VA loans often have lower score requirements than other loan kinds. Veterans United normally looks for a minimum FICO score of 600. VA loans do not have a rigid debt-to-income ratio limit, and they usually have shorter waiting periods after bad credit events such as bankruptcy or foreclosure.
Closing expenses and fees might vary when financing a home purchase. With VA loans, lenders are limited in how much they may charge a Veteran to originate and complete a loan.
In a VA transaction, sellers can pay all of the buyer’s loan-related closing expenses, as well as up to 4% of the loan amount in concessions. There are several prices and fees that VA purchasers are not permitted to pay
Buyers who cannot afford a 20% down payment on traditional loans are typically required to pay private mortgage insurance (PMI), an extra monthly fee that reduces their purchasing power. FHA loans need both an upfront and monthly mortgage insurance payment.
VA loans do not need a down payment or mortgage insurance, saving Veterans money and increasing their home-buying budget.
These are just a few of the advantages that the VA loan provides purchasers and homeowners. You may learn more about VA loan perks and answers to frequently asked questions in our guide.
Veterans and service members must fulfil basic time-in-service and character of service standards in order to qualify for a VA home loan. Some surviving spouses are also eligible for VA loans.
Active-duty service members, veterans, and members of the National Guard and Reserves, as well as certain other organizations, are eligible.
In general, you are qualified for a VA loan if you served:
1. 90 consecutive days of active duty (wartime).
2. 181 consecutive days of active duty (peacetime).
3. 6 years of Guard or Reserve service, or 90 days under Title 32 orders (at least 30 of those days must be spent consecutively).
Lenders such as Veterans United can assist you in obtaining your Certificate of Eligibility (COE), a legal document given by the VA that certifies you match the requirements. Veterans do not need to get this paperwork before beginning the home financing process.
Veterans must adhere to both VA and lender standards on credit scores, debt-to-income ratios, and other criteria. Our following portion of the article goes over VA loan qualifying requirements and usual lender standards in depth.
Each mortgage kind has unique benefits and cons. However, when compared side by side, VA loans outperform for many veteran and military homeowners.
Here is a short comparison of VA loans to standard mortgages and FHA loans, both of which are government-backed.
| VA Loans | Conventional Loans | FHA Loans |
|---|---|---|
|
0% Down
(for qualified borrowers) VA loans are among the last no down payment loans on the market. |
Up to 20% Down
Down payments as low as 3% are out there, but higher down payments are more common. |
3.5% Down
FHA loans require a minimum down payment. |
|
No PMI
Even with the 0% down payment benefit, VA loans don’t require private mortgage insurance. |
PMI Required
Conventional loans usually require private mortgage insurance unless you make a 20% down payment. |
Upfront + Annual MIP
FHA buyers pay both an upfront and annual mortgage insurance premiums. |
|
Competitive Interest Rates
VA loans have the lowest average rate on the market, according to Optimal Blue data. |
Low Rates at a Cost
Buyers often need top-tier credit scores in order to tap into the best conventional mortgage rates. |
Middle of the Road Rates
FHA loans are typically lower on average than conventional rates but higher than VA loan rates, according to Optimal Blue data. |
|
Lowest Origination Costs
VA loans had the lowest average origination cost last year, according to HMDA data. |
Middle of the Road Costs
Average conventional loan origination charges were 22% higher than VA charges last year, according to HMDA data. |
Highest Origination Costs
Average conventional loan origination charges were 27% higher than VA charges last year, according to HMDA data. |
|
Easier to Qualify
The VA loan is a hard-earned job benefit created to expand access to homeownership for Veterans and service members. More flexible and forgiving credit underwriting guidelines are a hallmark of the program. |
Standard Procedures
Conventional mortgage options often require higher credit scores and down payment requirements than VA loans, along with stricter underwriting guidelines in some cases. |
Qualifying is Easier, Too
FHA loans were created to help lower and middle-income consumers become homeowners and offer some flexible underwriting guidelines. |
Understanding all of your mortgage options is key to making the best financial decision possible. Just because you’re a Veteran doesn’t mean a VA loan is automatically the right fit. But for many Veterans and service members, this becomes the most financially advantageous path to homeownership.
A Veterans United loan specialist can run the numbers and help you evaluate all your mortgage options. Speak with a trusted VA-lending specialist today
The VA loan benefit provides qualifying Veterans with several powerful home finance choices.
Veterans and military members can utilize a VA loan to buy a new or existing property with no down payment. Veterans can also use VA purchase loans to acquire single-family houses, condominiums, mobile homes, multifamily properties (such as duplexes), and even new construction.
Lenders’ policies and criteria might differ. Some lenders may not provide all of these VA purchase loans.
The VA Interest Rate Reduction Refinance Loan (IRRRL) is one of two refinance choices available via the VA loan programme, and it is the preferred choice of the majority of Veteran homeowners.
