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VA LOANS

VA Loan Refinancing Overview

Qualified military service members and veterans have a refinancing option that allows them to lower their interest rate and get money out of the value of their home with the VA’s Cash-Out Refinancing Loan.

If you’re thinking this sounds like a home equity loan, it’s different. When you take out a home equity loan, you still have your original mortgage. The home equity loan is essentially another loan, which runs next to your mortgage. A Cash-Out Refinance Loan takes the place of your current mortgage and at the same time allows you to get cash from the equity you have in your home.

What can you expect?

In some cases, if qualified, borrowers may be able to refinance every penny of your mortgage debt. You can refinance an FHA, USDA, or a conventional loan with the Cash-Out Refinance program. One of the biggest reasons borrowers choose this option is because, once refinanced, your new loan usually has a longer repay time frame as well as a lower interest rate.

To summarize, here’s what you need to know about the VA Cash-Out Refinance Loan:

  • Fees and closing costs can be included in the new loan
  • This program follows the same credit processes and underwriting as other VA programs
  • Texas residents are not eligible for this program due to regulations by the state
  • You do not have to take out cash, it is only on option
  • You must confirm that the property you are refinancing will be occupied by you

Here are some additional benefits:

  • You can use the money you get back for whatever you want
  • The equity you have already built in your home provides the cash you need now

Some ideas of what you could use the cash for:

  • Pay off nagging debt
  • Repair your home
  • Help your child out with school needs
  • Handle an emergency situation
  • Kitchen and bathroom remodels
  • Purchase a new car or boat without taking out additional loan
  • Much more!

Contact one of the many loan specialists in our network to get started on your Cash-Out Refinance Loan.

VA Loan Overview

VA Loan Program: the Home Mortgage Overview

The VA Loan Program has assisted over 20 million veterans and their families in obtaining a home mortgage since its inception in 1944. Created to aid military members in receiving affordable lending to purchase a home after returning from service, VA home loans are guaranteed by the federal government and financed by private lenders throughout the country.

The housing market has been in trouble in recent years and as a result lenders have made it difficult for many Americans to receive home financing. This has hit American service members along with the rest of the country, many of whom have recently returned home from service and may be experiencing credit issues and difficulties securing a down payment. As a result, the VA Loan Program has been instrumental in helping these service members and others purchase homes for their families.

Walking you through the process

At Veterans Authority, we have put together a comprehensive guide for service members who are applying or thinking of applying for a VA Home Loan. There are several differences between VA Loans and traditional home mortgages. As with any new financial benefit, there is a lot of information you’ll need to educate yourself on. Read through our guide and feel free to reach out to us at any time if you have questions. We want your experiencing securing a VA home mortgage to be as simple as possible.

Is there a limit to how much financing you may receive?

The standard limit in place on a VA home loan is $417,000. However, if you are buying a home in a county with high-costs, you may qualify to borrower more than the limit. Visit our guide to high-cost counties to see if you qualify.

What fees and regulations are in place regarding VA mortgages?

Mortgages through the VA Loan Program are financed through private lenders. Since it is a federal program, the Department of Veterans Affairs acts as a guarantor for these loans, which means if a borrower defaults, the VA insures the balance. This is a huge incentive for private lenders and is one of the reasons so many offer the program.

Are there funding fees associated with financing a VA Loan?

Yes, there are. However, these fees are low (especially for first time users) and can vary based on a borrower’s circumstance and veterans with a disability due to a service-related incident will never have a funding fee. Borrowers who are using the VA Loan program for the first time will have a funding fee of 2.15 percent. Each time using the program after their first loan, the service member’s funding fee will be 3.3 percent.

In many cases a borrower will not be required to provide a down payment and thanks to limits set by the VA, closing costs are minimal with sellers having to provide most if not all of the expenses.

Keep reading to dive deeper into the know-hows of the VA Loan Program. If you would like to view a list of lenders near you who offer this service, visit our lenders page.

First Time Home Buyers

Purchasing your first home can be exciting and intimidating at the same time, perhaps even more so when you’re figuring out the VA home loan process. There are a lot of questions you probably have. Thankfully, we are here to provide you with the answers you need.

