Easily Learn About VA (Veterans Administration) Loans
What is a VA loan?
The VA loan program is a result of the GI Bill of Rights. This bill provided veterans a federally guaranteed loan with no down payment and no mortgage insurance. The loans are made by select "VA Approved Lenders" like MidCountry Bank to qualifying veterans for the purchase or refinancing of a home for primary occupancy.
"Backed" by the Veterans Administration, the lender is protected to an extent against default, which translates into better loan terms for the eligible veteran. In 2009, the VA guaranteed more than $68 billion (an 80% increase over 2008) in single family home loans and approximately 144,000 refinances (a 300% increase over 2008). More 27 million service members and veterans are eligible for VA loans.
Why should I get a MidCountry VA Loan?
MidCountry Bank is a "VA Approved Lender". As a nationwide provider, veterans and active military personal can access this benefit in all 50 states.
What can a VA loan be used for?
A VA loan may be used to buy or refinance an existing mortgage loan (both VA and non-VA). Property types include single family, town homes or condominiums in VA approved projects.
What are the advantages of a VA loan?
The ability to purchase a home with no money down (100 percent financing) is probably the biggest advantage. Although a VA funding fee may be required, an added feature is that there is never any monthly private mortgage insurance (PMI) associated with a VA loan. It is easier to qualify than traditional loans, no pre-payment penalties can apply and interest rates are generally lower given the VA's backing of the loan. Homes have never been more affordable or interest rates lower.
How do VA loan interest rates compare to other loan types?
Generally, VA loan rates will compare favorably with loan types such as conventional loans. This is due to the fact that the loan carries a federal guarantee against loss that conventional higher LTV (Loan to Value) loans do not have. It's easier to qualify for a VA loan, as there are no private mortgage insurance requirements, and no pre-payment penalties.
Is qualifying for a VA loan more or less difficult than other loan types?
Most of the time, a VA loan will be viewed about the same as any other loan with respect to the qualification and approval process. All lenders will have their own guidelines with respect to the VA loan program.
Does the VA set interest rates?
No, the interest rates are established by the open market. Rates are subject to change at any given time. Most lenders offer interest rate lock periods that allow ample time to close the loan in the time frame selected.
How large of a VA loan can I qualify for?
VA loans, like other loans, are limited to what a borrower will be able to afford to make monthly payments on as determined by VA guidelines. These guidelines include but are not limited to; total debt to income, residual income and credit rating. Check with your MidCountry VA Loan Specialist for up to date VA guidelines.
Is there a maximum VA loan amount?
No, but in most areas, the maximum loan amount without a down payment and assuming full entitlement, would be $417,000.
Do I need to occupy the home I am buying?
Yes, the veteran obtaining the loan must certify that they will occupy the home within 60 days of closing the loan. Falsely making this claim may result in severe penalties for the borrower.
Can I include any closing costs associated with the purchase of a home into the loan?
No. VA does not allow for closing costs to be included in the loan amount on a purchase transaction. In a refinance transaction, the required closing costs may be included in the loan if the appraised value allows for the inclusion.
What effect do credit scores have on my loan approval?
The VA does not make its decision based on credit scores, but most lenders do have a minimum credit score requirement in order to process, approve and fund the loan. Contact your MidCountry VA Loan Specialist to see how they may administer this element of the VA loan.
What if I have credit problems or have in the past?
The VA lender will look at credit worthiness of a loan applicant. The previous 12 month history prior to the loan application will serve as a guide for the lender and offer the most weight in the decision process. If the history is good, it helps determine the willingness and ability of the borrower to make the required payments on the loan. Conversely, if the credit is not good, the applicant may not be considered a good risk for the loan program.
Can the lender use the credit report I pulled off of the internet?
No, the lender must pull in an independent report for its exclusive use in your loan process.
If I get pre-approved, should I stay with the lender that issued the pre-approval?
Yes, The VA does not make the loan. Consequently, any other lender would need to redo all elements of the approval process.
What is the VA funding fee and do I have to pay it?
The VA funding fee is collected by the VA on many VA loan transactions. The funding fee is used by the VA to offset claims against the program due to defaults. Veterans that do not meet the exempt requirements are required to pay the funding fee.
Can the VA funding fee be included in the loan?
Yes, it may if it does not result in the loan going over the county maximum loan amount for the area the property is located in.
