 VA Home Loans
What are VA Home Loans?
VA Home Loans are made to eligible veterans by individual, VA approved lenders, such as ENG Lending, for the purchase of a primary residence. The VA Loan Guaranty means the lender is protected against loss if the borrower defaults on the mortgage loan.
What are the benefits of a VA Home Loan?
There are many benefits of a VA Home Loan including:
- No down payment
- Low interest rate
- Closing costs restricted by the VA
- No monthly mortgage insurance
- Assumable mortgage
- Prepay without penalty
- Assistance to veteran borrowers who default due to temporary financial difficulty
VA Home Loans have Great Interest Rates
The daily VA mortgage rates are comparable to a conforming 30 year rate.
VA Home Loans Require No Down Payment
VA Home Loans can be obtained with zero money down.
VA Home Loans Have No Mortgage Insurance
There is no monthly mortgage insurance payment for VA Home Loans.
What are the requirements for a VA Home Loan?
To determine if you qualify for a VA Home Loan Loan, the following will be looked at:
- Your income and your monthly expenses. VA uses two methods for income qualification purposes. The primary method of evaluating a veteran's income is the residual income method and a 41%
total debt to income ratio.
- A FICO score of 620 or above is currently required to obtain an approval.
VA uses two methods for income qualification purposes. The primary method of evaluating a veteran's income is the residual income method. Under this method, the underwriter determines that a veteran has sufficient income to cover day-to-day living expenses after paying housing expenses, taxes, and other debts such as car payments and credit card payments. VA also uses a debt-to-income ratio method like many programs. However, VA uses only one ratio (41%) which is the ratio of total debt (both housing and other debt) to income.
Additionally, to meet current VA Home Loan qualifications your military service must meet the following requirements:
Military Service Requirements for VA Home Loan Eligibility:
In General, nearly every active duty and honorably discharged service veteran will be eligible for a VA Home Loan.
Wartime - Active Duty
You must have at least 90 days on active duty and been discharged under other than dishonorable conditions. If you served less than 90 days, you may be eligible if discharged for a service connected disability.
Peacetime - Active Duty
You must have served at least 181 days of continuous active duty and been discharged under other than dishonorable conditions. If you served less than 181 days, you may be eligible if discharged for a service connected disability.
Reserves or National Guard
If you are not otherwise eligible and you have completed a total of 6 years in the Selected Reserves or National Guard, you are likely eligible.
You may also be determined eligible if you:
- Are an un-remarried spouse of a veteran who died while in service or from a service connected disability, or
- Are a spouse of a serviceperson missing in action or a prisoner of war
What is the maximum amount that I can borrow?
The maximum loan amount for a VA Loan qualification is determined by:
Maximum VA Home Loan amount: By law, VA Lenders cannot insure loans that exceed certain amounts based on the metropolitan area or county in which you live. The highest maximum VA mortgage right now is $1,094,625. The lowest VA lender maximum amount available in any county is $417,000. To see what the limit is in the county in which you're interested, visit the following site http://www.homeloans.va.gov/docs/2009_county_loan_limits.pdf. This site lists U.S. territories as well as states.
Maximum financing: The maximum VA Home Loan amount will be 100% of either the appraised value of the home or its selling price, whichever is lower. If you are refinancing and taking cash out, the loan will be limited to either 90% of the current appraised value.
How do VA Home Loans compare to conventional loans?
Conventional loans usually require a larger down payment. And, if you have less than perfect credit you may not qualify for many conventional loans and find yourself being offered loans with higher interest rates and/or fees than you expected. The best thing to do is compare the cost of the conventional loan to an VA Home Loan line-by-line. What are the fees on each? What is the interest rate? How much is the mortgage insurance on each? How much down payment is required? For some borrowers, a conventional loan may be less expensive. For many others, it will be more expensive than VA.
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