04 Nov Your Guide to Qualify for a VA Loan
Our Tennessee mortgage lender team helps all types of people looking to buy a home. This includes those in the military. If you are a veteran, service member or spouse to one, you may qualify for a VA loan. Here is what you need to know about qualifying for one.
What Is a VA Mortgage Loan?
In 1944, as a way to assist those returning from military service, a program was created by the U.S government to help veterans buy a home without having to come up with a 20% down payment or having great credit. The program has helped millions of active and veteran members of the military to buy and refinance a home.
A VA mortgage lets you make a 0% down payment and is issued by private lenders, like banks and mortgage brokers. The loans are guaranteed by the United States Department of Veteran Affairs. These loans differ from a traditional mortgage loan in a few ways:
- VA loans require 0% down and traditional loans require 20%
- VA loans don’t require private mortgage insurance; traditional mortgages do if making less than the 20% down payment
- VA loans tend to offer more competitive rates than traditional loans because they are considered less of a risk
- It’s usually much easier to qualify for a VA loan due to the less stringent qualification requirements
Fees and Regulations
Those who qualify for full VA loan entitlement are able to borrow what a lender offers without having to pay the down payment. There are some limits, however, for those who don’t have full entitlement. This usually occurs when they already have an active VA loan or have lost a loan due to foreclosure.
There is also a funding fee, which gets put back into the VA’s funds to help this program to keep running for generations to come. This fee will vary depending on your circumstances. If you are applying for a VA loan for the first time, you will usually pay a 2.3% funding fee of the home’s purchase price. Those who have applied before will usually pay 3.6%. Those with a disability that is connected to their military service won’t have to pay this fee. The funding fee can be calculated into the mortgage amount.
There is also a limitation to closing costs, with sellers paying all or most of the expenses. This means that, when it comes time to close, you won’t have any money still due to be paid.
Eligibility Requirements for a VA Loan
For you or your spouse to qualify for a VA loan, you need:
- To meet the service requirements set out by the VA
- To have a valid COE (Certificate of Eligibility)
- To satisfy the requirements of the lender
Service Requirements
You need to meet one of the following requirements set out by the VA:
- You have been in active service for 90 consecutive days during wartime
- You have been in active service for 181 days during peacetime
- You have served 6 years in either the Reserves or National Guard
- You are the spouse whose partner has died while serving or has become disabled as a result of their service
COE
The Certificate of Eligibility lets the lender know that you are eligible for a VA loan. Lenders can usually find this out through the VA automated system, which means you don’t need to have it on hand before you submit your application. A CEO can be requested electronically and is an important part of the VA mortgage process. You can obtain a COE by:
- Applying for a mortgage using a VA approved lender
- Applying through the VA eBenefits site online
- Filling out a VA Form 26-1880 and applying by mail
You will also need proof of service to acquire your COE. This can be done using a DD form if you are regular military, NDB Form 22 for National Guard Service, and NGB Form 23 for the Reserves. There are documents that you will need with your application:
Lender Requirements
Lastly, you need to meet the lender’s requirements, such as your credit score, debt level, and income. You also need to have the property checked by an appointed VA appraiser.
If you have questions about applying for a VA loan, give our Tennessee mortgage lender team a call today at (615) 833-0456!