VA Loan

What Is a VA Loan?

A VA loan is a type of government-backed mortgage designed to help eligible veterans, service members, and qualifying surviving spouses buy or refinance a home. Backed by the U.S. Department of Veterans Affairs (VA), these loans come with numerous benefits, including no down payment and competitive interest rates. By using a mortgage lender like Forward Loans Mortgage Marketplace, you can assure yourself the best mortgage rate and access to VA loans.

How Does a VA Loan Work?

The VA does not issue VA home loans but guarantees them, making them less risky for lenders. This guarantee allows lenders to offer more favorable terms, such as no down payment and competitive interest rates. VA loan types are non-conforming loans because they don’t meet the guidelines of conventional lenders like Fannie Mae and Freddie Mac. This flexibility helps more clients qualify for these loans.

Benefits of VA Loans

No Down Payment:

Most VA loans allow you to purchase a home with no money down.

Competitive Interest Rates:

VA loans offer competitive interest rates, often lower than conventional loans.

No Private Mortgage Insurance (PMI):

VA loans don’t require monthly mortgage insurance payments.

100% Access to Home Equity

You can convert up to 100% of your home equity into cash if you qualify.

Rate and Term Refinance Options:

Existing VA loan holders can refinance with fewer documentation requirements and often no appraisal needed.

VA Loan Requirements

Here’s what you need to qualify for a VA loan:

580 Median Credit Score

A credit score of 580 means you don’t need perfect credit to get a VA loan.

Certificate of Eligibility (COE)

You need a COE to show lenders that you’re a qualifying service member or surviving spouse. You can obtain a COE by providing proof of service. Forward Loans Mortgage Marketplace can assist you in securing your COE.

Debt-to-Income Ratio ≤ 60%

VA loans are accessible with a debt-to-income (DTI) ratio of up to 60%, making them more attainable than some other loan options.

VA Funding Fee

This one-time fee, paid to the Department of Veterans Affairs, varies depending on the size of your down payment. Many borrowers finance this fee into their loan.

Special Benefits for Disabled Veterans

VA loans are available to:

Veterans

Active service members

National Guard members (currently or formerly activated)

Current or discharged members of the National Guard who haven’t been activated

Surviving spouses

To qualify, you must also meet one of the following criteria:

181 days of active service during peacetime.

90 consecutive days of active service during wartime.

More than 6 years of service with the National Guard or Reserves or 90 days under Title 32 with at least 30 consecutive days.

Spouses of service members who lost their lives in the line of duty or due to a service-connected disability, subject to certain conditions.

Additional VA Loan Eligibility Requirements

Beyond the basic service requirements, your income, assets, and credit must also meet certain standards. The property you’re buying must comply with VA loan occupancy requirements, meaning it must be your primary residence within 60 days of purchase.

Property Types

VA loans can be used for single-family homes, condos, and manufactured homes. However, not all VA lenders will finance loans for condos and manufactured homes. Forward Loans Mortgage Marketplace can connect you with lenders who do.

Credit Score

The VA doesn’t set a minimum credit score requirement, but lenders do. Rocket Mortgage requires a minimum median credit score of 580 for a VA loan. If you want to convert 100% of your home equity into cash, you need a credit score of 620.

Income

Your lender will evaluate your DTI to assess your ability to repay the loan. While the VA doesn’t set DTI limits, lenders typically do. Forward Loans Mortgage Marketplace can help you understand and meet these requirements.

VA Loan Limit

The VA doesn’t cap how much you can borrow, but there are limits based on conventional loan limits, which are $726,200 for most U.S. areas in 2023. Higher limits apply in high-cost areas. For loans exceeding these limits, VA jumbo loans are available.

Costs of a VA Loan

Even with no down payment, VA loans aren’t free of costs. Here’s what to expect:

Funding Fee

Most borrowers pay a funding fee, which ranges from 1.25% to 3.3% of the loan amount. This fee can be financed into your loan. Some borrowers, like disabled veterans and surviving spouses, are exempt from this fee.

Reserve Funds

Lenders may require reserve funds, which are additional funds in the bank to cover mortgage payments after closing. Typically, having reserves equal to two months' worth of mortgage payments is beneficial.

Types of VA Loans

There are several VA loan options, including:

VA Purchase Loans

VA purchase loans allow eligible borrowers to buy a home with no down payment, provided they meet credit and DTI requirements.

VA Rate-and-Term Refinances

These refinances allow borrowers to lower their interest rate or change their loan term, often with fewer documentation requirements.

VA Streamline Refinance (IRRRL)

This refinance option offers lower documentation and no appraisal requirements, making it easier for existing VA loan holders to lower their interest rate or change their loan term.

VA Cash-Out Refinance

This option allows you to convert home equity into cash. To qualify, you need a minimum credit score of 620. You can take out up to 100% of your home’s value.

Special Benefits for Disabled Veterans

Disabled veterans receive additional benefits, including:

Funding Fee Exemption

Disabled veterans are exempt from paying the VA funding fee, saving them thousands of dollars at closing.

Specially Adapted Housing (SAH) Grants

These grants help veterans with disabilities construct or modify homes to better suit their needs. In 2023, the maximum SAH grant is $109,986.

Special Housing Adaptation (SHA) Grant

This grant, up to $22,036 in 2023, helps veterans with certain service-connected disabilities modify their homes.

Temporary Residence Adaptation (TRA) Grant

TRA grants help veterans with disabilities make temporary adaptations to a family member’s home.

Property Tax Exemption

Many states offer property tax exemptions to disabled veterans. These exemptions vary, so check with your local VA office for details.

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How to Apply for a VA Loan

Here are the steps to apply for a VA loan:

Secure a Certificate of Eligibility (COE)

You’ll need a COE to show your eligibility for a VA loan. Forward Loans Mortgage Marketplace can help you obtain your COE.

Apply for Approval

Get preapproved to understand how much you can afford and strengthen your offer to sellers.

Shop for a House

Find a home that meets your needs and the VA’s Minimum Property Requirements (MPRs).

Make a Purchase Offer

Submit an offer on your chosen home. Once accepted, a sales contract will be drawn up.

Undergo VA Appraisal and Underwriting

Your lender will assess your finances and the VA will conduct an appraisal to ensure the home meets MPRs.

Close on Your New Home

Sign the necessary documents, pay closing costs, and receive the keys to your new home.

Is a VA Loan Right for You? Marketplace Says!

A VA loan is a valuable benefit for eligible veterans and service members. With no down payment, competitive interest rates, and no PMI, it offers an affordable path to homeownership. If you’re ready to take advantage of this benefit, start your VA loan application today with Forward Loans Mortgage Marketplace to assure yourself the best rates and access to the ideal loan for your needs.

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