Our goal is to make your first time home buying experience more exciting and less intimidating. So, reach out and contact us with any questions. Visit our page of the specialists in our network and they’ll be more than happy to ease you through the process of securing your VA home mortgage financing and buying your first home.

Which loan option is best for your situation?

Even if you’re at the very beginning of the home buying process, you have probably already discovered there are several options out there for financing your first mortgage. Each program has its own benefits. For current military members, veterans, and military families, the VA Loan often provides the exact benefits they desire.

What are the benefits of a VA home mortgage?

Manageable qualification requirements

  • Since these loans are financially backed (guaranteed) by the Department of Veterans Affairs and thus lenders assume less risk, there are no credit checks for qualification and even when factoring interest rates, a borrower’s credit score is less of an issue than with traditional home loans.

Down payments are not required

  • For a lot of first time home buyers, saving thousands of dollars toward a down payment is daunting. This is the same for service members and veterans. With a traditional mortgage, a home buyer would need to put down a minimum of 5 percent toward the purchase price of their house and with Financial Housing Administration (FHA) loans they would have to put down 3.5 percent.
  • That means, if the home is $250,000, a traditional lender would require $12,500 down and an FHA lender would require $8,700. Knocking that number down to $0 allows service members and veterans an opportunity to buy a home they otherwise might not have had.

Monthly payments are lower than traditional home loans

  • Thanks to competitive interest rates available through the VA Loan program as well as the absence of a private mortgage insurance (PMI) requirement, VA Loan borrowers are able to save thousands of dollars throughout the life of their home loan.

What is your price range?

After you decided to start searching for your first home, the initial question you probably asked yourself was, “What are affordable payments for me?” There a number of factors that go into landing yourself a mortgage payment that you can manage.

We at Veterans Authority have created a payment calculator for the VA Loan program. Give it a spin and see how much of a payment you would feel secure in.

The main factors that determine an affordable mortgage are:

  • Existing payments toward debt
  • Annual income
  • How much is put down for a down payment, if any
  • Extra factors, such as homeowner association fees and insurance

Helping you find a real estate agent

Since the process can be complex, make sure you find a real estate agent who knows the process of qualifying and financing a VA home mortgage. It’s also important to find an agent who can identify the requirements of current military members and veterans.

Because of this, we at Veterans Authority have compiled a directory of real estate agents who specialize in helping military families find the right home for them.

How do you get pre-approved for a VA home loan?

To begin with, you’ll want to set up an appointment with a loan officer. The loan officer will look over your financial situation and figure out how much of a loan you are qualified for. Once that is determined, you will complete and submit the application.

If you have questions or would like to begin the process, visit our Specialist page and get started!

Additional resources through Veterans Authority

Here are some pages we have set up just for home buyers trying to qualify for the VA home loan program:

FAQs

Mortgage calculator specifically for VA Loan borrowers

VA home mortgage glossary

Purchasing Options

Va Loan Financing Options

Current military service members, veterans, and some military spouses, have several options when it comes to financing the purchase of a home. There are many possibilities to choose from and each program has its benefits. Veterans Authority always recommends the VA home loan program, if the borrower qualifies, due to the benefit of having the federal government as the loan’s guarantor. Here’s a handful of programs that service members and veterans can choose from.

Exploring FHA Loans

FHA stands for Federal Housing Administration. This is a program provided to more than just current and former members of the military. Along with service members, senior citizens, borrowers buying a home for the first time, people purchasing a home that is considered a “fixer upper” with the intent to remodel, and people buying a home in order to apply improvements to make the house energy efficient, all may qualify for an FHA loan. Our network of loan specialists can assist anyone in pursing an FHA loan, if interested.

Benefits of a USDA Loan

A USDA loan is another loan not specific to members of the armed forces. This loan is provided by the US Department of Agriculture. Along with military members, qualified applicants may include anyone with low income who intends to buy a home in a predetermined rural area zone. Borrowers may also use this loan to purchase land. If you are interested in applying for a USDA loan, ask one the many loan specialist in our network to see if you qualify.

What about Conventional Loans?

