If you are a veteran or active-duty military personnel, you may be eligible for a VA loan. VA loans are one of the best mortgage options available, as they offer low interest rates and no down payment requirements. In this blog post, we will walk you through the entire process of applying for a VA loan. We will explain what documents you need to provide, how to get pre-approved, and how to finalize your loan application. Let's get started!
How to Apply for a VA Loan Table of Contents
What is a VA Loan?
An VA loan is a mortgage loan that is guaranteed by the U.S. Department of Veterans Affairs (VA). The loan is available to eligible veterans, service members, and their spouses.
The VA loan program was created to help veterans finance the purchase of a home. The VA guarantees a portion of the loan, which protects the lender against loss if the borrower defaults on the loan. This guarantee allows lenders to offer more favorable terms, including low down payments and interest rates.
How to Apply for a VA Loan?
The first step in applying for a VA loan is to obtain a Certificate of Eligibility (COE). The COE is issued by the VA and establishes that the borrower meets the service requirements for a VA loan.
To obtain a COE, you will need to submit a completed Application for Certification of Eligibility (VA Form 26-1880). You can get this form from your lender or the VA website. Once you have completed the form, you will need to submit it, along with proof of your military service, to the VA.
Once you have obtained your COE, you can begin shopping for a home. When you find a home that you would like to purchase, you will need to submit a loan application to your lender.
If you are pre-approved for the loan, the next step is to obtain a loan commitment from the lender. The loan commitment is a document that states how much money you are eligible to borrow.
When you find a home that you would like to purchase, you will need to submit an offer to the seller. If the seller accepts your offer, they will sign a sales contract and send it to your lender. The lender will then provide you with a Loan Estimate (LE).
The LE is a document that outlines the terms of your loan, including the interest rate, monthly payments, and closing costs.
Once you have reviewed and accepted the terms of your loan, the next step is to complete a final loan application. This application will be used to verify your income, employment, and credit history. The lender will also order a home appraisal at this time.
If you are approved for the loan at this stage, the next step is to attend a loan closing. During the closing, you will sign all of the necessary paperwork and pay any remaining fees or costs associated with the loan. Once all of the paperwork has been signed and funds have been paid, you will be ready to move into your new home!
What Are the Different Types of VA Loans?
There are four different types of VA loans:
These loans are used to finance the purchase of a home.
These loans are used to refinance an existing mortgage.
Cash-Out Refinance Loans
These loans allow borrowers to refinance their mortgage and receive cash back from the equity in their home.
Interest Rate Reduction Refinance Loans (IRRRLs)
These loans are used to lower the interest rate on an existing VA loan.
How Are VA Loans Different From Personal Loans?
VA loans are government-backed loans that are available to veterans, service members, and their spouses. Personal loans are not backed by the government and can be obtained from a bank, credit union, or online lender.
VA loans have a few key benefits that make them different from personal loans, including:
- No down payment is required.
- They offer competitive interest rates.
- There is no private mortgage insurance (PMI) required.
- They can be used for a variety of purposes, including buying a home, making home improvements, or paying off debt.
What Do I Need to Get a VA Loan?
In order to get a VA loan, you will need to meet the following requirements:
- You must have served in the military, or be the spouse of a service member.
- You must have a credit score of 620 or higher for most lenders.
- You must have enough income to support your loan payments.
- You must have a valid Certificate of Eligibility (COE).
Can I Get a VA Loan With Bad Credit?
Unfortunately, there is no definitive answer to this question. The VA does not have a minimum credit score requirement, so it really depends on the lender you are working with. That being said, most lenders will require a credit score of at least 620 in order to qualify for a VA loan. So if your credit score is below that, you may have difficulty getting approved.
But it's not impossible. There are some things you can do to improve your chances of getting approved for a VA loan with bad credit. First, make sure you're applying with a reputable lender who specializes in VA loans.
They will be more likely to work with you and give you the best chance of approval. Second, try to get your credit score as high as possible before you apply.
You can do this by paying your bills on time, maintaining a good credit history, and keeping your credit utilization low. If you can do these things, you'll improve your chances of getting approved for a VA loan with bad credit.
Can I Get a VA Loan With No Down Payment?
Yes, you can get a VA loan with no down payment. In fact, this is one of the most common benefits of the VA loan program. Veterans and active duty service members are eligible for 100% financing on their home purchase, meaning they don't have to put any money down. This is an incredible benefit, especially when compared to other loan programs that require a down payment.
What Different Fees Come With a VA Loan?
There are a few different fees that come with a VA loan. The first is the appraisal fee, which goes to pay for the appraiser who will assess your home's value. The second is the funding fee, which goes to the Veterans Administration to cover their costs in guaranteeing your loan. Finally, there may be a few miscellaneous fees charged by your lender for things like processing and underwriting.
Here is a list of some of the fees that could come with you VA Loan:
Loan Origination Fee
A loan origination fee is charged by the lender for processing your loan. It is typically a percentage of the total loan amount, and can be anywhere from 0.50% to about one percent.
