As a veteran myself, I know the value of the VA loan and think this is hands down the best loan for first time homebuyers if you are eligible. It was created after World War II for returning service members and has evolved greatly over the years. The Veterans Administration (VA) will make the determination of eligibility for the loan and issue a certificate with the details, including the amount of the loan guarantee allowing 100% financing. Part of what I do for veterans and their families is apply for and obtain the Certificate of Eligibility (COE) to get the process started.
If you are active duty and have served a minimum amount of time, normally 180 days, then you are eligible for a VA loan. If you are separated or retired with a general or better discharge characterization, I’ll submit your DD-214 to obtain the COE. For National Guard or Reserves, you need six years of satisfactory service, or 180 days active duty (not for training), to be eligible. If you have separated, your eligibility is determined off your NGB-22 or DD-214.
What Can I Do with a VA Home Loan?
You can use your VA Loan to purchase a house, condominium, or townhouse. This includes multi-family units up to a four plex. You can also build a home using the VA Construction Loan, make energy-efficient home improvements, or refinance an existing mortgage up to 100% of the appraised value. If you have an existing VA loan, you can also do a low cost, no appraisal, no income verification Interest Rate Reduction Loan (IRRL).
Why Would I Want A VA Loan?
If you are eligible, the VA loan is usually the best way to go. The interest rates are lower than a conventional loan, but the biggest draw is that you can finance 100% of the purchase amount (up to $484,350 for 2019) and not pay ANY private mortgage insurance. If your loan exceeds this number, you will need to put 25% of anything over the loan limit down. So, for example, if you bought a home for $584,350, you would need to put $25,000 down. There is a funding fee associated with the VA loan, between 2.15% and 3.4% of the loan amount, but this can be financed into the loan.
One misconception I run cross many times is that the VA loan is a free loan. It is not. While there is no down payment required, there are closing costs associated with any purchase that range upward of $4,000 and includes a years homeowners insurance, title work, services, appraisal, taxes etc. Call me and let me show you how most of my VA clients don’t pay those fees out of pocket!