Veteran’s Administration (VA) loans offer an excellent opportunity for veterans to purchase a home. What makes VA loans so special is that there is no down payment required. Borrowers also aren’t required to purchase mortgage insurance because the loan is guaranteed by the government, specifically by the U.S. Department of Veteran Affairs.
VA loans started being offered in 1944 as a way to assist veterans interested in buying a home. By waiving down payment requirements and applying relaxed credit standards, it is easier to qualify for a VA loan than conventional loans. Designed specifically for veterans and their families, VA loans can be used for home purchases, refinancing, and building a new home.
VA Loan Eligibility
Strict requirements dictate who is eligible for obtaining a VA loan. It is always recommended that veterans check in with the VA Department to see if they qualify for a loan before applying. In order to qualify for a VA loan, you must present a Certificate of Eligibility (COE)to your lender. Veterans with at least 90 days of active duty during World War II, the Korean War, or the Vietnam War. A dishonorable discharge disqualifies a borrower. Veterans qualify in less than 90 days if they have discharged for a service-connected disability.
Gulf War veterans must prove they served for 24 months straight and were not discharged with a dishonorable discharge. A 90-day period of active duty is necessary. The only situation where a Gulf War veteran qualifies for a VA loan if they serve less than 90 days is in cases where they are discharged for a disability-related directly to service.
Veterans who left the military after September 7, 1980, for enlisted personnel and October 16, 1981, for officers are required to serve 2 successive years without service interruptions. A dishonorable discharge is not acceptable and will always disqualify a veteran for a VA loan. A minimum of 181 days must be served on active duty. In cases where a service member serves less than the required 181 days, they qualify if they were discharged with a disability deemed to be related to service.
This is not an all-inclusive eligibility list. Use the above information as a basic guideline. Since the VA Department has to approve all veterans based on the complicated guidelines issued, it makes sense to ask questions and to obtain a COE before applying.
Applying for a VA Loan
You can’t assume that your lender of choice does VA loans. Not all lenders do them. That’s why it is important to ask a lender whether they do VA loans first.
Once you have selected a lender, then it is recommended that you apply for a loan to see how many loans you qualify for based on debt-to-income ratios and credit requirements. In order to complete an application, you’ll need to get your paperwork together.
VA lists these documents as papers you’ll need to apply for a loan.
- Government photo ID
- Recent pay stubs
- Two years of W-2s
- Bank and Investment Statements
- Statement of Service Letter
This list is not necessarily complete. Some lenders may require additional paperwork. That’s why it is so important to talk to a lender first to find out what you need.
Restrictions and Other Important Considerations
According to Veterans United, VA loans can be used to purchase homes for $453,100 and less in most areas of the country. There are adjustments that can be made for borrowers in counties with higher costs. You can call the toll-free number at 1-800-884-5560 to find out exactly what the maximum loan amount is for your county.
The funding fee is charged as a measure taken to ensure the continuance of the VA loan program. Veterans United says the fee is about 2.15 percent of the home’s price. Fortunately, VA borrowers don’t have to pay this fee upfront. They can instead add it to the loan amount, essentially financing it.
Veterans should take advantage of this program as one of the benefits afforded veterans who serve their country. The popularity of this benefit is massive, allowing veterans to buy a home with no down payment and with less than perfect credit. In recent years, as lending guidelines have become stricter, a VA loan holds the key for many veterans who want to buy a home.
This loan can take a little longer to process than a conventional loan, so it is important for buyers to plan for a longer closing period. A VA appraisal is required, which can sometimes drag out the time it takes to complete the loan.