VA Loans | Purchase and Refinance Mortgages
VA loans are one among many loans offered to American home buyers. The loan awarding scheme started in 1944 and it was aimed at helping veterans (who had served in the army) to be able to purchase homes for themselves and for their families.
What You Need To Be Eligible For VA Loans
To be eligible for the loan, you must be a veteran who has served the US government for a minimum of 90 days during wartime or has served the government for 181 days during the peacetime. In addition, the veteran must have a satisfactory credit history. i.e., the veteran must have borrowed money previously and repaid the borrowed money.
The veteran applying for the loan should not be bankrupt. i.e., the veteran must be in a good financial situation. According to the pre-set rules, to qualify for the loan, the veteran must be two years out of chapter 7 or one year out of chapter 13 bankruptcies. In addition to bankruptcy, the veteran’s debt-to-income ratio should not be more than 41%.
How VA loans work
VA loans are among the few loans that don’t require a down payment. The loans guarantee a maximum of 25% of a mortgage that is between $104,250 and $417,000. The loans are made by private lenders such as banks, societies, and mortgage companies.
The guarantee given by the loan means that the lender is protected against loss; therefore, if the borrower fails to repay the loan, the department for veteran affairs will repay the loan on behalf of the veteran. In addition, the guaranty given replaces the down payment that is usually required whenever one wants to buy property.
Just like other types of mortgages, the closing costs are not included in the VA loan; therefore, the borrower must be aware of these costs. Although, the closing costs are not included in the loan, they can be included in the purchasing price of the property.
In addition to the closing costs, veterans borrowing the loan should be aware of the funding fee that is required by law for non-down payment loans. Currently, the funding fee is 2.15% for the first time home buyers. The fee increases to 3.3% for the previous home buyers.
Advantages of VA Loans
The VA loans have several advantages. One of the prime advantages is that they allow you to purchase the property of your dreams without making a down payment. Another advantage is that the loans have a long service period (usually 15, 20, or even 30 years). This ensures that you can pay your loan with minimal stress.
In addition, you can repay the mortgage at your convenient time without incurring pre-payment penalties. Finally, as long as you are a veteran, it’s easy to qualify for the loan. The loan requires only 620 credit scores to qualify for it.
Unlike other types of mortgages that are limited to the type of property that you can buy, the VA loans are versatile; you can use the loan to buy a townhouse, condominium, single family home or any other type of accommodation. In addition, you can take the loan to improve and furnish your current home.
- Cash out refinance
- Streamlined VA Interest Rate Reduction Refinance (IRRRL)*
Terms: 10, 15, 20, 25, 30 year fixed
Eligible Borrowers: Veterans, reservists, National Guard and surviving spouses who have not remarried. Check Eligibility (click here)
- Primary residence only
- 1 unit single family
- VA approved condos and PUDs
- Manufactured housing
- Investment properties
- 2 – 4 unit properties
- Second homes
- Non-Approved Condos
- New Construction (never been occupied)
- Any property in a Coastal Barrier Area
- 4x available entitlement – up to:
- $417, 000 for purchases including financed funding fee
- 100% for Purchase
- 100% for Rate / Term refinance
- 90% for Cash Out refinance
- 85% for Identity of Interest
- 100% for IRRRL 640 – 719 FICO
- 150% for IRRRL 660 – 720 FICO – 6 mo. post closing reserves
- 150% for IRRRL 720+ FICO
Min FICO: 640
*IRRRL Streamline Refinance – 660 minimum qualifying score required when the LTV is greater than 100%.
Max LTV/CLTV is 150%