What is a VA Loan?
A VA Loan is a type of home mortgage available to Veterans, Service Members, and select military spouses that allows them to borrow money to purchase a home while receiving certain benefits, like a $0 downpayment, compared to a traditional mortgage. It was created in 1944 as a way to help returning service members purchase homes without needing a down payment or excellent credit.
How does a it differ from a Traditional Mortgage?
- Down Payment: VA Loans allow Veterans, Service Members, and select military spouses to put $0 down when purchasing a home. A traditional mortgage on the other hand typically requires a homebuyer to put down 20% of the purchase price.
- Private Mortgage Insurance: Since VA Loans are backed by the U.S. Department of Veterans Affairs, the borrower does not need to purchase private mortgage insurance. Traditional borrowers, by contrast, must purchase private mortgage insurance if they borrow more than 80% of the home’s purchase price.
- Cheaper Interest Rate: Since VA Loans are backed by the U.S. Department of Veterans Affairs lenders deem them to be less risky allowing them to offer cheaper interest rates which can save thousands in interest payments over the life of a 30-year mortgage.
- VA Loan Funding Fee: Most VA Loans come with a funding fee which goes directly to the Department of Veterans Affairs and helps back the VA loans of the future. Fees range from a little over 2% of the home’s purchase price for first-time VA loan recipients to 3.3% for repeat home buyers. The good news is you can roll this fee into your total loan amount. That said, not everyone has to pay the fee, such as military men and women with a service-related disability.
- VA Loan Funding Limit: It’s important to note that with a VA Loan, you can get a $0 down mortgage up to $484,350 which was a new limit imposed in 2019. That said, in some high-cost housing markets like Middle Tennessee, the limit actually extends up to $534,750!
What are the qualifications I need to meet for a VA Loan?
To qualify for a VA Loan, you generally need to meet one of these qualifications:
- If you have completed at least 90 days of active service during wartime.
- If you have served at least 181 days of active service during peacetime.
- If you have at least 6 years of service either in the Reserves or National Guard.
- If you’re the spouse of a military service member who has either died in the line of duty or as a result of a service-related disability.
What’s the application process like?
- See if you are eligible for a VA Loan: In order to secure your VA home loan, you’ll need to produce your lending institution with your Certificate of Eligibility or COE. This shows that you’ve qualified for this military benefit.
- Find a VA Home Loan Lender: A common misconception is that the federal government is the one who is lending you the money. In actuality, it is actually private lending institutions that give you the loan. The Federal Government through the Department of Veterans Affairs does, however, guarantee your loan which allows the private lender to give you very favorable terms on the loan.
- Find your dream home: This is where Felix Homes comes in. You’ll work with one of our experienced Agents to find the right home for you. We’ll walk you through each step of the process and show you the latest inventory to hit the market. Once you find a home you love, we’ll leverage our technology to come up with an offer price and do all the negotiating on your behalf so you get the home for the best price. Once the paperwork is signed, we’ll provide you with a free local moving service so you don’t have to lift a finger.
- VA Loan Processing: Once the offer is accepted, your lender will conduct an appraisal of the home and double-check all of your loan documentation including your credit, debt information, employment records, etc.
- Closing: After the appraisal, all that’s left to do is close on your new home with the help of a title agent. Then, it’s time to sit back, relax and enjoy your new home.