How Do VA Home Loans Work?

Are you a veteran or current member of the military looking to buy a home? Are you eligible for a VA Home Loan benefit? The VA loan experts at HomePromise can explain the VA loan program. This type of loan can help you buy a home (primary residence), and improve or use the equity in your home for various purposes.

Qualifying For Your VA Loan Benefits

Qualifying for a VA mortgage requires certain military service requirements and demonstrating financial stability. To be eligible, you must be an active duty service member, veteran, or surviving spouse of a deceased service member. For a surviving spouse to qualify, the deceased service member must have died in the line of duty.

Also, you must have served at least 90 consecutive days during wartime or 181 consecutive days during peacetime.

You must obtain a Certificate of Eligibility (COE). This COE is issued by the Department of Veterans Affairs. Your COE proves that you meet all the required criteria. You can apply to get this document from HomePromise by calling our VA home loan experts at 800-720-0250.

Another important factor that affects your eligibility is your credit score and income. VA loans do not have a minimum credit score requirement. However, lenders may have their own minimum credit scores which may be 640 or higher.

If you have a low credit score then HomePromise may be able to help. HomePromise has helped many veterans get their VA loans with credit scores as low as 580.

Finally, in order to qualify for a VA home loan, you must show proof of stable income. You must submit your employment history which will be verified. This includes providing W2 forms or tax returns from previous years to verify your income.

Is It Hard To Apply for a VA Home Loan?

VA home loans are an excellent option for military personnel and veterans who want to buy a house. These loans have many benefits, including no down payment requirement, competitive interest rates, and flexible credit requirements.

Applying for a VA home loan is not as complicated as many think. In fact, the process is designed to be straightforward and easy to follow, with clear guidelines like the requirements mentioned above.

To apply for a VA home loan, you will need to complete an application which can be done over the phone by calling HomePromise at 800-720-0250. You’ll need to provide documentation that verifies your eligibility based on your military service. You must also provide information about your income, credit history, assets, and debts.

While there are specific requirements involved in applying for a VA home loan; it’s generally not considered difficult. Working with experienced lenders, like HomePromise, who specialize in VA loans can help make the process easier.

What Are VA Home Loan Closing Costs?

As with all mortgages, VA home loans will have closing costs. These costs can include appraisal fees, title insurance, origination fees, recording fees, transfer taxes, and prepaid items. Examples of prepaid items are real estate taxes and homeowners insurance.

The total of these fees and prepaid typically ranges from 2% to 5% of the purchase price, depending on the interest rate you choose and your state or local government charges.

It’s essential to understand these costs before applying for a mortgage so that you can budget accordingly. HomePromise will give you an estimate of all closing costs related to your loan when you apply and also at least three days before closing. This will give you the opportunity to review the costs and be prepared for the closing date.

How Do VA Home Loans Differ From Conventional Loans?

VA home loans differ from conventional loans in several significant ways. One of the biggest differences is that VA home loans are backed by the government, while conventional loans are not. This means that lenders have less risk when offering VA home loans, allowing them to offer more favorable terms.

VA home loans usually do not require a down payment. In contrast, conventional mortgages typically require a down payment. This is often 20% or more of the purchase price to avoid a monthly mortgage.

To give you a sense of a home big as 20% can be, a $300,000 home with a 20% down payment would be $60,000. This can be a huge barrier to homeownership for many veterans and active duty service members.

One other thing to know is that regardless of your down payment, there are no monthly mortgage insurance requirements (often called “Private Mortgage Insurance” or “PMI”) for VA home loan borrowers.

In terms of credit requirements, VA home loan applicants can have lower credit scores compared to conventional loan applicants. Lenders must consider other factors when evaluating an applicant’s credit eligibility for a VA loan. These factors include reviewing past bankruptcies and foreclosures.

The rules for bankruptcies and foreclosures for VA loans are complicated. But, the good news is that under the VA home loan program, you can qualify faster after bankruptcy or foreclosure compared to conventional loan programs.

There is another great benefit of VA loans that is unavailable for conventional mortgages.  It is the VA IRRRL program.  Using the VA IRRRL program, you may be able to refinance your existing mortgage using a streamlined process with no appraisal or income verification required.

It is important for veterans and active-duty military personnel to understand the differences between VA home loans and traditional mortgages. This will help you make informed decisions about homeownership.

For most veterans, the VA home loan program is the best option. But, your individual circumstances may be unique. Call and get guidance from a HomePromise VA home loan expert at 800-720-0250. Depending on individual circumstances, both types of mortgages may be suitable options.

Types of VA Home Loans Available

The VA home purchase loan is the most common type of VA loan for veterans and active-duty service members. It requires little or no down payment and often allows the seller to pay all of your closing costs.

Another type of VA home loan is the Interest Rate Reduction Refinance Loan (IRRRL) mentioned above. This loan helps veterans lower their interest rates at a lower cost than VA home purchase VA loans. This program is available only if you already have an existing VA loan.

The VA Cash-Out Refinance Loan is another option for VA homeowners. You can use this loan type even if you don’t have a VA home loan right now. It enables you to access your home equity for many purposes including paying off debt, making home improvements, or covering unexpected costs.

VA loans are very flexible and accommodating for those who have served our country. Call 800-720-0250 to talk with a VA home loan expert at HomePromise to understand all the available options.

Can You Buy an Investment Property with a VA Loan?

While you may not purchase an investment property with a VA loan, you can purchase a multi-unit property that could generate rental income to help pay some of all your monthly mortgage payments. By “multi-unit” we mean 2, 3, or 4-unit properties.

There are 3 main conditions that must be met in order to accomplish this.

 1) The veteran must occupy one of the units as their primary residence. 

This means that if you’re planning on buying a fourplex, triplex or duplex using your VA loan, you will have to live in one of the units for at least 12 months after closing.

2)  Existing rental income from additional units may be used to qualify for the mortgage. 

This means that in certain circumstances, income from existing leases on the home you are buying can be used as income.  Some VA lenders won’t allow this kind of income, but HomePromise does.

3) Limit on how many units can be financed through a VA loan. 

You cannot use a VA loan to purchase a home with more than four units.

In summary, it’s possible to buy a multi-unit property with a VA loan as long as certain conditions are met. The key is to plan carefully and work with an experienced lender, like HomePromise, who understands these requirements well.  When buying a multi-unit property you can use your VA home loan benefits to invest in real estate and help secure your financial future!

Summary and Conclusion

A VA home loan is a mortgage option for eligible veterans, active-duty service members, and surviving spouses. This loan is backed by the VA. No down payment or private mortgage insurance is required. The process begins with the borrower obtaining a Certificate of Eligibility from the VA to prove their eligibility for the program.

This program has a special feature. Borrowers can finance the entire value of their home without needing to make a down payment. This eliminates one significant barrier many people face when buying a house – saving enough money for a down payment.

VA loans typically have lower interest rates than conventional mortgages. This is because they are backed by the government. Additionally, there are no prepayment penalties on these loans, so borrowers can pay off their debt early without incurring any fees or penalties.

VA home loans are an excellent option for many veterans and active-duty service members. They provide low-interest rates and eliminate the need for expensive monthly mortgage insurance and large down payments. Purchasing or refinancing a home is made much more accessible using the VA home loan program.  Call a VA loan expert at HomePromise to see if you qualify 800-720-0250.