60 Most Asked Questions Answered About VA Loans
1. What is VA Loan?
A VA loan is a mortgage loan available through a program established by the United States Department of Veterans Affairs (previously the Veterans Administration). VA home loans are provided by private lenders, such as banks and mortgage companies, instead.
2. Who can qualify for VA guaranteed loans?
You may be eligible for a VA loan by meeting one or more of the following requirements: If you have served 90 consecutive days of active service during wartime, or 181 days of active service during peacetime or you have 6 years of service in the National Guard or Reserves.
3. What are the benefits of a VA loan? Listed below are some of the most important benefits of a VA loans
– Not required to have a down payment in most cases.
– No monthly mortgage insurance premiums or PMI to pay.
– Limitation on buyer’s closing costs.
– Lower average interest rates than other loan types.
– No prepayment penalties.
4. What credit score do you need for a VA loan?
No minimum credit score You read that right: The U.S. Department of Veterans Affairs, which ensures all VA home loans, doesn’t require a certain credit score. But the private lenders that issue VA loans may have their own minimum credit score requirements, typically ranging from 580 to 660.
5. Why are VA loans bad?
Yikes! The lower interest rates on VA loans are deceptive. Both will end up costing you much more in interest over the life of the loan than their 15-year counterparts. Plus, you’re more likely to get a lower interest rate on a 15-year fixed-rate conventional loan than on a 15-year VA loan.
6. What is a VA cash out loan?
A VA-backed cash-out refinance loan lets you replace your current loan with a new one under different terms. If you want to take cash out of your home equity or refinance a non-VA loan into a VA-backed loan, a VA-backed cash-out refinance loan may be right for you.
7. What is a 30-year VA cash out?
The VA’s Cash-Out refinance loan gives qualified veterans the opportunity to refinance their conventional or VA loan into a lower rate while extracting cash from the home’s equity.
8. What is the VA funding fee on cash out loans?
The VA funding fee is 2.3% of the amount borrowed on a VA home loan. The fee increases to 3.6% for borrowers who have already used the VA loan program in the past. However, the funding fee can be reduced by putting at least 5% down at the time of closing.
9. Can I roll the VA funding fee into my mortgage?
Borrowers do have the option of rolling the VA loan funding fee into the cost of the loan, avoiding the initial financial burden of paying the fee in total upfront. However, by doing so the long-term cost of the VA mortgage is higher. VA funding fee refunds are awarded based on how they’re paid.
10. Can VA funding fee be waived?
Veterans are exempt from paying a funding fee if they’re entitled to receive VA disability compensation. VA officials announced that veterans who qualify for the funding fee waiver are now being notified in the home loan certificate of eligibility, and in their disability compensation award letter.
11. Do you have to pay closing costs with a VA loan?
Like every mortgage, the VA loan comes with closing costs and related expenses. VA loan closing costs can average anywhere from 3 to 5 percent of the loan amount, but costs can vary significantly depending on where you’re buying, the lender you’re working with and more.
12. Can you use VA loan twice?
VA loans aren’t a one-time benefit. They can be used over and over again. You can even have more than one active VA loan at the same time.
13. What will fail a VA home inspection?
One surefire way to fail a VA home inspection is to have a roof in Disrepair. VA appraisers will check that there aren’t any holes in the roof that can lead to leaks and other defects. If left unchecked, these shortcomings can have a huge impact on the value of a home, often leaving homebuyers in a bind if small problems snowball into big ones as the house gets older.
14. Why do sellers not like VA loans?
VA loans come with red tape, appraisal delays and fees born by sellers instead of buyers — all reasons offers are being rejected, agents say. In addition, real estate agents and veterans say, some sellers reject offers because of misconceptions about the VA program.
15. Why is there a VA funding fee?
The VA funding fee is a one-time payment that the Veteran, service member, or survivor pays on a VA-backed or VA direct home loan. This fee helps to lower the cost of the loan for U.S. taxpayers since the VA home loan program doesn’t require down payments or monthly mortgage insurance.
