The dedicated men and women who proudly serve in the U.S. military are entitled to a wide range of benefits available to them. One of these benefits is the VA Loan Program. This is an alternative mortgage option to traditional lending options which provides an incredible advantage to active duty, retired military , and qualified reserve and national guard men and women as well as their families.
This program allows the purchase or refinance of a loan for qualifying veterans or active duty personnel with absolutely zero down, no private mortgage insurance (PMI), very low rates and relaxed credit guidelines.
VMA offers you an incredible opportunity to purchase your dream home with programs designed specifically to make purchasing a new home or refinancing an existing VA Loan affordable and easy! Learn more about your eligibly for these programs in the sections below.
You may be eligible if you meet one of the following conditions:
In order to qualify for a VA Loan there are specific service conditions each borrower must meet. This must include just ONE of the following:
- You have served 90 consecutive days of active service during wartime
- You have served 181 days of active service during peacetime
- You have more than 6 years of service in the National Guard or Reserves
- You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.
If you have any specific questions about your particular situation, we would welcome the opportunity to speak with you about it.
Application Process
A new Certificate of Eligibility (COE) is required. we can take your old Certificate of Eligibility to show the prior use of your entitlement and we can update your certificate of eligibility.
Loan Limits
VA does not set a cap on how much you can borrow to finance your home. The law changed in 2020 that allows VA to guaranty a loan up to 25% of the loan amount for a Veteran that has no use shown on their COE.
The basic entitlement available to each eligible Veteran is $36,000. If the COE shows previous use that has not been restored, this will affect the amount of money an institution will lend you without a possible down payment. These county loan limits are the amount a qualified Veteran with partial entitlement remaining after subtracting any unrestored use may be able to borrow without making a down payment. The loan limits vary by county based on average home sales in that area.
VA Refinance Eligibility
An IRRRL can only be made to refinance a property on which you have already used your VA loan eligibility. It must be a VA to VA refinance, and it will reuse the entitlement you originally used.
Additionally:
- A Certificate of Eligibility (COE) is not required. When we order your new loan, VA will provide a new registration and loan number and show your prior use.
- No loan other than the existing VA loan may be paid from the proceeds of an IRRRL. If you have a second mortgage, the holder must agree to subordinate that lien so that your new VA loan will be a first mortgage.
- You may have used your entitlement by obtaining a VA loan when you bought your house, or by substituting your eligibility for that of the seller if you assumed the loan.
- The occupancy requirement for an IRRRL is different from other VA loans. For an IRRRL you need only certify that you previously occupied the home.
VA Loan Income Requirements
Those looking to purchase a new home are not required to reach an income threshold to take advantage of the VA Loan Program. Be aware however that borrowers are expected to have a reliable source of income that will cover mortgage payments plus remaining residual income for miscellaneous living expenses not listed on your credit report.
The VA requires that borrowers have a reasonable ratio of income that goes towards a mortgage payment so that they are not at risk for foreclosure. This means that you typically do not want more than 41% of your income to go towards a mortgage payment to become a low risk borrower. The additional amount of your budget covers typical expenses that every household requires.
By enforcing residual income requirements, the VA increases the chances of its borrowers earning sufficient income to meet all financial obligations, and also ensures borrowers have a cushion in the event of an emergency.
When working with a VA Loan Specialist at Veterans Mortgage of AmericaTM, we will help you determine what your individual income and budget thresholds give you in buying power for your new home. Our primary goal is to provide you with options that will give you the very best lending scenario that won’t tax your financial situation.
Finally, a veteran applying for a VA Loan must not have been discharged under dishonorable conditions.
VA Funding Fee
Generally, all Veterans using the VA Home Loan Guaranty benefit must pay a funding fee. This reduces the loan’s cost to taxpayers in the case of a default considering that a VA loan requires no down payment and has no monthly mortgage insurance. The funding fee is a percentage of the loan amount which varies based on the type of loan, if you are a first-time or subsequent loan user, and whether you make a down payment. You have the option to finance the VA funding fee or pay it in cash, but the funding fee must be paid at closing time. You do not have to pay the fee if you are a:
- Veteran receiving VA compensation for a service-connected disability, OR
- Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay, OR
- Surviving spouse of a Veteran who died in service or from a service-connected disability, OR
- An Active Duty military member who has been awarded a Purple Heart.
The funding fee for second time users who do not make a down payment is slightly higher. See Loan Fees for more information about loan costs. Some lenders offer IRRRLs as an opportunity to reduce the term of your loan from 30 years to 15 years. While this can save you money in interest over the life of the loan, you may see a very large increase in your monthly payment if the reduction in the interest rate is not at least one percent. Beware: It could be a bigger increase than you can afford.
