VA Loans Explained
If you served in the United States military, you may be eligible for a VA loan. VA stands for Veterans Administration, which is the federal agency that backs these types of loans. Because they generally offer attractive terms, including lower interest rates and a zero down payment, VA loans are very popular with first-time buyers.
Who Is Eligible?
VA loans are available to retired and active duty servicemen and women in every branch of the armed forces. This also includes those in the reserves National Guard, and Coast Guard. Reservists and National Guard members must have served in the military for at least six years. Military members who served on an active duty status must have served for at least 90 days. A National Guard or reserve member who served for 90 days of active duty basis is also eligible. Additionally, surviving spouses of deceased military members can qualify for a VA loan.
How Do I Determine Eligibility?
Before you can apply, you must provide proof that you are actually eligible to receive the VA loan. First, submit VA Form 26-1880, also known as a request for a Certificate of Eligibility. Applicants can obtain this form directly from the Veterans Administration. The Certificate of Eligibility does not guarantee that you’ll be approved for the loan amount.
The Pre-Approval Process
Once a current or former service member obtains a Certificate of Eligibility, he or she can get pre-approved for a VA loan. In most cases, a mortgage specialist will request income verification for the previous two months. For current military members, this is a Leave and Earning Statement (LES). Former members can simply submit pay stubs or canceled checks. Additionally, the loan specialist will want to see W2s and tax.
The second step entails qualifying and getting pre-approved for a VA loan and is relatively straightforward. Usually a Mortgage Advisor will need to see at least two months of the most recent Leave and Earning Statements (LES) that all active members and some retired members get as well, two years of W-2’s and tax returns if necessary. If you are retired, the Mortgage Advisor will look at retired income still received from the government, as well as civilian income if they are still out in the workforce. For all that our military members do for our country, it is great that they are given the opportunity to purchase their home at an affordable interest rate and with 0% down!
Zero Down Payment
VA Home Loans allow qualified buyers the opportunity to purchase a home with no down payment. There are also no monthly mortgage insurance premiums to pay, limitations on buyer’s closing costs, and an appraisal that informs the buyer of the property value. For most loans on new houses, construction is inspected at appropriate stages and a 1-year warranty is required from the builder. VA also performs personal loan servicing and offers financial counseling to help veterans having temporary financial difficulties. Although there is no maximum VA loan, lenders generally limit the maximum VA loan to $417,000. See the VA Loan FAQ on Military.com.
One of the key features of the VA loan is that you have the option to put 0% down for financing loans all the way up to the San Diego County loan limit of $500,000. Qualifying for a VA loan is also a lot more lenient in regards to the debt to income ratio. You can put 0% down and are allowed to go higher into the debt to income ratio, which means a client can typically qualify for more of a loan. Definitely a plus for those active or retired service members!!!