If you’re shopping for a new home and starting to consider your loan options, a VA loan is likely already on your radar. And while you may know that VA loans are related in some way to the Department of Veterans Affairs, there’s more to the story. Today, the Cushing Team in Reno is sharing everything you need to know about VA loans, including whether you might qualify.
The VA Loan
This type of mortgage is indeed insured by the Department of Veterans Affairs (VA). It’s designed for active-duty service members, as well as eligible veterans and qualified spouses of military personnel. A VA loan can be used to buy or build a new home, make energy-efficient upgrades to an existing home, or to refinance an existing loan.
While the VA itself doesn’t make loans, there are a number of lenders who will work with prospective homeowners on a VA loan. They’re guaranteed by the government, which means little risk for lenders and easier qualification requirements for borrowers.
Do I Qualify?
VA loans can be a great choice for qualified borrowers, even if they don’t have stellar credit or they don’t have money for a down payment. Generally, these qualifications include:
- Military service eligibility (which may include surviving spouses)
- Proof of income needed to repay the loan
- Satisfactory credit score
- No down payment is required for a VA loan in most cases. And unlike FHA loans, mortgage insurance isn’t needed either. However, VA loans do have what’s known as a funding fee for most borrowers, which adds to the overall mortgage cost. The funding fee can vary between .5 up to 3.3% of the funds you intend to borrow and is based on a few factors:
- Your service role – whether you’re in the military, the national guard, or you’re a veteran or a qualifying surviving spouse
- The down payment amount, if any
- Loan type
- Whether you’ve had a VA loan previously
- VA loans also differentiate from other loan options in that there is no maximum debt-to-income limit. Borrowers should still be prepared to provide sufficient proof of their ability to repay their loans if it will exceed 41% of your monthly gross income.
While the VA sets no limits on the amount you can borrow, it does cap the insurance it provides to the lender. As a result, most lenders will set their own loan limits. Different lenders will offer different loan limits and charge different fees, so it’s a good idea to shop around.
The Application Process
Applying for a VA loan has a few different steps than the conventional mortgage process. First, borrowers need to get their certificate of eligibility. This tells the lender that minimum eligibility requirements have been met. Borrowers should compare offers from a few different VA lenders before submitting an application and providing necessary financial information. A VA appraisal will also be needed.
Interested in Learning More?
If you qualify for a VA loan and you’d like to learn more, the Cushing Team here in Reno is happy to help. We can answer your questions about eligibility, funding fees, and other details specific to this kind of loan, so contact us today.