What is a VA (Veterans Affair) Loans?

VA Loans

Summary: VA loans are backed by the U.S Department of Veterans Affairs and are available to current military members, veterans, and qualifying surviving spouses. VA loans offer tremendous benefits such as no down payment, no prepayment penalties, and limited closing costs. To qualify for a VA loan, applicants must attain a COE (Certificate of Eligibility) which can be done by the mortgage lender or independently through the VA website.

VA loans are available to current military members, veterans, and qualifying surviving spouses. The loan is established by the U.S Department of Veterans Affairs; the VA sets the standards for the loan but does not fund it.

VA loans offer tremendous benefits. Borrowers do not have to make a down payment, pay private mortgage insurance, and incur a prepayment penalty. Closing costs are also limited and may be paid by the seller. VA loans can only be used for primary home purchases or refinances. It does not limit the amount an applicant can borrow, and current military members, veterans, and qualifying spouses can borrow up to 100% of the home value.

Borrowers can refinance their current mortgage program into a VA loan. Active duty and veteran military members will need a COE to be eligible and to start their process. The COE has a list of qualifying requirements that detail the eligibility conditions. Applicants can apply for a COE or have their mortgage lenders apply on their behalf. Each applicant is evaluated on a case-by-case basis. Additional eligibility and requirements can be found on the VA website.

If you are considering a VA loan, here is a brief rundown of the loan process:

  1. Choose a Mortgage Broker
    • Call a mortgage lender that is approved for VA loans.
  2. Get a Certificate of Eligibility (COE)
    • The COE application can be found on the VA website. This certificate determines if the buyer qualifies for the loan and is the first step in the loan process. Sometimes your mortgage lender can assist you with obtaining it.
    • COE can be attained by the buyer or done by the mortgage lender.
  3. Get a Pre-Approval
    • Getting a pre-approval after receiving your COE helps applicants navigate the home search.
    • A buyer’s offer is sounder with a pre-approval due to the financial verification.
  4. Begin House Hunting!
  5. Get a VA Appraisal
    • Appraisers evaluating the home will make sure the home meets VA’s Minimum Property Requirements (MIPs), is sanitary, has a sturdy structure, and is move-in ready.
  6. Underwriting
    • All information needs to be approved by the underwriter before the loan is finalized.
  7. Close on Your New Home!
    • VA loans have no down payments but there are still a few costs.
      • VA applicants may pay a funding fee—a first-time VA loan is at 2.3%, subsequent purchases will increase to 3.60 %.
      • Applicants with a disability, recipients of the Purple Heart, and surviving spouses of military members with military lead disability or death are exempt from the fee.
    • The property being purchased must be the applicant’s primary home within 60 days.

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