16. Is the VA funding fee tax deductible?
The annual amount you pay toward your VA Funding Fee is likely tax deductible. It’s always best to consult the IRS or check with a tax professional.
17. What is the best VA home loan lender?
Best VA Loan Lenders of 2020:
USAA.
Navy Federal Credit Union
Quicken Loans
Freedom Mortgage
Veterans United
18. Does credit score affect interest rate?
There are VA lenders that can require lower scores, down to 620 and even lower on a case-by-case basis. The difference that credit scores make on a VA loan affects an interest rate and any discount points associated with that rate. The higher the credit score, the better your rate and point combination may be.
19. Can I rent out my VA loan home?
Renting out your home financed with a VA loan is an option. As a rule, VA loans are not used to purchase income property due to the owner-occupancy rule. But, once you’ve lived in the home, it is okay to vacate and rent out the home.
20. What is the maximum amount you can borrow for a VA loan?
$453,100. Some borrowers are surprised to learn there is no fixed VA loan maximum. You can borrow as much as a lender will lend. But the VA’s guaranty to lenders on the loan only extends up to a certain figure. In most parts of the country, the current VA loan limit is $453,100.
21. Can I get a VA loan with a 500 credit score?
Most mortgage companies state you must have at least a 620-660 credit score and high income to qualify for a VA loan. You can get a VA loan with a 500 credit score if you happen to have enough residual income then there is a good chance you can qualify up to and maybe above a 60% debt to income ratio.
22. Do VA appraisers lowball?
VA appraisals are much like regular appraisals — an appraiser will come out to the house you’re looking to buy and establish its value. If a VA appraisal comes in low, problems can occur. Sometimes the VA appraisal is lower than the asking price, and sometimes it is higher. When the appraisal is lower than the asking price, it essentially means that the lender does not place a value on the home as high as the seller.
23. Who pays for the appraisal on a VA loan?
If you’re new to the VA loan process, you’ll learn you must pay both the initial appraisal and any required home inspection. Costs vary by location and home type, but the VA appraisal fee generally ranges between $300-$500. Homebuyers may ask the seller to repay this cost as part of your negotiations.
24. Is it harder to buy a house with a VA loan?
The short answer is “no.” It’s true VA loans were once harder to close — but that’s ancient history. Today, you’re likely to have roughly the same issues with a buyer who has this sort of mortgage as any other. And VA’s flexible guidelines may be the only reason your buyer can purchase your home.
25. What are the advantages?
No Down Payment Option
Higher Debt-to-Income (DTI) Ratios are Allowed
Loan Origination Fee Limited to 1%
Competitive Terms
No Private Mortgage Insurance (PMI) Required
Limited Closing Costs
No Prepayment Penalties
Assumable Loans
26. How long does it take to close on a house with a VA loan?
Most VA loans close in 40 to 50 days, which is standard for the mortgage industry regardless of the type of financing. In fact, dig into the numbers a bit and you don’t find much difference between VA and conventional loans.
27. Is a Home Inspection Required?
The VA appraisal is an assessment of the property’s value and condition by an independent VA appraiser. VA appraisals are required for every VA purchase loan. These are two different things and unlike the appraisal, a home inspection isn’t required when you’re buying a home. But many buyers choose to invest in one.
28. How much are closing costs on a VA home loan?
VA loan closing costs average around 1% – 3% of the loan amount on bigger home purchase prices, and 3% – 5% of the loan amount for less expensive homes. The veteran can pay them out-of-pocket or receive seller and/or lender credits to cover the closing costs.
29. Is FHA or VA loans better?
For average interest rates, the winner is VA Loans. Average mortgage rates on government-backed loans continue to outperform conventional loans, which surprises many homebuyers. But VA loans consistently lead the industry and have lower average interest rates than both conventional and FHA loans.