These are fees paid upfront in order to lower your interest rate. One point is equal to one percent of the loan amount.
As mentioned before, this goes to pay for the appraiser who will assess your home's value.
If you choose to have a home inspection (and you should), that will be an additional cost.
VA Funding Fee
The funding fee goes to the Veterans Administration to help cover their costs in guaranteeing your loan. This fee can range from 0.50% to three percent of the loan amount, and is usually added to the total loan amount.
These are miscellaneous fees charged by your lender for things like processing and underwriting. They can range from a few hundred dollars to a few thousand, depending on the size of your loan.
Mortgage insurance premium (if required) : If your down payment is less than 20%, you will likely be required to pay mortgage insurance. This is an additional monthly fee, in addition to your regular mortgage payment.
You can expect to pay between $100 and $500 for an appraisal, depending on the value of your home. The VA funding fee is a one-time charge that ranges from 0.50% to as high as three percent of the loan amount, depending on factors like whether you're a first-time borrower or if you're making a down payment.
Overall, the fees associated with a VA loan are generally lower than those for a conventional loan. However, they can still add up, so it's important to factor them into your budget when you're planning your home purchase.
These fees can add up, but luckily they can all be rolled into your loan so you don't have to pay them upfront out of pocket. Talk to your lender about how to do this so you can make sure everything is included in your budget.
Where Can I Get a VA Loan From?
You can get a VA loan from any lender that offers them. However, not all lenders are created equal. Some may offer better terms and rates than others, so it's important to shop around and compare your options before you decide on a loan.
A few things to look for in a lender:
- Competitive interest rates
- Low fees
- Good customer service
- A strong understanding of the VA loan program
You can begin the process of applying for a VA loan by filling out a short form on Veterans United's website. This will give you an initial idea of whether you're eligible for a VA loan and how much you may be able to borrow.
If you're ready to move forward with the process, the next step is to get in touch with a licensed loan officer. They'll help you gather the necessary documentation and complete the application.
Can I Apply For a VA Loan Online?
Yes, you can apply for a VA loan online. Veterans United is one of the few lenders that offers a completely digital application process.
How Quickly Can I Get a VA Loan?
The timeline for getting a VA loan varies depending on the lender you're working with. Some lenders may be able to fund your loan in as little as 30 days, while others may take 60-90 days.
How Many VA Loans Can I Have?
The number of VA loans you can have is not set in stone. In fact, there are a few different scenarios where you might be able to get more than one VA loan.
- If you sell your home that has a VA loan and use the proceeds to pay off the loan in full, you can then reapply for a new VA loan.
- If you have multiple properties in different locations, each with a VA loan, it's possible to maintain all of the loans as long as each property is occupied by the borrower or a tenant.
- There are also cases where veterans who have foreclosed on a previous VA loan may be eligible for another one.
What Are The Average Interest Rates for a VA Loan?
The average interest rate for a VA loan depends on several factors, including the type of loan you choose, your credit score, and the length of the loan. For example, a 30-year fixed-rate mortgage has an average interest rate of around four percent, while a 15-year fixed-rate mortgage has an average interest rate of around three percent. If you have good credit, you may be able to get a lower interest rate on your VA loan.
How Much Can You Borrow With a VA Loan?
The amount you can borrow with a VA loan depends on how much eligible equity you have in your home. Eligible equity is the difference between your home's appraised value and the balance of any outstanding loans or lines of credit secured by your home.
For example, if your home is worth $200,000 and you have a $100,000 mortgage balance, you have $100,000 in eligible equity. The maximum loan amount for a VA loan is four times your eligible equity, or $400,000 in this example.
However, most borrowers will not be able to borrow the full amount because lenders typically limit loans to 80% of a home's value to protect themselves from loss if the borrower defaults on the loan. This means that the maximum loan amount you could qualify for would be $160,000 in this example.
What Happens If I Cannot Repay My VA Loan?
If you cannot repay your VA loan, you may be eligible for a VA-backed mortgage. This type of mortgage is similar to a traditional bank loan, but the government guarantees a portion of the loan, which protects the lender from loss if you default on the payments.
You can also contact your lender to discuss other options for repaying your loan, such as a forbearance or modification.
A forbearance allows you to temporarily stop making payments on your loan while you get back on your feet financially. A modification permanently changes the terms of your loan, such as the interest rate or monthly payment amount.
Both options will likely require that you provide documentation of your financial hardship.
What Are Some Alternatives to a VA Loan?
If you're not eligible for a VA loan or if you're looking for an alternative to a VA loan, there are other options available.
You may be able to qualify for an FHA loan, which is a mortgage insured by the Federal Housing Administration.
Another option is a conventional loan, which is not backed by the government but typically requires a higher down payment than an FHA loan.
There are also programs available for low-income borrowers and first-time homebuyers that can make qualifying for a conventional loan easier. Talk to your lender about all of your options to see what's best for you.