What is a VA loan?
The Department of Veterans Affairs (VA) offers loan programs to help servicemembers, veterans, and their families buy homes.
The VA sets the rules for loan qualification, arranges the terms under which mortgages may be offered, and guarantees any loan made under the program. Some VA loans are available with no down payment. It's important to keep in mind that not all lenders participate in the VA home loan program.
Pros/Cons
Some of the advantages of a VA loan include the ability to buy a home with no down payment (as long as the sales price doesn’t exceed the appraised value), and no private mortgage insurance (PMI) requirement. VA-guaranteed home loans are available for manufactured homes, though maximum loan amounts vary. The VA loan program also limits the closing costs you may be charged and gives you the right to prepay your mortgage without a penalty. Also, the VA may be able to offer you some assistance if you run into temporary financial difficulties.
There may be disadvantages to a VA loan. For example, a VA loan could have a higher interest rate than a conventional loan, although interest rates on VA loans are negotiable. In addition, most borrowers are required to pay a VA loan funding fee (currently between one and three percent of the amount of the loan).
Eligibility
The VA can help you determine your home loan benefit and issue your Certificate of Eligibility (COE). If you have already bought and sold one home that was financed through a VA loan, your eligibility can generally be restored. Because of the Veterans' Benefits Improvement Act of 2008, veterans who would like to refinance their existing non-VA mortgages into a VA loan may be eligible to do so for up to 100 percent of the value of the property. This may allow you to lower your monthly payments.
Spousal status is evaluated the same for all borrowers, the VA does not differentiate between same-sex and opposite-sex spouses when processing claims and applications. If you are applying for a VA loan with a co-borrower who is not your spouse (regardless of sex), you could face different loan underwriting requirements than veterans who apply for a VA loan with their spouse.
Many veterans and current servicemembers can access their eligibility certification online . Registration is free, immediate and provides information on many benefits for servicemembers, veterans, and their families. With your COE, you have evidence that the VA will “stand behind” your loan. This VA guaranty is certainly considered by the lender, but VA loans are underwritten, closed, and serviced entirely by private lenders, not by the VA. Servicemembers and veterans must go through the application process and provide information related to repayment ability, just like any other loan applicant.
How to Get Help
To learn more about VA loan programs, including whether you might qualify for one, visit the Department of Veterans Affairs website or call (800) 827-1000. You can also use the CFPB’s “Find a Housing Counselor” tool to get a list of HUD-approved housing counseling agencies in your area to discuss using a VA-loan.