30. What fees can a veteran not pay on a VA loan?
The 1 Percent Fee Loan application or processing fees
Interest rate lock-in fees
Document preparation fees
Lender appraisals
Postage costs
Escrow or notary fees
Tax service fees
Loan closing or settlement fees
31. How is VA recoupment calculated?
Recoupment is calculated by dividing all fees, expenses, and closing costs, whether included in the loan or paid outside of closing (i.e., an appraisal fee), by the reduction of the monthly PI payment.
32. How do I get my VA Certificate of Eligibility?
There are 3 ways to obtain your certificate of eligibility: Ask your lender. The easiest and best method of obtaining a COE, in our opinion. Apply online. Go to the eBenefits portal and log in or create a new account. Apply via mail.
33. Is the VA loan guaranteed?
VA guaranteed loans are made by private lenders such as banks, savings and loan associations, or mortgage companies. If the loan is approved, VA guarantees the loan when it is closed. The guaranty means the lender is protected against loss if you or a later owner fail to repay the loan.
34. Does USAA Do VA construction loans?
USAA offers VA construction loans, which can be used for home purchases as well as new construction. A USAA construction loan lets you pay for the lot and construction, then roll the balance into a mortgage once the home is completed.
35. Where do I claim the VA funding fee on my taxes?
Government-backed loans typically cover the risks and defray the costs of their programs by charging mortgage insurance, funding fees or guarantee fees. The amount you can deduct should be included in box 5 of your mortgage tax form 1098.
36. Is a VA loan really worth it?
If you stack up a VA loan against a conventional mortgage, you’ll see that despite the benefits, when it comes to the cold hard cash, you’re best going with a conventional loan! You’d have a better interest rate at around 3.6%, and you would also have no PMI.
37. What kind of homes qualify for a VA loan?
Apartments, condos, manufactured homes, co-ops, single-family homes — modern real estate has come a long way since the days of the one-room shack.
38. Does spouse have to be on VA loan?
Only one spouse needs to be eligible for a VA loan in order to secure the full guaranty. In fact, it’s common for couples consisting of a service member or veteran and a person not in the military to use a VA loan to buy their home.
39. What is a high balance VA loan?
Technically known as a High Balance VA Loan, the VA Jumbo Loan is often confused with a higher limit Veteran mortgage that is available in high-cost areas and is based on the median home price for the county the home is located in.
40. Can I get a VA backed loan with no credit score?
In most areas, the FICO Credit Score must be a least 620. However, there are VA loans for some borrowers who have no credit score or even a score less than 620. If you are without credit, qualification is determined based on past payment history of rent, car insurance and other regular monthly expenses.
41. Can I get approved for a VA loan with bad credit?
The short answer is yes, it is possible to get a VA loan with bad credit. For VA loans, borrowers often need a FICO score of at least 660, but the VA doesn’t mandate a minimum credit score requirement and some lenders may be willing to go below that cutoff.
42. What paperwork is needed?
Some of the documents needed for VA loan preapproval are a copy of a government issued photo ID, copies of pay stubs, W-2 statements and federal tax returns from the last two years, Divorce decree and/or childcare statement specifying costs.
43. Do VA appraisers go inside the house?
Once granted, a VA-licensed appraiser will inspect the property inside and out. VA appraisers are assigned by the VA and are a neutral third-party to the transaction. Appraisers are required to review the property and suggest an appraised value, even if it doesn’t conform to the sale price of the home.
44. Can I buy a fixer upper with a VA home loan?
VA rehab and renovation loans offer veterans and service members a low-cost, no-down-payment way to purchase fixer-uppers or homes in need of some extra TLC. Through VA renovation loans, borrowers can finance both the purchase price and necessary repairs, or refinance and repair an existing home.
45. Can a VA home loan be denied?
VA lenders can’t subvert VA requirements in order to approve a loan, but they can add additional qualifications making it more difficult to qualify for the loan. For example, while the VA doesn’t have a minimum credit score requirement, most lenders have settled on a minimum credit score of 640 in order to be approved.
