VA Purchase Loan
What is a VA Purchase Loan?
A VA Purchase Loan is a mortgage loan guaranteed by the Department of Veterans Affairs (VA) to qualified former or active-duty Veterans of the United States. A VA Purchase loan is a mortgage program backed by the federal government.
A borrower must have satisfactory served, retired, or is active-duty within any armed forces in the United States. If the applicant has served with, United States Navy, Marines, Army, or Airforce or a served in the National Guard, or is a surviving spouse of a military veteran.
There are certain qualifications a borrower must meet to get approved under VA Mortgage Loan Programs. In this article we will provide information on what a borrower needs to qualify to purchase a VA mortgaged home. We will inform the borrower of every benefit offered with obtaining a VA Purchase loan.
A VA purchase loan is a good choice for veteran borrowers. The VA purchase loans does not require a down payment, terms are better than most conventional private lender backed mortgages. The terms of these loans may be fixed or adjustable-rate mortgages. These loans are provided by select VA approved lenders and their terms may vary.
The Types of homes a veteran borrower may purchase are:
The Veterans Administration has guidelines on the types of properties that qualify for VA financing. The guidelines require properties to be in a satisfactory condition, unless the purpose of the loan is to improve, repair and or remodel the property.
1. Purchase a single-family home, up to 4 units.
2. Purchase a manufactured home and/or lot.
3. Purchase a condominium, in a Department of Veterans Affairs approved project.
A veteran borrower may also:
1. Qualify under VA to purchase home.
2. Refinance a mortgage with a VA 100% Cash Out Refinance.
3. Refinance an existing VA mortgage using VA Interest Rate Reduction Loan Program.
4. Use a VA Home Improvement Loan to include the cost of improvements.
What are the Qualifications for a VA Purchase Loan?
The major requirement for being approved for a VA home loan is to obtain a VA Certificate of Eligibility, (COE). The borrower musts have been on active-duty service for at least 90 days, with at least 30 days must be consecutive. The borrower’s DD214 must show 32 USC sections 316, 502, 503, 504, or 505 activations.
Active-duty service members may qualify for a VA mortgage if they have served in the US military service for at least 180 days during peacetime or 90 days wartime. In some cases, the borrower may need to provide the VA lender with a Leave and Earnings statement, this a term for a military service paycheck.
If the borrower is a veteran, they will need to provide a copy of their discharge papers. If they are on active duty, they will need a signed statement of service signed by their commander, personnel officer, or adjutant.
A member of the National Guard will be eligible is they have 6 creditable years with the National Guard. They must be honorable discharged or placed on the retirement list.
The property the borrower wants to purchase must be a primary resident. The property may not be a vacation or investment.
The VA has minimum property requirements. A VA approved appraiser will need to inspect to make sure the property meets the VA requirements and the current government issued guidelines.
The VA mortgage loans are non-conforming loans and do not have to meet the purchasing standards of traditional Freddie Mac and Fannie Mae purchase standards.
What are VA eligibility requirements?
To be eligible for a VA home loan, a borrower must meet certain requirements, including but not limited to:
Serving on active duty for at least 90 consecutive days during wartime or at least 181 days during peacetime.
Being honorably discharged.
Meeting specific income and credit requirements.
Acquire their Certificate of eligibility.
What are the Guidelines for a VA Purchase Loan?
There are certain guidelines for obtaining a VA Purchase loan.
Below are the guidelines needed for a veteran borrower to obtain a VA Purchase loan.
Credit Score:
A credit score is the prediction of how likely a borrower will be to pay back a loan, based on information from their credit report. There is no specific credit score required by the VA. The VA is not issuing the mortgage.
The credit score is also value of the credit history on credit cards, automobile loans, and other loans.
Veteran borrowers will need to keep in mind that most mortgage lenders require a minimum credit score of 580 to qualify for 100% financing. If the Veteran has a credit score of 550 to 579, most lenders will require a 10% down payment. A Veteran borrower may qualify with some lenders, but they may have to meet additional requirements and scrutiny.
Eligible borrowers should have satisfactory payment history. Applicants with higher credit score generally obtain lower mortgage rates, which has a direct impact on the overall cost of a mortgage loan. When applicants have higher credit scores, and lower borrowing cost the underwriting an loan approval process will be simplified.
Debt To Income (DTI):
The debt-to-income ratio is an underwriting guideline that looks at a borrower’s gross monthly income and their major monthly debts. The DTI offers VA lenders an insight into your purchasing power and your ability to repay debt.
The guideline from the VA for debt to income for a VA loan is 41%. This is just a guideline as the VA does not issue mortgages. The DTI will be based on the VA Lender’s requirements.
VA lenders may allow up to 50% DTI. This is an exception if allowed.
What are the Benefits of a VA Purchase Loan?
The Veterans Administration VA Home Loans was created as an entitlement benefit for individuals who have served in the U.S. Armed Forces. The Veteran Mortgage Loan Programs provide 100% loan to value financing and refinancing without the high cost of monthly mortgage insurance.
VA Mortgage loans are guaranteed by the full faith and credit of the United States Government; therefore, mortgage lenders have very limited losses and offer very low interest rates compared to Conventional Mortgage Loans, and FHA Loans. VA Mortgage Loans are purchased and securitized by Ginnie Mae.
- Up to 100% Financing
- No Monthly Mortgage Insurance
- No VA Funding Fee for greater than 10% Disability
- VA IRRL Refinance with no appraisal or income documents
- $0.00 down payment
As long as the price of the home is not higher than the appraised value, no down is required.
Low VA Interest rates:
The interest rates for a VA purchase loan are lower than a conventional mortgage rate provided by private banks, mortgage companies or credit unions.
