VA LOANS

 

What is a VA Loan?

Created in 1944 by the United States government, the VA loan is one of the most unique and powerful loan programs ever established. The VA loan is a mortgage loan issued by approved lenders and guaranteed by the U.S. Department of Veterans Affairs (VA). The VA loan was designed to assist returning service members with the purchase of a home without needing a down payment or excellent credit.

 

VA Loan Eligibility

The VA is the final authority on eligibility for the home loan program but the basic eligibility guidelines apply to active duty service members, National Guard members, reservists, and veterans. Spouses of military members who passed away on active duty or as a direct result of a service-connected disability may also be eligible.

In order to be eligible for a VA Home Loan, you must meet
one 
or more of the following conditions:

90

You have served 90 consecutive days of active service during wartime

181

You have served 181 days of active service during peacetime

6

You have more than 6 years of service in the National Guard or Reserves

You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.

 

Additional Eligibility Requirements

The VA is the final authority on eligibility; however, the private VA lender you choose will also have an additional set of criteria you must satisfy including debt, income and credit requirements. When you apply for your loan your lender will pull your credit score from the three leading credit agencies, as well as examine your debt-to-income ratio. It is also important here to mention that a veteran applying for a VA loan must not have been discharged under dishonorable conditions.

How To Apply for a VA Loan

The VA loan process usually takes 30 to 45 days once you are under contract on a home purchase. Remember that the application for a VA loan doesn’t obligate you to complete the loan with a specific lender or to complete the home purchase. Here’s a quick guide to the four steps to apply for a VA loan:

1. Read the VA loan eligibility requirements above
2. Contact a VA approved lender and start your VA loan application.

Here are two Preferred Partner VA lenders based here in Las Vegas for you to consider:

Jim Johnson, New American Funding: Preferred Partners: Mortgage Lender 
Tom Brassfield, BNC National Bank:  Preferred Partners: Mortgage Lender

3. Complete your VA Certificate of Eligibility via the link provided above or your lender can provide.
4. Complete your loan application and provide all necessary paperwork to your lender, including W-2s, federal and state tax returns (if applicable) and recent bank statements.

VA Loan Certificate of Eligibility (COE)

The VA loan certificate of eligibility is a very important document. You can begin the loan process with an approved VA lender but you will need a VA Loan Certificate before the loan can be funded. Your COE verifies that your length and character of service make you eligible to use the VA home loan benefit.

You can apply for a VA Loan Certificate of Eligibility in three different ways:

  1. Apply through a VA approved lender
  2. Apply online through the VA’s eBenefits portal. Here’s a helpful link: eBenefits Link
  3. Apply by mail with VA Form 26-1880. Here is a helpful link: VA Form 26-1880 Link

The VA loan certificate of eligibility takes only a few minutes to complete and ensures your home financing moves forward without delays. To complete the form please note that you will need proof of your military service.

Why Choose a VA Loan?

VA loans require no down payment or private mortgage insurance. They feature competitive rates and terms and allow qualified borrowers to purchase a home with little to no money out of pocket.

  1. No down payment required
    With a VA loan, a qualified buyer can borrow 100% of the home’s value without putting down a single dollar. The chart below provides examples of down payment savings when using a VA loan.

    Loan Amount 0% Down 5% Down 10% Down 20%
    $150,000 $0 $7,500 $15,000 $30,000
    $250,000 $0 $12,500 $25,000 $50,000
    $350,000 $0 $17,500 $35,000 $70,000
    $450,000 $0 $22,500 $45,000 $90,000
  2. No PMI (private mortgage insurance)
    Most conventional lenders require a borrower to pay monthly PMI if their down payment is less than 20%. PMI is an insurance that protects the lender in case the borrower defaults.VA loans do not require PMI! That’s so important we needed to repeat it. The federal government backs VA loans and assumes the risk on behalf of the borrower that is typically covered by the PMI. No PMI is an advantage that allows you to build more and more equity in your home, effectively saving you thousands of dollars over the life of your mortgage. The chart below provides examples of PMI savings per month.

    Loan Amount Monthly Savings
    $150,000 $115/Month
    $250,000 $191/Month
    $350,000 $268/Month
    $450,000 $345/Month
  3. Competitive Interest Rates
    The interest rate charged on a mortgage loan is based on the risk assumed by the lender to finance the loan. Since VA loans are backed by the VA with a guarantee, lenders carry less risk and can offer interest rates that are typically .5 to 1 % lower than conventional interest rates. The chart below provides an example of the savings on a 10% down loan over a thirty-year loan period.

    Loan Amount $150,000 $250,000 $350,000 $450,000
    .5% lower rate $14,760 $24,480 $34,200 $43,920
    1% lower rate $28,800 $48,240 $67,320 $86,400
  4. Basic Allowance for Housing
    Lenders can include your Basic Allowance for Housing (BAH) as effective income, which means you can use BAH to pay some or all your monthly mortgage costs.
  5. No Pre-Payment Penalty
    Lenders make the most money from a loan when you make your mortgage payments all the way to the end of the term. The pre-payment penalty is a way for financial institutions to recoup some of that money should you decide to pay off your mortgage loan early. The VA loan allows borrowers to pay off their home loan at any point without having to worry about a pre-payment penalty. The absence of a pre-payment penalty allows you to consider future home purchases and refinancing options without the additional penalty expense.

 

First Time Home Buyers

Purchasing a home at any point in life is exciting but your first home is exciting and a learning process all at the same time. Typically, the very first question a first-time home buyer asks themselves is “What can I afford?” There are many factors that determine what a reasonable mortgage payment should be for an individual or couple including annual income, existing debt payments, down payment (if applicable), as well as the additional homeowner costs like insurance and HOA fees. Your lender will help you to quickly determine the payment that makes the most sense for your budget and once that payment is known we can back into the purchase price range that makes the most sense for you.

 

Refinancing with a VA Loan

The VA Home Loan program provides qualified homeowners with an easy way to take advantage of lower rates and decrease their monthly mortgage payment. In addition, military homeowners can get cash back on a VA refinance and use the proceeds for a variety of needs, from paying off debt to making home improvements. Two main programs assist VA borrowers to refinance to a lower rate:

  1. VA Streamline Refinance
    Often called a “Streamline” refinance, the Interest Rate Reduction Refinance Loan (IRRRL) option is great for existing VA loan holders who are looking to realize significant savings and take advantage of lower interest rates.
  2. Cash-Out Refinance 
    A “cash-out” refinance is an option for those with a VA or conventional loan looking to take advantage of their home’s equity to access cash for home improvements, emergencies, pay off debt, or any other purpose.

 

VA Refinance Eligibility

If you served on active duty for more than 90 consecutive days during wartime or more than 181 days of service during peacetime, you can typically qualify.

For National Guard and Reservists, the veteran must have served at least six years.

Some surviving spouses of veterans who died while in service or from a service-connected disability may also be eligible.

Please note that in order to receive a VA Streamline refinance, you must hold an existing VA Loan.