These are also known as VA Streamlines because they are straightforward, low-cost refinancing loans that, in certain situations, do not need credit screening, income verification, or appraisal.
The VA IRRRL is only available to Veterans who presently have a VA loan, requires that your new rate be lower than your previous rate, and limits the time it takes to recuperate expenses and fees. All of this helps guarantee that Veterans receive the full financial advantage.
The VA Cash-Out refinancing program enables qualifying homeowners to refinance their mortgage and withdraw cash from their home’s equity. These loans are available to veterans with and without existing VA loans. Qualified homeowners can usually refinance up to 90% of their home’s value.
Lending rules and loan-to-value restrictions may differ per lender. Homeowners do not needed to take out cash with these loans, so Veterans with non-VA mortgages can use this option for a simple rate-and-term refinance.
The VA permits veterans to borrow additional funds to pay for energy-efficiency upgrades to their homes as part of a property purchase or refinance.
Veterans can borrow up to an additional $6,000 to pay the cost of eligible renovations such as storm or thermal windows, heat pumps, and solar heating and cooling. Homeowners cannot utilize this option to buy appliances, window air conditioners, or other non-permanent improvements.
VA loans have helped generations of veterans and military families establish a better financial future. Here are some of the most common inquiries concerning this historic home loan advantage.
Although the VA loan is a governmental program, the government does not often provide direct loans to veterans. Instead, commercial lenders such as Veterans United Home Loans finance the loan, with the Department of Veterans Affairs providing a guarantee.
This assurance protects the lender from ultimate loss if the buyer defaults, incentivizing private lenders to offer the VA loan at better terms than alternative mortgage choices.
The VA loan restrictions assist decide how much Veterans with reduced VA loan entitlements can borrow before requiring a down payment.
Veterans with full entitlements can borrow as much as they can afford, with no down payment. However, if you have an ongoing VA loan and wish to utilize your benefit to purchase a new house, or if you have defaulted on a prior VA loan, at least some of your entitlement is inaccessible.
In some circumstances, the VA loan limit for the county in which you’re purchasing influences how much entitlement you have remaining. With that computation and the Veteran’s Certificate of Eligibility, lenders can determine whether purchasers must make a down payment.
The VA’s loan limitations are identical to the Federal Housing Finance Agency’s one-unit conforming loan limits. These might vary each year.
The VA Funding cost is a government cost that is applied to all VA buy and refinancing loans. This charge is determined by Congress and goes directly to the Department of Veterans Affairs to help support the loan program.
When using the benefit for the first time, veterans pay 2.15% of the loan amount for a purchase or Cash-Out refinancing. For each successive usage, the cost increases to 3.3% of the loan amount. The financing cost for a VA Streamline refinance is 0.5%.
Buyers might reduce their finance fee exposure by paying a down payment.
Veterans can incorporate this charge into their loan rather than paying it in cash at the closing. They might even request that merchants cover it as part of any concessions. Veterans receiving compensation for a service-connected disability, as well as certain others, are completely free from paying this cost.
To determine your VA Funding Fee, visit SDVA Loans’ Funding Fee Calculator.
VA loans are maybe the most powerful lending option on the market. They provide several advantages, including no down payment, no mortgage insurance, flexible and forgiving credit requirements, and the industry’s lowest average fixed interest rates.
Each Veteran buyer’s circumstance is unique, and discussing all of your financing alternatives with a home loan professional will help you make the best financial decision possible.
A common misperception regarding low and no-down payment loans is that they are inherently hazardous. According to the Mortgage Bankers Association’s foreclosure data, VA loans have been the safest loans on the market for the most of the last 15 years.
VA loans include a unique underwriting criteria known as residual income, which provides a more comprehensive view of a Veteran’s resources and capacity to weather financial difficulties. The VA loan program also offers extra servicing for its loans and encourages servicers to consider alternatives to foreclosure.
Those initiatives have helped hundreds of thousands of veterans escape foreclosure and remain in their homes.
Speak with a reputable lender that understands VA loans and how to make the most of this hard-earned perk. The procedure usually begins with getting preapproved, which may frequently be completed in minutes using your phone, laptop, or tablet.
Loan preapproval is an important first step in placing an offer on your dream property. Having a preapproval letter offers you a clear understanding of your purchasing power and demonstrates to sellers and listing agents that you are prepared to close.
Start my VA loan with SDVA Homes — California’s #1 VA Lender for Homebuyers
Yes, this is a lifelong advantage. You can re-use the VA loan several times.
Buyers often recover full use of their benefit after selling their house and repaying their initial VA loan in full. It is also feasible to obtain a VA loan, live in the property for a period of time, then rent it out and purchase a new home with any remaining VA loan entitlement.
To obtain your entire VA loan entitlement, you will likely need to sell your house. The VA allows all qualifying purchasers one chance to settle a VA loan in full (often with a non-VA refinancing loan), keep the property, and repurchase with their full entitlement.
Continue to learn more about VA loan eligibility in further detail.
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