November 10, 2022
A VA Loan is a mortgage insured against default by the United States Department of Veterans Affairs. The program assists our most deserving citizens to get home financing at competitive interest rates, while requiring no down payment or private mortgage insurance (PMI).
VA home loans can be used to:
Your length of service or service commitment, duty status, and character of service determine your eligibility for specific home loan benefits (see applicable eligibility requirements). VA-guaranteed loans are eligible for a home for your occupancy or a spouse and/or dependent (for active-duty service members). To be eligible, you must have satisfactory credit and income to meet the expected monthly obligations and a valid Certificate of Eligibility (COE).
Applying for a Certificate of Eligibility
After gathering all the necessary documentation, you can apply for a Certificate of Eligibility (COE) a number of different ways:
Perhaps the greatest advantage of VA home financing is the ability to avoid mortgage insurance while requiring no down payment at the same time. In fact, loans can be granted up to 103.3% Loan to Value (LTV is the lessor of the sales price/ appraised value divided by the loan amount expressed as a percentage), meaning that borrowers can borrow over 100% of the value of their home.
Though VA loans do not require mortgage insurance, they carry a funding fee of 3.3% of the loan amount. The fee is financeable at a borrower’s request, which is the purpose of allowing eligible veterans to borrow 3.3% more than their home’s value. Disabled veterans are exempt from the funding fee based on their percentage of disability.
Remember, with all mortgages, there are closing costs to consider aside from your down payment, like origination fees, title fees, escrow deposits, etc. Unless covered using existing equity or by seller concessions, these costs will have to be paid by borrowers at the closing table.