VA Loans
Veteran Affairs
Definition of VA Mortgages –
The Department of Veteran Affairs (VA) has helped 24 million service members since its launch in 1944. In efforts to reward military members for their honorable and extraordinary services to this country the government decided to reward veterans with their own loan program. There are a few exceptional benefits that the VA offers for Veterans, which include lower interest rates than a civilian Conventional or FHA loan. The VA also offers down payment options as low as $0, or 100% financing, which is a huge help to cover the large upfront cost of buying a home!
The VA does not issue or originate loans. The VA backs or guarantees private lenders to help them issue and originate them. In other words, you’ll work with a private lender (Supreme Lending) to get the VA loan and the money for the mortgage will come from the VA.
Qualifications –
With being a veteran on honorable discharged or a current service member you will have access to a certain amount of entitlement and a certificate of eligibility.
The certificate of eligibility will disclose what type of veteran you are as well as your entitlement and exempt status.
As long as you have not bought a home in the past you’ll have full entitlement to buy a home where there is not a required loan limit. If you own a home and you still have entitlement left over there is a loan limit of $548,250 as of 2021 if you’d like to buy another primary residence. This is good to know if you plan on buying a new home before selling your current home to make it easy on moving!
If you plan on selling your home before buying a new home, or simultaneously buy a home while selling your current home, your entitlement will renew automatically. Your entitlement is also available despite a foreclosure or a bankruptcy.
A VA loan is considered still considered a Government loan and it is subject to Government code requirements, which is stricter than Conventional Financing. Furthermore, VA Financing is only for primary residence move in ready homes for single family use, multi-family use, town homes and condo’s.
The VA will also be requiring a 620 or higher credit score as of January 2021. Credit requirements do vary depending on the economy, so please be sure to check with your mortgage loan originator on the current requirements. A credit score of 640 or higher will have less strict underwriting scrutiny.
Funding Fee –
Unlike a Conventional or FHA loan a VA loan does not have Mortgage Insurance. Mortgage insurance is a monthly fee that is paid through your mortgage if you don’t have 20% equity or more in your home. Check out my Mortgage Insurance blog post to learn more.
Instead, the VA has an upfront Funding Fee that is rolled into the loan. The max this funding fee can be is 3.30% of the loan amount. This can be a considerable amount if you’re buying a larger sized home.
If you were wounded in the line of service or are in “Exempt” status with the VA you will not have to pay this funding fee. You can check to see if you are exempt by reviewing your Certificate of Eligibility.
Loan to Value Scenario –
The VA is known for a $0 down payment and 100% financing, but what about the Funding Fee and closing costs?
The VA will guarantee up to 103.30% of the home value, which means you can get a loan for 103.30% of the appraise value of the home. This will cover the Funding Fee and the $0 down payment, but it will not cover the closing costs, so you may end up needing to bring money to closing if the sellers won’t pay the closing costs through the transaction.
Have Questions?
Read our other blog posts or reach out to us directly.
Benson Ringle
Loan Officer NMLS #1516626
GA Lic. # 1516626
(218) 507-0429
Benson.Ringle@supremelending.com