Why is the APR higher than my locked loan rate?
The APR is the cost of your mortgage loan as a yearly rate. The APR will generally be higher than the interest disclosed on the Note or TIL because it considers ALL costs of credit incurred in placing the loan. The APR includes interest, origination fees, discount points, and other fees you may have agreed to pay in conjunction with the loan. The APR is a good tool to compare lender costs from various companies.
Who is eligible for a VA loan?
Almost all active duty and retired (honorably discharged) service members are eligible. In most cases, the veteran must have served a minimum period as identified by the VA. This period differs for certain time frames, but in general the period is anywhere from 90 to 181 days for active-duty personnel or six years for reservists or the National Guard. Check with your local VA Resource Center or contact a MidCountry VA Loan Specialist for specifics.
Is it a good idea to use my VA eligibility vs. another type of loan?
Other than the Certificate of Eligibility and the possible need to include the VA funding fee, the process of obtaining a VA home loan is very similar to other types of loans. A VA loan may afford you the opportunity to buy a home with as little as zero down and no monthly upfront or monthly mortgage insurance.
Does the receipt of VA Disability Benefits have any impact on a VA loan?
Veterans receiving VA compensation for service connected disabilities, spouses of veterans that died in service or from service related disabilities and veterans entitled to receive service connected disability compensation – if not receiving retirement pay- are NOT required to pay the VA funding fee. Verification of the exempt status is most commonly documented with VA form 26-8937 used in the loan process.
Can a veteran use a co-borrower for the loan?
Yes, veterans and their spouses may use both parties' credit and income to qualify for the maximum required loan amount allowed for the transaction. Also, veterans that are not using entitlement or non-veteran co-borrowers may be eligible for a joint loan. Any borrower who does not use entitlement (such as a non-veteran) does not have to intend to occupy the property. Joint loans must be submitted to the VA for approval.
How do I prove eligibility?
This is done by obtaining your Certificate of Eligibility from an online program called ACE- Automatic Certificate of Eligibility- through your approved VA lender. The automated system won't work for all veterans. Your lender will supply you with VA form 22-1880 (Request for COE). Discharged veterans simply include the information from form DD-214 and have the lender send it to the Eligibility Center for determination. If you are on active duty, you must obtain a Statement of Service on official letterhead signed by your Commanding Officer.
How can a veteran restore previously used entitlement in order to get another VA loan?
The most common way is if the property which secured the VA loan has been sold, and the loan has been paid in full. There are several other circumstances that may be used as well. Please contact your MidCountry VA Loan Specialist for specific guidelines.
Can I pay off a debt associated with my VA loan to restore eligibility?
Yes, if you are able to pay off the government's loss you are able to restore eligibility.
Purchase and Refinancing FAQ's
What type of property can be purchased or refinanced with a VA loan?
A VA loan may be used to buy or refinance an existing loan. Property types include single family, town homes or condominiums in VA approved projects.
Can I refinance my existing VA loan?
Yes, you may qualify to refinance your existing VA loan in several ways. You may do a cash-out refinance to consolidate debt in order to lower your monthly payments. This type of loan is generally limited to 90% of the appraised value of the property, by the investors that purchase VA loans. A VA loan that is in good standing may take advantage of the Interest Rate Reduction Refinance Loan (IRRRL) program to lower monthly mortgage payments.
Can I refinance a non-VA loan with a VA loan?
Yes. Generally this is considered a cash-out refinance and will be limited by most lenders to 90% of the current appraised value of the home as determined by the VA appraiser.
Can I include any closing costs associated with the purchase of a home into the loan?
No. VA does not allow closing costs to be included in the loan amount on a purchase transaction. In a refinance transaction, the required closing costs may be included in the loan if the appraised value allows for the inclusion and does not involve exceeding the county maximum loan amount without additional down payment.
Should I get a loan pre-approval before I enter into a purchase contract?
Yes. Getting a pre-approval from your VA lender is an excellent idea. You will know exactly how much of a loan you can get, thereby directing your search to homes that fall within your pre-approval budget. Sellers will also know that you are a serious buying candidate.
Do I have to use my current VA lender to refinance my existing VA loan?
No, you can choose any approved VA lender for this transaction.
Simply call 1-855 VA Home Loan (1-855-824-6635) to learn more
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