Conventional home mortgage loans could be a good option for military members who do not qualify for a VA home loan. Our network of qualified loan specialists can assist you with finding a quality loan with a reasonable interest rate. However, this should be somewhat of a last case scenario as military members have several options for more affordable home ownership.

Securing a VA Home Loan

The VA home loan is only available to members and former members of the military, as well as some military spouses. This program has been in place since 1944, offering veterans a pathway to owning a home. This option is available to any member who meets a handful of basic requirements and includes no down payment and reasonable interest rates. Visit our basic requirements page to see if you qualify. If so, this is almost always the best option.

VA Loan Eligibility

Find Out If You Are Eligible for a VA Loan

The VA Loan Program is designed for veterans and members who are currently serving in the military. Those who qualify are eligible to receive home financing with no down-payment and little to no closing costs. There are a few conditions and requirements one must meet in order to qualify. Let’s check them out.

To begin with, you must first meet at least one of the following scenarios:

  • Served in an active duty capacity during wartime for at least 90 days consecutively
  • Served in an active duty capacity during peacetime for at least 181 days
  • Served in the Reserves or National Guard for at least 6 years
  • Were not dishonorably discharged
  • Are the husband or wife of a deceased service member who died during duty or who passed away due to a disability suffered during service.

Are there any income requirements associated with a VA home loan?

While there are no minimum income standards to receive a VA mortgage, you must have consistent income and be able to pay for your monthly expenses as well has have a certain percentage of income beyond what is needed to cover your monthly expenses and mortgage payment. This additional amount of income is referred to as “Residual Income” and includes expenses like transportation, food, clothing, and other necessities.

Thanks in part to the Department of Veteran Affairs requiring all applicants to have residual income, VA Loan borrowers are more likely to sustain a good income and save up for emergencies. This has also helped VA Loan borrowers report the lowest rate of foreclosure among all major mortgage lending programs.

You will need to acquire a Certificate of Eligibility (COE) before being approved

Luckily, you don’t need to receive a COE in order to start the application process. A COE is a document issued by the VA that lists the rights you possess pertaining to receiving VA Benefits. To receive this document you can call or visit a VA Loan specialist or print the form (VA Form 261880) from the VA website and send it via mail to the Department of Veterans Affairs.

What additional requirements do private lenders need in order to qualify for a VA Loan?

Once the VA determines those who are eligible for a VA home mortgage, the lender who finances the loan may require certain standards are met before issuing the financing. These requirements may include minimums on your credit, income, and debt.

When you contact a specialist or lender, they can calculate your debt and credit, and run your credit score from the three major credit agencies

Cash-Out Refinance Loan

Qualified military service members and veterans have a refinancing option that allows them to lower their interest rate and get money out of the value of their home with the VA’s Cash-Out Refinancing Loan.

If you’re thinking this sounds like a home equity loan, it’s different. When you take out a home equity loan, you still have your original mortgage. The home equity loan is essentially another loan, which runs next to your mortgage. A Cash-Out Refinance Loan takes the place of your current mortgage and at the same time allows you to get cash from the equity you have in your home.

What can you expect?

In some cases, if qualified, borrowers may be able to refinance every penny of your mortgage debt. You can refinance an FHA, USDA, or a conventional loan with the Cash-Out Refinance program. One of the biggest reasons borrowers choose this option is because, once refinanced, your new loan usually has a longer repay time frame as well as a lower interest rate.

To summarize, here’s what you need to know about the VA Cash-Out Refinance Loan:

  • Fees and closing costs can be included in the new loan
  • This program follows the same credit processes and underwriting as other VA programs
  • Texas residents are not eligible for this program due to regulations by the state
  • You do not have to take out cash, it is only on option
  • You must confirm that the property you are refinancing will be occupied by you

Here are some additional benefits:

  • You can use the money you get back for whatever you want
  • The equity you have already built in your home provides the cash you need now

Some ideas of what you could use the cash for:

  • Pay off nagging debt
  • Repair your home
  • Help your child out with school needs
  • Handle an emergency situation
  • Kitchen and bathroom remodels
  • Purchase a new car or boat without taking out additional loan
  • Much more!

Contact one of the many loan specialists in our network to get started on your Cash-Out Refinance Loan.

