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This article was reviewed by Marguerita Cheng, a member of the Finder Editorial Review Board and award-winning advocate for ethical financial planning for over 20 years.
With lower interest rates than conventional loans, no down payment and a little red tape, VA home loans can help veterans, military members and some military spouses purchase or update a home.
A VA loan is a type of mortgage that’s guaranteed by the United States Department of Veterans affairs. VA loans provide eligible US military service members, veterans and surviving spouses with a range of programs to help them purchase, build or repair a home.
The maximum conforming VA loan limit for one-unit properties in most counties will be $548,250 in 2021 — up from $510,400 in 2020. VA lenders are able to offer borrowers more favorable finance terms, such as a competitive interest rate, comparable closing costs and the ability to refinance the funding fee. The loan itself is provided by qualified lenders such as banks and mortgage companies, and you still have to meet credit and income requirements to qualify.
All VA loans involve a feature called an entitlement. An entitlement is the dollar amount that the VA will guarantee to the lender in the event you default on your loan. While it varies by lender, many are willing to loan up to four times the amount of your entitlement.
VA loan programs include:
To be eligible for a VA loan, you must have sufficient credit and income and a valid COE. You must have served a minimum of 90 consecutive days during wartime, 181 consecutive days during peacetime, or six years in the National Guard or Reserves. The property you want to buy must be for your own personal occupancy.
VA mortgages are available for:
While the VA doesn’t set an official minimum credit score, most lenders who offer VA loans will. It varies by lender, but you’ll generally need a credit score of at least 620 to qualify.
Costs associated with a VA loan include:
For purchase loans, cash-out refinances and NADL programs, you can apply through the participating lender. For interest-rate reduction refinance loans, you don’t have to access a COE and can use the VA email confirmation process instead. Finally, for adapted housing grants, you can apply either through the VA website or by completing the application form and lodging it at your local Regional Loan Center.
To apply for a VA mortgage through a participating lender:
If you’d like to apply to get a VA loan, you’ll typically need proof of your veteran status and:
Compare VA mortgage lenders based on:
VA loans can help qualifying veterans, military service members and spouses get a home with a competitive interest rate and no down payment. But if you don’t qualify or if you need a loan with a higher limit, compare other mortgage types.
Yes. The only time a VA loan can be used to purchase rental property is for a duplex, triplex or fourplex/quadplex, as long as you will also be living on the property.
Yes. There are a few reasons your VA loan could be denied, such as changing your employment in the middle of the application process, errors in your application and sudden changes with your credit.
Yes, a veteran’s entitlement can be restored once the veteran has disposed of the property and paid the loan in full. This will allow the veteran to use his or her VA home loan benefit again. Veterans who have lost a previous VA loan to foreclosure or bankruptcy may also be able to apply for another after a two-year waiting period.
Only in certain situations. If the improvements make the home more energy efficient, you can request an energy efficient mortgage (EEM), which can allow you to finance up to an additional $6,000 on your mortgage. You also have the option of taking a cash-out refinance to take out additional funds for home improvements.
A child care letter is a letter on a VA Loan which requires childcare expenses to be counted as a liability. A child care letter is only needed if your child is 13 years old or older.
Accelerate your journey to homeownership by getting preapproved for your VA loan.
Read more…Britny Lawhorn is an assistant publisher for Finder who specializes in mortgages. She’s here to help readers get a better deal when they buy or refinance a home. Prior to joining Finder, she spent more than 5 years working in marketing agencies where she helped businesses grow their audience. She attended the University of Tennessee, where she earned a degree in English. In her free time, she enjoys traveling, volunteer work and dabbles in photography.
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