46. Is the seller required to pay closing costs?
VA buyers can ask the seller to pay for — or share — some or all of your closing costs, including discount points, the VA appraisal, credit report, state and local taxes and recording fees. Seller concessions. You also may ask a seller to pay other closing-related expenses, up to a limit of 4% of the loan amount.
47. Do you have to put down earnest money with a VA loan?
VA home loans do not require a down payment. Consideration is also called “earnest money deposit”. Consideration can be anything of value as long as the receiver accepts.
48. How do I know if I qualify for a veteran’s assistance loan?
You may be eligible for a VA loan by meeting one or more of the following requirements: served 90 consecutive days of active service during wartime or served at least 181 days of active service during peacetime, or have 6 years of service in the National Guard or Reserves.
49. How long do you have to stay in the home?
Homebuyers have 60 days from closing to occupy a home purchased with a VA loan. However, the VA does allow homebuyers in certain situations to go beyond the 60-day mark, potentially extending up to one year.
50. What is a VA IRRL?
If you have an existing VA-backed home loan and you want to reduce your monthly mortgage payments or make your payments more stable an interest rate reduction refinance loan (IRRRL) may be right for you. Refinancing lets you replace your current loan with a new one under different terms.
51. How much does a VA Irrrl cost?
The VA funding fee for an IRRRL costs just 0.5% of the loan amount. That’s lower than the funding fee for other VA loans, which range from 1.4% to 3.6% of the loan amount depending on your down payment and whether you’re used a VA loan before.
52. What is a recoupment period?
Recoupment Period means the period beginning on the date the financial statements requiring restatement were originally released to the public or submitted to the Securities and Exchange Commission (whichever is earlier) and ending on the date the restated financial statements are filed with the Securities and Exchange.
53. How long does it take to get a COE?
How Long Does it Take to Get My COE? If you have access to your eBenefits portal it will only take you about 5 minutes to receive your COE confirmation. If you mail in your COE application, it will take about 4-6 weeks to receive your COE confirmation.
54. Can a child of a veteran qualify?
Are dependents eligible for the VA loan while the veteran parent is still living? Unfortunately, the answer is no on all counts. Dependent children of veterans cannot have the VA home loan benefit transferred to them. In short, the VA home loan benefit does not extend to the children of veterans and service members.
55. Will the VA pay my rent?
If you meet the basic eligibility requirements, Veterans Inc. provides direct services and financial assistance to help search for housing, assist with initial rent costs, and pay for certain bills related to back rent or utilities. If you are a veteran in need of services, please call 800-482-2565.
56. Where do I apply?
Call 877-827-3702 to find the nearest VA regional loan center Monday through Friday, 8:00 a.m. to 6:00 p.m. ET. You can also visit https://www.va.gov/ to learn more about the VA home loan program and the home-buying process.
57. Can I put my girlfriend on my VA loan?
Can I add a girlfriend, boyfriend, significant others who is not his or her spouse in obtaining a VA loan? Yes, but the guaranty is based only on the veteran’s portion of the loan. Unlike other loans, the lender must submit joint loans to VA for approval before they are made. Both incomes can be used to qualify for the loan.
58. Can a veteran cosign a VA loan?
It’s true that the legally married spouse of a military member or veteran can co-sign a VA loan. When a military member or veteran wants to bring an unrelated, non-military cosigner, the VA allows this with one major exception. The VA guarantee is limited to the amount of the veteran’s interest in the property.
59. What is the VA loan limit for 2020?
The standard VA loan limit is $510,400 for most U.S. counties in 2020, an increase from $484,350 in 2019. For more expensive housing markets in the continental U.S., VA loan limits reach all the way up to $765,600 for 2020, up from $726,525 in 2019. Remember, these limits do not represent a cap on borrowing.
60. Can I have 2 VA loans at once?
The VA allows veterans to have two VA loans at the same time in some situations, and eligible veterans can qualify for a VA loan even if they’ve defaulted on one in previous years. Don’t let anyone in the mortgage or real estate industries tell you differently. The key is something called second-tier entitlement.