You have served your country and now it’s time to use the benefits you have earned. Here are some simple highlights of the VA Home Loan program.
Who is Eligible?
To qualify for a VA loan you must meet the active duty or reserve timeline requirements. These are listed at www.benefits.va.gov/homeloans/purchaseco_eligibility.asp. Active duty military qualify as long as they have served for a total of 90 continuous days. Most active duty and reserve members that served during the Gulf War period (8/2/90 to present) and have an Honorable Discharge qualify for a VA loan.
Paperwork to Prepare
Gather all of your supporting income and asset documentation as you would for a non-VA mortgage. You will also need your DD-214 (NGB Form 22 for Reserve members) and your Certificate of Eligibility (COE) to prove you qualify for the VA loan. Your Loan Advisor can help you obtain the COE from the VA either by mailing a request to the VA Regional Office or submitting a request through the VA Portal.
Cost Negotiation – An Important Detail to Consider Early
Closing costs, property taxes and home owner’s insurance may be paid by the seller if this detail is properly negotiated as part of the offer to purchase the home. Therefore, it is very important to communicate your needs regarding closing costs to your REALTOR® and your Loan Advisor early in the process. This will ensure that the offer is submitted correctly so you are prepared for amounts due at closing.
The VA does not set a cap on how much you can borrower to purchase your home. However, there are limits on the amount of liability the VA will incur, which can affect the amount of money the lender will lend you. These loan limits vary by county. In most areas, the maximum loan limit with zero down payment is $417,000. Although in markets where the average sales price is higher, the limit can go as high as $625,500. If you need to borrow more than the established limits, the lender requires that you contribute to the transaction with a down payment. In general this would be 25% of the difference between the maximum loan limit and the sales price.
The VA has a funding fee that is used to keep the program going for all veterans. This fee is different for first-time users of the VA loan versus second or third-time users. It is also different if you are a reservist. If you are receiving compensation for a Service Connected Disability you may be eligible to have this fee waived. To do so, you need to provide your VA Award Letter showing you are at least 10% Service Connected Disabled. This can save you as much as $13,000 on your home purchase.
– No mortgage insurance in your monthly payment
– No reserve required if you own no other homes
– No down payment required
– Money for down payment (if you choose to make one) and closing costs can be gifted to you by a family member
– VA loans accept credit scores as low as 620 for conventional loan amounts up to $417,000, although you may receive a better interest rate if your score is higher
– Loan programs offered include 30 year fixed, 15 year fixed and a variety of adjustable rate programs
– The VA loan is only for veterans and their spouse buying a primary home (no rental/investment property purchases allowed)
– Construction loans are not allowed on this program
– Condos must be on the VA/FHA Approved Condo list or they do not qualify for the VA Loan
– No pre-payment penalties
Contact a loan advisor near you for assistance with a VA Loan and move one step closer to realizing your home ownership dreams!
Written By: Scott McCarty, Senior Loan Advisor, Oregon