How to Get a VA Home Loan

    VA Loan Papers and Money
    Unless someone likes the idea of living in a foxhole or a tent, housing probably wasn’t the reason they joined the U.S. military.

    But getting the opportunity to buy a nice house often turns into a huge plum for millions of veterans thanks to a Veterans Administration home loan.

    The VA has put a roof over more than 22 million veterans since 1944. More than 705,474 home loans were guaranteed by the VA in 2016, the most in the history of the program.

    All the reasons for their popularity can be boiled down to one – money. Veterans can save a lot of it by getting a VA loan instead of the conventional ones that civilians must pursue.

    So how do you get a VA mortgage? Here are a few questions that will help you decide whether one is right for you.

    Am I eligible for a VA loan?

    Almost all members of the military, reservists, National Guard and veterans are eligible for VA loans. Spouses of military personnel that died while on active duty or a result of a service-connected disability can also apply.

    Active-duty military qualify after six months in the service. Reservists and National Guard have to be enlisted for six years before they can apply. If they are called to active duty before that, they become eligible after 90 days of service during war periods.

    What are the benefits of a VA loan?

    There are four glowing perks that make a VA loan extremely attractive:
    • You won’t need to make a down payment
    • Your credit score isn’t that important
    • You won’t need mortgage insurance
    • You’ll get a lower interest rate on your loan.

    Civilians might get envious, but the people who protect the country deserve such perks. That sentiment became official when Congress passed the GI Bill in 1944.

    Everyone agreed the country had done a disservice to World War I veterans, who were given $60 and a train ticket home when they returned from the battlefield. The GI Bill paved the way for World War II veterans to go to college and own homes.

    The rules and benefits have evolved over the years. Credit scores weren’t an issue in 1944 because nobody had a credit card. Now the average civilian needs a decent credit score to get a mortgage. The average FICO score on conventional mortgages was a healthy 753 in 2016, according to Ellie Mae, which processes almost one-quarter of mortgages in the U.S.

    The average VA mortgage borrower had a credit score of 707. Your credit score isn’t supposed to matter with VA loan, though borrowers must at least show they have a steady income and aren’t hopelessly mired in debt.

    Civilians also need to pay mortgage insurance if they don’t make at least a 20% down payment. You can make a 0% down payment and still get a VA loan without mortgage insurance.

    Interest rates are also likely to be lower. It was 3.76% for 30-year fixed-rate VA loan in 2016, compared to 4.06% for a conventional loan.

    That adds up to a $15,480 difference over the life of the loan on a $250,000 mortgage, which leads to the next question.

    What are the borrowing limits?

    The VA isn’t actually in the business of making the loans. They guarantee the loan, but you must go to a qualified lender to actually get a VA loan. As such, there are no official borrowing limits, but there are limits to the amount of liability the VA can assume.

    They vary by county, but the limit is $424,000 in most parts of the U.S. The highest is $626,000 in areas of Hawaii.

    What are the fees associated with a VA loan?

    Fees? Who said anything about fees? Sorry, but even veterans have to deal with some up-front costs.

    In order to keep the VA home loan system afloat, there is a one-time funding fee. It varies depending on the down payment and type of veteran. For instance, a borrower getting his/her first VA loan and making no down payment would pay a 2.15% fee on the amount of loan. The fee is 1.25% if the borrower makes a down payment of 10% or more.

    Reservists and National Guard members usually pay about one-quarter of a percentage point more than active-duty personnel.

    If you’re using the VA loan program for a second time and have no down payment, the fee is 3.3% of the total loan amount. The fee is waived for veterans who received disability compensation.

    Can I get more than one VA loan?

    You sure can. Though as we just noted, the fee is slightly higher the second time around and beyond. VA loans are also for primary residences only, so don’t bother trying to get one for a beach condo you hope to rent out and make a killing on.

    How do I apply for VA Loan?

    Find a lending institution that participates in the VA program. Since almost all lenders do, that should not be a problem. In fact, the first thing most lenders ask after introducing themselves is: “Are you a veteran?”

    If you say yes, it usually puts a smile on the lender’s face because they know the U.S. government is backing your loan and it will be much easier to get you into a home.

    Borrowers must have a Certificate of Eligibility to prove they belong on the VA home-loan track. You can apply for one online at the VA website. Most lenders have access to that system.

    You can also apply through the mail. If you need assistance with Certificate of Eligibility acquisition, call 1-800-983-0937.

    Who are the best lenders for a VA home loan?

    The ones with the best rates and customer service, of course.

    Interest rates fluctuate and customer experience varies, however, depending on a variety of factors. The best answer is to find a lender that is well-versed in the VA home loan program. Even then, there is no shortage of candidates.

    A 2017 NerdWallet study gave high marks to Navy Federal Credit Union, Veterans United, Quicken, Bank of America, Citibank and Fairway. As with any mortgage, the best advice is to shop around and find a lender you’re comfortable with and has rates that make you happy.

    The big advantage veterans have is they can get into a program that makes it easier to get into a home that will make them happy.

    After spending so much time in tents and foxholes, they deserve it.

    Bill Fay

    Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at Debt.org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@debt.org.

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