Contract Guidelines

It can be a nerve-racking time as you move further toward your goal of owning a home. You’ll feel the excitement as you pass each mile marker but at the same time you’re bracing for the next one. Remember, the process is not complete until you have closed on your house and the keys are in your hand. Even once you are under contract and your credit history, debt load, and income, are being reviewed, it’s not the time to start taking it easy. This is the time when you hunker down and ensure you are managing your financial situation correctly.

Staying consistent with what has worked this far

This is the time your VA Loan private lender will process your paystubs, bank statements, and check your credit, to ensure all of your debts are accounted for on your application. During this time, some borrowers begin to believe the hard part is over (once the application is completed). This can lead to slipping up financially and could result in delays in your VA loan being approved or even the cancelation of the loan altogether.

Things to avoid while your application is under review

  • Do not change banks or move money around from one institution to another
  • Do not take on any new debts. If you must take on the debt, consult with your VA Loan specialist first
  • Keep track of your credit limit on any credit cards
  • Stay current with all bills, including any current mortgage payments

If you do not stay on top of these things and/or there is an increase to your debt to income ratio, you will, at minimum, delay the financing of the loan while additional documents are processed and at maximum, you could risk the VA loan process being canceled, which would cause you to lose the home you have been preparing to purchase.

Keep going and look forward to what’s just around the corner

It’s highly beneficial to be aware of these possibilities while the application, approval, and closing processes are being finalized. It’s not something to worry about. Once you get to this point, as long as you keep doing what you’ve been doing to get you here, you will soon be sitting in the living room of your new house. You are almost there. If you do have any concerns, contact your VA loan specialist and discuss your situation.

VA Loan Rates

The overwhelming majority of service members and veterans receive lower interest rates with the VA home loan program over traditional mortgages. This is thanks to the financial backing given by the Department of Veterans Affairs as the loan guarantor, which allows lenders to assume less risk and in turn, provide lower interest rates.

If you’d like to find a qualified VA Loan specialist near you, visit our Specialists page.

How will a lender decide a borrower’s interest rate?

There are several factors involved in determining the interest rate of a loan, including:

  • Ratio of debt-to-income
  • Current conditions of the housing market
  • A borrower’s credit score
  • Duration of loan (15 year, 20 year, 25 year, or 30 year)

A good credit score will nearly guarantee you a lower interest rate. This is again due to the risk a lender is assuming in financing the loan. Like before, though, thanks to the federal government guaranteeing the mortgage, most borrowers will still see a lower interest rate even if their credit isn’t perfect.

What steps need to be taken to secure an interest rate?

The first thing you’ll need to do is find the house. Once you’ve located your future residence, your next step is to enter into a contract with the seller(s). That’s when your VA home loan lender will be able to determine your interest rate. Their underwriters are going to want to look over the loan as well as know your estimated closing date.

You don’t have to wait until entering into a contract to start the process, though. Visit our Specialist page to talk with a qualified VA mortgage specialist in your area who can help walk you through the process and get you on the path to homeownership.

What is the benefit of signing up with a Veterans Authority specialist?

Getting an interest rate as low as possible is important for your long term financial health. There are private lenders who attempt to gain your business by initially telling you that to qualify for an extremely low interest rate is practically guaranteed. This is hardly the case as super low interest rates are usually very tough to qualify for.

The specialists on our site have been vetted and have demonstrated a knowledge of the VA Loan process and a track record of setting realistic expectations from the beginning.

Why a VA Mortgage

VA Home Mortgage Advantage

There are several benefits that come along with qualifying for a VA home mortgage. Many service members find themselves frequently moving, which can affect their ability to save for a down payment and keep up with their credit history, neither of which are factored into getting qualified for a VA loan. Unlike getting a traditional mortgage, the VA mortgage program provides its borrowers piece of mind and flexibility in a number of categories.

Does the VA mortgage program offer competitive interest rates?

Since this program is guaranteed, or insured, by the Department for Veterans Affairs, lenders assume less risk in the case of a default. Interest rates increase when the lender has to assume risk. Because of this, lenders who offer the VA loan program offer lower interest rates than traditional lenders, because their risk is significantly lower. Usually, you can expect to have an interest rate of 0.5% to 1% less than that of traditional home loans.

