A VA loan is a mortgage option issued by private lenders and partially backed by the Department of Veterans Affairs. Eligible borrowers can use a VA loan to purchase a property for a primary residence or refinance an existing mortgage. The Department of Veterans Affairs will back a portion of each loan against default.
There are many types of home finance programs available in the US for purchasing and refinancing homes. Each home finance program has specific requirements for qualification. Reach your options to ensure the loan program you are applying for will fit your needs and you are able to satisfy the minimum qualifying requirements.
Some History Of VA Loans
VA loans are flexible home mortgages with $ 0.00 down payment mortgages being offered since 1944, a part of the original Servicemen’s Readjustment act also known as the GI Bill of Rights.
On June 22nd, President Franklin D. Roosevelt leveled the playing field for those who served our country during World War II and helped reshape the course of America with the availability of VA home loans.
A Veteran can have a conventional, FHA, or VA loan. Non veterans can only qualify for a conventional or FHA loan, unless they are a serving spouse of a veteran with VA benefits.
A Veteran who is in a current conventional or FHA loan can refinance into a VA loan and if already in a VA loan can continue to refinance into a VA loan if they choose so.
The VA Loan Refinancing Steps
Find a lender that is able to do VA loans and get prequalified. The estimated dollar amount you are able to borrow based on your income and home equity is called a prequalification. Your mortgage broker will ask you for income documentation and credit history to prequalify you for a home.
Your broker will need several documents from you for submitting your loan to underwriting. The first set of documents will be;
* Government issued ID
* two years of W-2 statements
* two years most recent tax returns
* two months bank statements (checking, savings, and retirement)
* one month recent pay stubs
* VA disability award letter (if applicable)
* Social Security award letter
*DD-214 Statement of Service or Points Statement
*COE Certificate of Eligibility
To avoid a delay in your home loan being underwritten, providing the above upfront will help keep your loan approval moving at a steady pace.
As an US Veteran Homeowner you may already have a VA loan on your home when you purchased. You can refinance into an IRRRL also known as a VA Streamline Refinance. This refinance lowers your interest rate and monthly payment. The documents needed for underwriting may be less when completing as IRRRL depending on your lender.
Speak with your broker and inquire if a IRRRL VA Streamline Refinance or a VA refinance cash-out is best for you.
Pros with a VA Home Refinance Loan
~No private mortgage insurance; conventional loans with loan to value of 80% or higher pay private mortgage insurance (PMI), VA homeowners are not required to pay this monthly fee.
~Debt to income ratio as high as 40%; conventional loans require borrowers to have no more than 36% debt to income ratio (DTI)
~No prepayment penalty
~Flexibility with bankruptcy and foreclosure; borrowers may receive a VA loan as soon as two years after a bankruptcy or foreclosure.
Cons with a VA Home Refinance Loan
~VA loans are only for Veterans and surviving spouses
~ Appraisals are required and are required to go through the Veterans Department of Affairs
~ Funding fees are mandatory unless service-connected disabilities are exempt from paying the fee.
Funding fees are as follows; First use with no down payment is 2.3%, 5% down or more is 1.65%, 10% or more is 1.40% of the loan amount, Subsequent use with zero down is 3.60%, 5% or more is 1.65% and 10% or more is 1.40% of the loan amount.
~ Not all properties are eligible
~ Only can be used to finance a primary residence
VA appraisals vs. Regular residence appraisals
A VA home appraisal looks for Minimum Property Requirements (MRPs) making sure the property has working electric, heating and cooling system, adequate roofing, sufficient living space, clean and continuous water and sanitary facilities, lead free paint throughout the home, free of wood destroying insects, fungus and dry rot, safe and sanitary sewage disposal, accessible from public and private streets during all forms of weather, accessible and well vented attics and crawl spaces.
Covid and VA
VA loans were experiencing COVID overlays limiting financing to 90% of the home’s value compared to the usual 100% finance limits. However, this has been lifted for Major Mortgage and 100% financing is available again to our Veterans.
VA has also extended its moratorium on foreclosures and evictions. The extension lasts through June 30, 2021. This means that a mortgage company should not attempt to begin a foreclosure during the moratorium. If a foreclosure began before the moratorium, it should be put on hold until the moratorium ends. Similarly, if a foreclosure is already complete, there will not be an eviction while the moratorium is in effect.
Recent changes to VA loan limits
Veterans and active-duty service members have been able to buy high priced homes under the “jumbo VA loan” with a required 25 % down payment.
The new law provisions no longer require a down payment. Meaning a qualifying veteran or active-duty service member can purchase a high priced home over the $548,250
bench mark under a jumbo loan and not be required to pay a down payment of any size.
As your Home Loan Consultant
As your Home Loan Consultant, I will help you complete your VA loan purchase or refinance. Use the check list above and have your top 3 goals ready ! Call me and lets get started on the savings.