The VA has insured over 22 million home loans for veterans over the last 70+ years. The program is exclusively available to eligible veterans, active-duty service members, and surviving-spouses and in most cases, it is far-and-away the most cost-effective financing option for qualifying homebuyers. Here are some quick facts about the program.
Veterans and active-duty service members earn their eligibility for the VA mortgage program after:
- 90 consecutive days of active service during wartime
- 181 days of active service during peacetime
- 6 or more years of service in the National Guard or Reserves
The character of your service, if you are a veteran, must typically be classified as Honorable (HON), Under Honorable Conditions (UHC), or General (GEN). Those who separated with an Other Than Honorable (OTH) or Bad Conduct discharge status may be eligible, but it is based on an individual case-by-case review by the VA, which can take several months. A veteran with a Dishonorable discharge is not eligible for the VA home loan benefit.
As stated above, surviving spouses may also be eligible to use the program provided one of the following is true:
- The service member died in the line of duty
- The service member’s death was the result of a service-connected disability
- The service member has been missing-in-action or a prisoner-of-war for at least 90 days
- The service member was classified as totally disabled for at least 10 years prior to death
It is important to note that all eligibility determinations are made by the VA, not the lender. Early in the mortgage qualification or approval process, a Certificate of Eligibility will be requested from the VA. The COE, as it is called, informs the lender as to your eligibility.
Down Payment Benefits
Perhaps the most significant benefit to the VA Home Loan is that, in most cases, it requires absolutely no money down. There are loan limits on the no money down option, but even if you are purchasing a home above those limits, the required down payment is typically much, much lower than that required of other programs.
The loan limits are determined both by the area in which you are buying, as well as the determination of benefits provided by the VA on your COE. If you have never used your VA benefit before to purchase a home, you will most likely have “full entitlement,” meaning you can use the loan program to purchase a home with no money down at a sale price up to the maximum loan amount for your area.
A common question is whether or not you can use your VA benefit more than once and the answer is usually yes. If you used your benefit before and paid off that loan, your “full entitlement” is typically restored. But even if you currently own a home with a VA loan, as is common when a service member buys a home at one duty station and then rents that home out when he or she transfers to a new duty station, you may be able to use your benefit to purchase another home with little or even no money down again. The calculations to determine if that is a possibility are too complicated to address here, but if you contact me, I can help figure out what options you may have with any remaining entitlement you have earned.
Another huge benefit of a VA mortgage is that it typically has a lower monthly payment than just about any other option for a couple of reasons. First, VA loan rates are often among the best 30-year fixed rates you can get. Second, there is no monthly mortgage insurance payment. VA charges a funding fee on most loans (it is waived for veterans with an eligible service-connected disability) that can be financed into the loan. The funding fee is a percentage of the loan amount and can be several thousand dollars; but even when it is financed, it typically does not result in a significant increase in the monthly payment like monthly mortgage insurance payments cause.
An often-overlooked benefit of the VA loan is the availability of the Streamlined VA Refinance program. The Streamline makes refinancing your VA loan into a new VA loan with a lower interest rate easier. Different lenders may have some different requirements, but generally-speaking, the program has reduced documentation requirements and lower costs if your only purpose for the refinance is to lower your interest rate.
I hope this answers some basic questions you may have about the VA loan program. If you have other questions about the program or would like to explore what a VA loan would look like in your specific circumstances, please do not hesitate to contact me at your convenience.