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The letters “VA” in VA Home Loan advertise that this benefit is provided by the Department for Veterans Affairs. The VA Home Loan helps service members, veterans, and surviving spouses secure loans to help recipients’ with homes for their own occupancy.
The VA guarantees part of the loan, helping the borrower obtain a loan from a private lender, bank, or mortgage company at favorable terms without making a down payment
. The VA will guarantee up to 25% of a home loan, up to a maximum amount of $113,275, making the maximum loan amount $453,100.
Over 22 million VA loans have been approved since the program’s creation as part of the GI Bill in 1944.
To approve your VA Home Loan, lenders need a Certificate of Eligibility (COE).A COE confirms that an applicant served the required time and attests to honorable character of service. There are three ways to apply for a COE: through a VA-approved leading mortgage lender; through the VA’s eBenefits website; or through the mail, with VA Form 26-1880.
There is a two-part appraisal process comprised of a valuation and an assessment of property conditions called the Minimum Property Requirements (MPRs). The appraisal process may be requested by any party to the transaction – provided the appraiser is assigned by the VA.
VA loans typically close within 30-45 days.
The following people meet the requirements for the VA loan program:
The minimum service period is usually 90 consecutive days of active service in wartime, 181 days of active service in peacetime, more than six years of service in the National Guard or reserves, or the spouse of a service member who has died in the line of duty or as a result of a service-related disability.
People meeting any of these descriptions can go to eBenefits or call 1-877-827-3702 to determine their eligibility.
The average interest rate of a 30-year fixed-rate VA home loan was 4.05% in December 2017, according to Ellie Mae, the software company that processes almost one-quarter of American mortgage applications. In comparison, the average cost of a conventional mortgage was 4.32%.
The VA does require payment of a one-off funding fee for all VA-approved loans. Most borrowers pay a fee of 2.15% of the amount of the loan, although members of the National Guard or reserves pay 2.4%. The VA will reduce the fee to 1.5% (or 1.75% for National Guard or reserves) for those who pay a 5% down payment on the home, and to 1.25% (or 1.5% for National Guard or reserves) for a 10% down payment. Surviving spouses and disabled service members are exempt from the funding fee.
Factors to consider:
Most of the top lenders that offer conventional mortgages will also offer VA home loans and many of the considerations you should think about apply to other types of mortgage loans as well. As with any loan, VA loan rates vary between lenders, so it is worth shopping around and comparing VA home loan lenders and their rates and terms.