Answers to the Most Common Questions about VA Loans
In this article:
- Find answers to the most common questions about VA loans.
- Learn about eligibility requirements, VA loan fees, and VA appraisals.
- See how your credit score and past bankruptcy might affect your ability to get a VA loan.
Can I get a loan from the VA to buy a house?
The U.S. Department of Veteran’s Affairs (VA) doesn’t make VA loans, but rather backs the VA loans that lenders make. The VA sets the loan guidelines by which VA loans can be approved, and lenders make the loans. So you can’t get a loan from the VA, but you can get a VA-backed loan from a VA approved lender. It’s easy to find lenders who make VA loans.
What are the benefits of a VA loan?
VA loans allow those who have served in the U.S. military or are presently serving to buy a home with up to 100-percent financing.
Do I need to occupy the home I’m buying with a VA loan?
Yes, you must occupy a home you buy with a VA loan as your primary residence. VA loans aren’t available to purchase second homes or investment properties.
Can I pay off a VA loan early?
Yes, you can pay off a VA loan early without incurring any extra fees because there is no prepayment penalty on a VA loan. You can pay it off in full, or you can pay it down more aggressively than the normal monthly payments require along the way. If you pay the loan down extra along the way, it doesn’t lower your monthly payment.
What if I have trouble repaying my VA loan?
If you experience a major life transition like a job loss or divorce that will make it impossible to pay your VA mortgage payments, talk to your lender immediately to explain your hardship situation.
If your hardship situation will result in a permanent change that will render you unable to make your mortgage payments, it’s best to explore selling your home to avoid foreclosure. If the hardship is only for a short period of time, the VA may be able to offer an alternative repayment plan.
In addition to talking to your lender, you can get counseling from the VA by calling 877-827-3702 and requesting a call from a Loan Service Representative or by contacting the VA regional loan center closest to you.
Can I get a VA loan for a condo, or just a single family home?
Yes, you can get a VA loan for a condo, but the VA must approve the condo project. The agency maintains a database of pre-approved condos, and if the condo you want isn’t on this list, you’ll need to work with your lender to get the condo you want to buy approved. This process can add considerable time to a home purchase transaction, so make sure you do this research before writing an offer, and make sure your real estate agent is aware you’re getting a VA loan.
Who is eligible for a VA loan?
Those eligible for VA loans include:
- Active duty service members
- Current or former National Guard or Reserve members who have been activated Federal active service
- Current National Guard or Reserve members who have never been federal active service
- Discharged members of the National Guard who have never been activated for federal active service
- Discharged members of the Selected Reserve who have never been activated for federal active service
- Surviving spouses in Receipt of Dependency and Indemnity Compensation (DIC) benefits
- Surviving spouses who aren’t receiving DIC benefits
Is there a minimum service threshold to be eligible for a VA loan?
To be eligible for VA loans, your service requirements are as follows:
- Served 181 days during peacetime (Active duty)
- Served 90 days during war time (Active duty)
- Served 6 years in Reserves or National Guard
- Spouse of service member who died in the line of duty or because of a service-connected disability
How do I prove military service to get a VA loan?
To get a VA loan, you need a Certificate of Eligibility (COE).
What is a Certificate of Eligibility (COE) and how do I get it?
The type of COE you need depends on your type of service: veteran, active duty service member, current or former National Guard, etc. To obtain your COE yourself, apply online through the VA benefits portal or by requesting via mail.
Can my lender get my COE for me?
Yes, your lender can obtain your COE for you. The VA requires all VA-approved lenders to include a COE in their loan underwriting process, so the fastest way to get your COE is through a VA lender. They can usually obtain it for you within minutes through a lender-only portal provided to lenders by the VA.
What is the max VA loan amount?
The national VA limit is $417,000, but there are certain exceptions to this for high-cost areas, where you can get VA loans as high as $1 million depending on your financial profile. When you apply for a VA loan, your lender can brief you on the options you qualify for in your specific area. You can review the entire list of VA loan limits by county here. And you can estimate the cost of your VA loan here.
How do I apply for a VA loan?
You can find lenders on Zillow who make VA loans. You can read reviews and compare rates, then make contact with a lender. They will tell you how to apply — usually by completing an online application, providing an application over the phone, or meeting face to face.
After the initial application, the lender will ask you to provide detailed documentation of your residence, employment, income, credit, debt, and asset history. You must give your lender everything they ask for in a timely fashion for them to be able to accurately advise you on your options and approve you.
Can I use a co-signer?
Co-signers — also called co-borrowers because they’re equally liable for the loan — are allowed but only if the co-borrower is a spouse or another veteran.
Does my credit score affect my VA Loan rate?
Yes, credit scores affect your VA loan rate and your ability to qualify. Each lender will vary in terms of the credit score they require, but generally a score of 620 or better is required for you to qualify for a VA loan.
There is a direct correlation between rate and credit score: the higher the credit score, the lower the rate. Your lender can quote you based on your credit score, and you can even get a feel for what your rate will be based on your credit score without talking to a lender with a quick rate search.
Can I get a VA loan if I’ve had a bankruptcy?
The VA allows certain borrowers who meet post-bankruptcy guidelines to get a loan two years after a bankruptcy. But the VA doesn’t actually make the VA loans, the VA-approved lenders do, and these lenders can choose to be more stringent. Conversely, there are certain circumstances where borrowers might not have to wait a full two years. Consult your lender for details based on your specific profile.
