For the Veteran Home Buyer: A Look at VA Loans

You served your time in the military, have traveled around the globe, and have earned the respect of your fellow Americans.  Now, you are navigating the often complex waters of buying a home.

Like most homebuyers, you are probably contemplating your mortgage loan choices. And, while there are several different loan options, if you’re a US Veteran you may want to consider a VA loan.

Never heard of a VA loan? To put it simply, a VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs. It is designed to offer long-term financing to eligible American veterans or their surviving spouses. Like government or bank-backed loans, the Department of Veteran Affairs guarantees VA loans, protecting mortgage lenders from loss if the homebuyer fails to repay the loan. Think you may be eligible for a VA loan? Read on to find out more!

What Are the Advantages of a VA Loan?

• No down payment
• Flexibility in negotiating interest rates
• No mortgage insurance premiums
• Closing costs limitations

Can I Get a VA Loan?

As a North Houston homebuyer, you qualify for a VA loan if you are:

• An honorably discharged veteran
• Currently serving on active duty
• Completed a total of six years of service in the National Guard or selected reserves

Expert tip: Some surviving spouses of veterans are also eligible for a VA loan if they have not remarried. If your Veteran spouse died after their military service, the VA must determine that the death was due to a service-connected disability, a process that will take two to three months.

How To Obtain a VA Loan

The Department of Veteran Affairs sets forth five steps veterans must take when purchasing a home with a VA loan:

1. Apply for a Certificate of Eligibility (COE) either online or by submitting a “Request for a Certificate of Eligibility” (VA Form 26-1800) to the VA’s Eligibility Center.

Expert tip:  If the VA has sufficient data about your military service and eligibility, you may be able to apply through a lender as most have access to an Internet-based application from which they can obtain a Certificate of Eligibility.

2. Decide if you want to buy a home or build one, then negotiate the terms and sign a purchase agreement.

3. Your lender will request for the home to be appraised through the VA’s “The Appraisal System” (TAS), an online service available to lenders.

4. Apply to the lender for the loan while the VA appraisal is being completed and wait to receive final approval after appraisal the appraisal has been completed and returned.

5. After both the appraisal and loan are approved, you’ll go through the loan process, which will (hopefully!) result in closing on the loan and moving into your new home.

Expert tip: The process of getting a VA loan can take longer than a conventional mortgage, however, it is an excellent alternative if little or no money is available for the down payment required to obtain a conventional mortgage.

How Much Money Can I Borrow With a VA Loan?

The VA does not set a limit on how much you can borrow, however, since the VA guarantees the loan, there are restrictions on the amount of liability the VA can assume which generally affects the amount of money a lender will lend you.

According to www.benefits.va.gov, “the loan limits are the amount a qualified Veteran with full entitlement may be able to borrow without making a down payment.”The basic VA entitlement is $36,000, and in general, lenders will loan up to four times a Veteran’s available entitlement without requiring a down payment. Of course, this is all subject to whether the home buyer is income and credit qualified and whether the property appraises at the contract price.

Once Entitlement is Received, Am I Guaranteed to Get a Loan?

Even though the loan is guaranteed by the VA and you have available entitlement, that doesn’t mean you automatically qualify for a VA loan as it’s up to each lender to decide if they will extend you a VA loan.  However, all lenders offering VA loans must comply with VA credit and income standards. Similar to non-VA loans, a lender who writes VA loans will make this decision based upon:

• Ability to repay the mortgage – a review of your bank statements
• Employment – a review of your earning statements and tax returns
• Credit history – information from a credit report

Is My Eligibility Reusable?

If you’ve already obtained one VA loan, you can only get another one in the following circumstances.

• You’ve paid off your prior VA loan when you sold your property
• You paid your prior VA loan in full and you still own the property (this is only allowed one time), allowing you to use your eligibility to purchase a second home.

Expert tip: You can use your VA eligibility for refinancing up to 100% of your home’s value without having to pay mortgage insurance.

Do All VA Loans Have the Same Repayment Schedule?

VA loans allow you to choose a repayment schedule that works best for your current situation, including the traditional fixed 30-year loans.  If you are a retiree, you may want to ask your lender about one of the following options:

• Graduated Payment Mortgage (GPM)
• Growing Equity Mortgage (GEM)
• Adjustable Rate Mortgage (ARM)
• Hybrid ARM

As with all home loans, you’ll want to consult a lender for advice on the best loan terms for your particular situation.

Ready to apply for your VA loan? Let us help you find a lender in the North Houston area!