VA mortgages can be one of the most appealing types of home loans. How do they work? Is a VA loan right for your next home purchase or refinance?
Veterans Affairs (VA) mortgages may not be as widely known as some other home financing programs, but for those who qualify they can be an incredible tool for achieving homeownership and retaining all of those benefits.
So, what are these special types of loans? How are they different from other mortgages? Who qualifies and how can you get one?
What Is A VA Mortgage Loan?
These loans are restricted only to eligible members of the military and similar branches of the government, and their surviving spouses.
They are perhaps one of the best benefits of military service.
In most respects VA home loans work just like any other mortgage, with a few feature differences.
These loans can be used to build, refinance, improve and buy one to four family properties.
VA Loan Eligibility: Who Qualifies?
To qualify for this loan program you will generally need to fall into one of these categories:
- Have been and are currently on active duty for at least 90 continuous days
- Have served 90 days to 24 months continuously (depending on the period and if it was during war time)
- Were discharged for a service related disability
- Have served 6 creditable years in the National Guard or Selected Reserve
- Be the surviving spouse of a veteran, POW or MIA
You may also qualify if:
- You were a member of a military academy
- Have been a public health service officer
- Were an officer at the NOAA
Typically you may not qualify if you received a bad conduct, dishonorable discharge or anything other than honorable discharge.
However, there are many exceptions, including applying for a discharge review or upgrade.
It is absolutely worth inquiring about your eligibility for this loan program.
Where To Get A VA Home Mortgage Loan
As with FHA and USDA home loans, the VA guarantees or insures the mortgages that other front line lenders actually make.
So, you’ll need to find a VA approved direct lender or Seattle mortgage broker to apply with and who will process and fund your loan.
With the insurance of this program, lenders are covered if you default and can’t make your mortgage payments and fall into foreclosure. This lowers their risks and gives them the confidence and ability to make much more aggressive mortgage loans.
The idea is to provide a big perk for serving in the military and their families, and promoting the benefits of homeownership.
Purchasing A Home With A VA Loan
There are many benefits and advantages of choosing a VA loan. These include the following:
No Down Payment
That’s right! One of the amazing things about VA loans is that it offers 100% financing. You don’t need any down payment.
Lower Interest Rates
This is designed as a perk and to encourage lenders to give the best loans by ensuring any potential losses they and their investors could face. In turn that can mean getting some of the lowest possible interest rates.
The VA and lenders want you to get these loans. They make it as easy as possible to qualify, while still ensuring they are offering sustainable and common sense lending.
Being Able To Invest & Financing Your Own Housing At The Same Time
VA loans can be used to finance single family homes, duplexes, triplexes and fourplexes. That means you can live in one unit and rent out the others. Those tenants can pay your mortgage and maybe even provide some extra spending money every month, while you live for free.
Higher Loan Amounts
One of the greatest advantages of this loan program is the recent lifting of maximum loan amounts. Where other programs limit the size of loan you can get at much lower than the average Seattle home price, you can borrow a whole lot more with VA.
Lower Credit Score Requirements
You’ve already been trained on keeping your credit in good shape. Yet, this loan program also allows for lower than average credit scores. Often down to the low 600s. Though these rules can change over time.
What’s Different About VA Mortgages
The mechanics of a VA loan are just like any other home loan. There are just a couple of unique differences you’ll want to keep in mind.
You’ll Need A COE
To qualify you’ll need a Certificate Of Eligibility (COE). You know the government doesn’t always move paperwork quickly. Even more so if you need an exception. Be sure to request this document early.
VA Funding Fees
In order to keep the program running and benefits available to future service members, veterans and their family, you may have to pay a VA funding fee at closing.
If you do, this can range from 0.5% to 3.6%, depending on the type of loan, down payment if any is made and loan amount.
Note that there are a variety of exceptions which may grant you a waiver of or refund of this fee. This may include:
- Earning a purple heart
- Receiving disability related compensation
- Being the surviving spouse of a veteran
Be sure to ask about these and other exceptions. If you do need to pay the fee you can have the option of financing it into your loan.
Easy Refinancing With A VA Mortgage Loan
The VA also offers great loan features for refinancing and improving your home. You may get cash out or use the streamlined refinance, IRRL (Interest Rate Reduction Loan) to lower your rate and payments. This program requires no appraisal and allows you to borrow up to 150% of your home’s current value.
Can I Get A Second VA Home Loan?
The VA home loan is a lifetime benefit for qualifying members of the military and other branches as listed above.
While the eligible amount you qualify for can only be held as an outstanding balance across the total of any VA financing you have on a home, there are ways to acquire additional properties using your COE.
Sell Your Home & Buy Another One
If you sell your home and the balance of your VA loan is paid off, then you may file VA Form 26-1880 and have your eligibility reinstated to the full amount. Use your new COE to apply for a new VA loan for purchasing your next home.
Refinance Or Pay Off Your Home
If you want to keep your current property and buy an additional one, then you can either refinance the balance of your loan with a non-VA mortgage program, or simply pay off your mortgage.
Have Another Veteran Assume Your Loan
One of the best and least known features of VA mortgage loans is that they are assumable. That means you can sell your home and have the new buyer simply take over your mortgage. This makes it much easier to sell. If you have a veteran or qualifying family member assume the loan then you can reinstate your eligibility and get a new VA loan to purchase another property.
Get A Second VA Home Loan
If you haven’t used the full amount of your entitled benefit per your COE you can get a second VA loan and hold it simultaneously under the exception of military reassignment. For example; if you are reassigned, and need a new home in a new location, had $400,000 in eligibility, but only owe $150,000 on your current VA loan, you could rent the property out, and use the remaining $250,000 of benefit for a new property.
Check Out Some Of Our Most Popular VA Home Loan Products
We're proud to serve those who have bravely served in the Armed Forces with SMB's Elite Washington VA home loan Pricing. Take your purchase to the next level with industry-leading government rates and pricing. This is the obvious choice for a top-tier buyer.
Program highlights include:
- 640+ FICO
- $175,000 minimum loan limit
- Maximum loan amount can exceed county limits
- All fixed term mortgages
- Single family primary residences
The simplistic of all refinances the IRRL or Interest Rate Reduction Loan. This may be the perfect choice if you are looking to keep your balance low and only restructuring the term or rate. Allow you house to take full advantage of your VA benefits by streamlining your current VA loan into a lower interest rate.
- LTVs available up to 150%, unlimited CLTV
- No appraisal
- Maximum loan amount can exceed county loan limits
- AVM run prior to submission, no surprises on calculated value!
- Elite pricing available to those who qualify