Can I get a VA loan if I’ve had one before?
Yes, a VA loan isn’t a one-time benefit, so you can get a VA loan even if you’ve had one for a previous home in the past. But you can only use a VA loan to buy a primary residence, so you can’t use VA loans to acquire multiple properties.
After active duty, how is my qualifying income calculated?
The VA says your total monthly housing cost plus all other monthly payments (car loans, student loans, etc.) cannot exceed 41 percent of your income. There are select exceptions to this rule, which you can discuss with your lender.
If you’re salaried, your current income will be used. If you’re self-employed, an average of two years’ income will be used. In all cases, your income is evaluated by viewing two years of tax returns and W-2s, as well as current paystubs to determine how it will be calculated.
If I’m still on active duty, how is my qualifying income calculated?
If you’re on active duty, you’ll need a Leave and Earnings Statement (LES) with an Expiration of Term of Service (ETS) date less than 12 months after loan closing to prove income, and a Statement of Service to prove ongoing service and income.
If your separation date is 12 months or less from your loan closing, you must document income in one of the following ways:
- Evidence of re-enlistment or extension showing new ETS date more than 12 months from date of loan closing.
- Statement that you intend to re-enlist, accompanied by a statement from your Commanding Officer that you’re eligible to re-enlist and that they believe your re-enlistment will be granted.
- Offer letter from private employer after release from active duty. Must include start date, rate of pay, and whether employment is full-time or part-time.
What fees should I expect to pay for my VA Loan?
The fees for a VA loan are much like fees for any other mortgage loan. There are lender fees like origination, discount, underwriting, processing, and credit report. And there are settlement fees like title insurance, escrow fee, and document preparation. Additionally there is a VA funding fee that’s specific to VA loans. This list isn’t all-inclusive. See VA Closing Cost Guide for details.
What is the VA Funding Fee, and how do I calculate it?
The VA Funding Fee is a percentage of the loan amount that the VA assesses every borrower to fund the VA home loan program. Funding fees break down like this:
- 0-percent down payment: VA funding fee of 2.15 percent for regular military personnel (and 2.4 percent for Reserve and National Guard personnel)
- 5-10-percent down payment: VA funding fee of 1.5 percent for regular military personnel (and 1.75 percent for Reserve and National Guard personnel)
- 10-percent or more down payment: VA funding fee of 1.25 percent for regular military personnel (and 1.5 percent for Reserve and National Guard personnel)
Can I finance my VA funding fee?
Yes, the VA funding fee can be financed into your loan. For example, if you were regular military personnel buying a $250,000 home with 100% financing, your funding fee would be 2.15 percent, or $5,375. This amount would normally be due at closing but, to conserve cash at closing, you can also add it to the $250,000 loan amount.
How do I track fees to make sure I’m getting a good deal?
All lenders are required by federal law to disclose these fees to you within three days of your application. The disclosures must be in a specific format so they will be easy to read and understand, and if you’re shopping lenders, you’ll get the same forms from all lenders to compare:
- Before October 1, 2015, the initial fee disclosures will be the Good Faith Estimate and Truth In Lending forms.
- After October 1, 2015, the initial fee disclosure will be the Loan Estimate.
You can ask for these disclosures by name after you submit your application to a lender.
What is a VA appraisal?
A VA appraisal is used to determine whether the home is worth what you’re willing to pay for it. It’s also used to assess the condition of the property, with focus on verifying the following items:
- Functional roof, heat, plumbing, and electrical systems.
- No pest issues such as termites.
- No lead-based paint.
- No water intrusion.
- No health or safety issues.
Who orders the VA appraisal?
Your lender will order a VA appraisal on the property you’re in contract to buy. Even though your lender orders the appraisal, the VA appraiser isn’t a lender employee, but rather an independent, licensed, VA-approved appraiser who is randomly assigned by the nearest VA regional loan center. This ensures that the appraisal won’t be biased in any way.
What if the appraisal says that repairs are necessary?
If repairs are required by the appraisal, they must be fixed before the loan can close. The buyer and seller must negotiate who is going to pay for the required repairs.
If the seller won’t pay for the repairs, and the buyer is unwilling to take the risk of paying for the required repairs, the buyer can exit the contract and find a new home to buy. In a case like this, the appraisal is nonrefundable.
What if the appraisal is lower than the sale price of the home?
If the appraisal is lower than the sale price of the home, the lender will make the loan based on the lower of the purchase contract price or appraised value.
So if someone was in contract to buy a home for $250,000 using 100-percent VA financing and the appraisal came in at $225,000, the borrower could still choose to buy the home for $250,000, but they’d need to bring in an extra $25,000 at closing. Or they can negotiate with the seller to lower the price. If the seller won’t lower the price and the buyer won’t bring in extra cash at closing, the buyer can exit the contract and find a new home to buy. In a case like this, the appraisal is nonrefundable.
Where can I go for further VA loan resources?
Zillow has detailed resources expanding on the topics above are available here:
– How To Get A VA Loan: Step-By-Step Process
– Veterans: Get 100% Financing on Home Loans up to $1 Million
– VA Loan Eligibility Requirements
– VA Loan Closing Cost Guide
– What Is a VA Certificate Of Eligibility?