What are the down payment requirements?

There is no down payment required for the VA mortgage program. This is a huge benefit for many members of the military, who often find it hard to save money while always on the move. Service members who qualify, can have 100% of their home financed.

Here’s an example of the money you can potentially save with no down payment required.

Loan Amount 0% Down 5% Down 10% Down 20% Down
$150,000 $0 $7,500 $15,000 $30,000
$200,000 $0 $10,000 $20,000 $40,000
$300,000 $0 $15,000 $30,000 $60,000
$400,000 $0 $20,000 $40,000 $80,000

Is there a penalty if a borrower pays off their loan early?

If you are able to pay off your VA home mortgage before your term is over, there are absolutely no prepay penalties. Most traditional lenders do not want borrowers to pay of their loans early, which would cause the bank to lose out on future interest payments. To ensure borrowers cannot pay their mortgage off early, they impose prepay penalties for doing just that. The money a qualified service member or veteran can save by avoiding the prepay penalty is a huge incentive and can enable borrowers to purse refinancing and purchasing a new home in the future.

Are VA loan borrowers required to purchase private mortgage insurance?

What is private mortgage insurance (PMI)? It is a kind insurance most lenders make you buy if you cannot put at least 20% down on the purchase price of the house. Saving up 20% of a house’s purchase price can be a daunting task for many veterans and since the VA home loan program is guaranteed by the federal government, the lenders are protected against default. In turn, they require no PMI. This can save a borrower hundreds of dollars a month and thousands of dollars over this live of the loan.

Here’s an example of what a VA mortgage borrower can potentially save without PMI

Loan Amount Monthly Savings 25 Year Term
$150,000 Save $115/mo $34,500
$200,000 Save $152/mo $45,600
$300,000 Save $228/mo $68,400
$400,000 Save $304/mo $91,200

Can a service member use their Basic Allowance for Housing (BAH) as effective income?

If you are a current service member, you can use your BAH to pay your mortgage payments. This is a great benefit for active service members. To find out more information about BAH, visit our Basic Allowance for Housing page.

With so many advantages to choosing a VA home loan, thousands of veterans and active service members have successful been able to buy and afford a permanent residence.

Practicing Responsible Homeownership

For many, owning a home is the main ingredient to the American Dream. Military service members and veterans display this value even more so, owning homes in greater percentages than civilians. While homeownership is exciting, it’s also the most expensive item you will ever purchase and finance. It can also potentially be your biggest asset. Because of this, there are several things you must remember in order to ensure you are financially responsible while preparing for and living with homeownership.

Unexpected situations can happen

While the requirements for obtaining a VA Loan help to ensure service members and veterans are able to afford their payments and while the VA Loan has the least amount of foreclosures in the last 6 years amongst all available mortgage options, still unplanned situations arise and there is certainly no way to guarantee success.

Saving money for when you need it

When you own a home and have a mortgage, you will have monthly payments that need to be paid. There are a number of unexpected situations that could impact your ability to make a payment and that can have a detrimental impact on your credit score, along with other consequences. Whether it’s because of a loss of income, medical bills, family issues, or any other financial struggles, the mortgage will still need to be paid. So, ensure you are saving up a nest egg to combat any unexpected financial difficulties, should they arise.

What are you paying for each money on your VA Loan?

Remember, your monthly payments are going toward more than just the principal and interest of your home. Parts of each payment goes toward: property tax and homeowners insurance. The commonly used acronym used for this is PITI (principal, interest, taxes, insurance).

While taxes and insurance premiums can go up or down, the principal and interest payments will stay the same as long as you have a fixed rate mortgage.

Other costs to factor in are repairs and regular maintenance, which is typically 1% of the home’s value on an annual basis. For example, on a $300,000 house, the yearly repair and maintenance would be $3,000.

How can you ensure success?

Although borrowers of the VA mortgage program have very low default percentages, for some people, default is a reality. You want to take all the precautions possible to protect yourself from this reality. Defaults, though, aren’t the only thing that will hurt your credit. Loan modifications, foreclosures, and even late payments, will significantly impact your credit and financial profile. So, stay on top of your mortgage and call your loan specialist if you have any questions or concerns.