The more you know about our home loan program, the more you will realize how little “red tape” there really is in getting a VA loan. These loans are often made without any down payment at all, and frequently offer lower interest rates than ordinarily available with other kinds of loans. Aside from the veteran’s certificate of eligibility and the VA-assigned appraisal, the application process is very similar to any other type of mortgage loan.
What is a VA Guaranteed Loan?
These loans are made by a lender, such as a mortgage company, savings, and loan or bank. VA’s guaranty on the loan protects the lender against loss if the payments are not made, and is intended to encourage lenders to offer veterans loans with more favorable terms. The amount of guaranty on the loan depends on the loan amount and whether the veteran used some entitlement previously.
Who is Eligible?
Veterans who served on active duty and were discharged under conditions other than dishonorable. Veteransmust have at least 90 days’ service. Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 days’ active service. Veterans of enlisted service which began after September 7, 1980, or officers with service beginning after October 16, 1981, must in most cases have served at least 2 years. VA regional office personnel may assist with additional eligibility questions.
VA Loan Applications
The application process for VA financing is no different from any other type of loan. In fact, the VA application form is the same as that used for HUD/FHA and conventional loans. The mortgage lender verifies the applicant’s income and asset and obtains a credit report to ensure other obligations are paid on time. The loan is underwritten using Fannie Mae’s proprietary automated software DU. (Desktop underwriter) DU will view the loan application and credit report to determine if the veteran qualifies for the home they have applied for.
VA Loan Uses
You may use VA-guaranteed financing:
- Buy a home
- Buy a townhouse or condominium unit in a project that has been approved by VA
- Repair, alter or improve a home
- Improve a home through installation of a solar heating and/or cooling system or other energy efficient improvements
- Refinance an existing home loan
- Refinance an existing VA loan to reduce the interest rate and add energy efficiency improvements.
- Buy a manufactured (mobile) home
VA Loan Costs
A basic funding fee of 2.2 percent must be paid to VA by all but certain exempt veterans. A down payment of 5 percent or more will reduce the fee to 1.5 percent and a 10 percent down payment will reduce it to 1.25 percent. A funding fee of 2.4 percent must be paid by all eligible Reserve/National Guard individuals. A down payment of 5 percent or more will reduce the fee to 1.75 percent and a 10 percent down payment will reduce it to 1.5 percent. The funding fee for streamline loans to refinance an existing VA home loan with a new VA home loan to lower the existing interest rate is 0.5 percent. Veterans who are using entitlement for a second or subsequent time who do not make a downpayment of at least 5 percent are charged a funding fee of 3.3 percent. Some veterans are exempt from the VA funding fee. Some veterans are exempt from the VA funding fee. The most common example are disabled veterans.