What is a VA Loan?

A mortgage offered by the US Department of Veteran Affairs. In honor of Memorial Day, I thought it was a great time to talk about VA loans!

A VA loan is backed by the federal government. The program is intended to make homeownership more affordable for Active-Duty Service Members, Veterans, those serving in the Reserves or National Guard, and Surviving Spouses. 

There are multiple benefits to a VA loan that set it apart, including: 

• No down payment is required. 
• Closing costs are lower. 
• No mortgage insurance requirement. 
• No pre-payment penalty for selling the home before the mortgage is paid off. 

Single-family residences are the primary type of property for which VA loans are intended. Other types of residences, including VA-approved condominiums, manufactured housing, and modular homes can also be eligible. Some individual states also have additional requirements for a property to qualify for a VA loan. 

It’s worth pointing out that while VA loans are backed by the government, the loans are made by financial institutions that set their own rates. A mortgage provider can help you identify the best available rate. 

Get Preapproved.

• How to qualify for a VA loan? Eligibility is dependent on meeting certain VA requirements. To be eligible you must be the personal occupant of the home and must have sufficient income, suitable credit, and a valid Certificate of Eligibility (COE). To obtain a COE, you must meet certain service requirements. The VA outlines how to request a COE and provides a listing of required information. 
• What is the funding fee? A one-time fee paid as a percentage of the loan amount. This Certificate of Eligibility contains information regarding the borrower’s funding fee obligation.  The VA funding fee is based on the down payment amount and type of service and can either be paid in cash by the borrower or financed into the loan. Some borrowers will be exempt from the funding fee. These include those with a service-connected disability, Gold Star Spouses, and Active-Duty Purple Heart Recipients. This VA funding fee is in addition to any closing costs associated with the loan, including the loan origination charge, the appraisal fee, and title charges. Unlike these closing costs, the funding fee can be rolled into the loan. 
• How to determine my loan amount?The Certificate of Eligibility also provides entitlement information that is used to calculate the maximum loan amount, or VA entitlement, which is the amount the U.S. Department of Veterans Affairs will pay the lender if the loan defaults. Veterans who have never had a VA loan or those who have fully restored their entitlement by repaying the original VA loan and selling the property purchased are eligible for a full entitlement loan with no maximum loan amount. Veterans who have used their entitlement on a previous loan and not yet fully restored it will be subject to a maximum loan amount determined through a formula that considers the following: 
  • The requested amount to be borrowed, 
  • The loan limit for the county in which the property being purchased is located, and 
  • The amount of the entitlement used in a previous loan. 
  The amount that can be borrowed will also be based on the borrower’s residual income – the income remaining after the borrower has fulfilled all their monthly credit obligations. 

Can you refinance a VA loan?

Refinance to either cash out or take advantage of lower interest rates. 

Refinanced VA loans have different requirements and terms than the VA loans used for the purchase of a property. A knowledgeable and experienced mortgage provider can help navigate various options and determine the right refinancing opportunity for you and your situation. 

I hope everyone has a wonderful Memorial Day weekend – thank you to those that have served our country, especially those that paid the greatest sacrifice. As a former Army wife, I truly appreciate the sacrifices our military make for us.

Leslie Vanderwerf,  NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website