VA Loans with Flexible Terms:
Like most mortgage loan programs, the VA purchase loan are typically offered with 10, 15, 20, 25 or 30 years. Most private banks, mortgage companies or credit unions should offer the same terms.
VA Loan Limits use Fannie Mae and Freddie Mac limits:
The maximum loan amount for a VA Loan is determined based upon the county the property is located in. These loan limits use the average market price of a home in that county to determine that county's maximum VA loan amount for both purchasing and refinancing a home. This allows a borrower to borrow up to the Fannie Mae and Freddie Mac conforming loan limits in most areas and some high-cost counties. A borrower may borrow more if they are willing to make a down payment.
Private Mortgage Insurance (PMI) or Mortgage Insurance Premiums (MIP)
A VA purchase loan does not require Private Mortgage Insurance (PMI). PMI is a type of insurance which protects the lender. If the borrower makes a down payment less than 20 % for the purchase of the home, then the borrower will have to pay PMI.
Mortgage Insurance Premiums (MIP)
A VA purchase loan does not require Mortgage Insurance Premiums (MIP).
MIP is an insurance premium that the Federal Housing Administration (FHA)
Mortgage requires a borrower to pay to insure against future losses.
Fewer Closing Costs:
There are instances where the seller will pay all of the closing costs.
No Penalty Fees:
There are no additional penalty fees if the VA purchase loan is paid off early or before the end of the terms.
What Are the VA Loan Limits?
VA Mortgage loan limits are the same as Conventional Mortgage Loans and frequently change based upon market conditions.
VA loan limits are not based on which type of VA loan a borrower selects. VA Loan limits are determined based upon the county the property is located in, and the income of the applicant.
Applicants eligible loan amount will be determined by their income, credit score, DTI ratio and the county the residential property is located in.
Eligible Veterans, service members, and survivors with full entitlement no longer have limits on loans over $144,000. This means the borrower will not have to pay a down payment.
The VA guarantees to the borrower’s lender that if they default on a loan that’s over $144,000, the VA will pay them up to 25% of the loan amount.
The borrower will have full entitlement if they meet any of these requirements.
The borrower has never used their home loan benefit.
The borrower has paid a previous VA loan in full and sold the property (in this case, they would have their full VA entitlement restored
The borrower has used their home loan benefit but had a foreclosure or compromise claim (also called a short sale) and repaid back the loan in full.
Important Information:
The borrower may have heard the terms "additional entitlement," "bonus entitlement," or "tier 2 entitlement" when discussing VA-backed loans over $144,000. However, they do not need to use them when applying for a loan - just ignore these terms as they are only used in conversations between lenders.
When does the VA Require a Funding Fee?
On conventional loans, mortgage insurance is usually paid when a borrower pays less than a 20% down payment. This serves as an assurance for lenders in case of default on your loan. With VA loans, however, no such insurances are needed - instead it comes with a VA funding fee that the federal government sets between 1.25%-3.3%.
A borrower may choose to pay this fee upfront or include it into their total loan amount depending on the size of their down payment.
Typically, the amount of a borrower’s VA funding fee is based on their particular loan and borrower information. Additionally, if they are a veteran with a disability from military service-related activities, then they may be eligible to receive an exemption, this exemption allows the borrower to not pay this fee.
If any of these apply to the borrower or if have additional questions regarding eligibility for the waiver program, please don't hesitate to reach out directly to the Veterans Administration.
If you have any questions about the VA loan process, a borrower can always contact their regional VA loan center by calling 877-827-3702 from 8:00 AM to 6:00 PM EST, Monday through Friday.
Does the VA Have Any Additional Requirements
The VA has additional requirements/guidelines for the property. They use the same appraisal requirements for FHA home loans. This is so the home the veteran borrower would like to purchase is structurally sound. The appraisal also includes up to date, plumbing, electrical, HVAC systems, and roof condition.
The appraiser will also look for hazards such as radon, mold mildew and lead paint. This are items that will need to be remediated.
There also may be a pest control inspection to check if there are any wood destroying organisms or pests.
Conclusion:
The Department of Veterans Affairs (VA) offers home loan benefits to help eligible veterans and active-duty service members achieve homeownership. This is done as a way of recognizing the sacrifices made by our nation's veterans and as a form of gratitude for their service.
The VA's Home Loan Program is available not only to veterans but also to surviving spouses and even native American veterans. Native American direct loans work with Native American veterans and Tribal Leaders for the access to federal trust land.
Veterans who choose to utilize the VA Home Loan benefit can enjoy several advantages, such as low-down payment requirements, no mortgage insurance premium, and lower average mortgage payments.
The VA also provides assistance to those who experience financial hardship in paying their mortgage payments. Overall, the VA Home Loan benefit serves as a valuable tool for helping veterans achieve the American dream of owning a home while honoring and supporting their service to the country.
There are many benefits to choosing a VA Purchase Mortgage loan. The borrower needs to do their research to make sure they are receiving all the benefits they are entitled to receive.
The borrower needs to research lenders prior to making a decision on their VA Purchase Mortgage Loan. They will need to find a trustworthy and reputable lender.
A VA purchase mortgage loan is a type of home loan available to veterans, service members, and surviving spouses of active-duty or deceased veterans. This program offers eligible individuals the ability to purchase a home with zero down payment and without private mortgage insurance (PMI). The loan is backed by the U.S. Department of Veterans Affairs.
Overall, the VA Home Loan benefit serves as a valuable tool for many families, helping veterans achieve the American dream of owning a home while honoring and supporting their military service to the country.
Please read through this site for information and if you have questions we are here to assist.
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