Who is be Eligible For a VA Loans?

Dated: September 26 2020

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What Is A VA Loan?

VA loans have many benefits over conventional loans, such include lower interest rates, more lenient borrowing requirements, and no down payment due at closing. Issued to qualified veterans and active service members, VA loans are government-backed loans. 

They’re backed by the US government, specifically, the Department of Veterans Affairs (VA).

The Department of Veterans Affairs does not provide VA loans, but they check qualifications and choose which lenders can issue them. Because they’re backed by the Department of Veterans Affairs (VA), VA loans pose less of a risk to lenders. What VA makes more attractive than other types of mortgage loans you can get for similar terms? They have lower interest rates and don’t have monthly mortgage insurance. Some Lenders require certain types of qualification and credit requirements are more lenient than many other mortgage programs.

Who is be Eligible For a VA Loan?

 To qualify for a VA loan, you must meet at least one of the following qualifications:

 • Served 181 days of active service during peacetime.

 • Served 90 consecutive days of active service during wartime.

 • Served more than 6 years of service with the National Guard or Reserves.

 • Are the spouse of a service member who lost their life in the line of duty or as the result of a service-connected disability. You generally cannot have remarried, although there are exceptions.

What Is A Certificate Of Eligibility (COE)?

To be eligible for a VA loan, you must show your mortgage lender a Certificate of Eligibility (COE) which is a document that demonstrates you’re eligible for a VA loan. To obtain a COE, you need to show proof of military service, whether you’re an active-duty military member, a veteran, a surviving spouse, etc.

For Veterans

Veterans need to provide DD Form 214. DD Form 214 is a certificate that shows proof of your military discharge. You can go online to request your DD Form 214 by using the eVetRecs filing system. 


For Active-Duty Servicemembers

If you're an active-duty serviceperson, you’ll need a statement of service signed by your personnel officer, adjunct, or unit commander. It must have in it your full legal name, birthdate, Social Security number, the date you entered the service, information on any breaks or discharges you took from service, and the name of the commander providing the information. Ask your superior for a statement of service before you apply for your COE.

Current National Guard Or Reserve Member

To get a COE, current National Guard or Reserve members need first a statement of service. 

Discharged Member Of The National Guard

 A discharged National Guard member needs to have NGB Form 22: Report of Separation and Record of Service, for each period of National Guard service. She must also provide NGB Form 23: Retirement Points Accounting, and proof of character of service.  Since National Guard units belong to individual states, contact the National Guard Adjutant General’s Office in the state where you served and ask for your NGB Form 22 and 23 to obtain your COE.

Discharged Member Of The Selected Reserve

If you're a discharged member of the Selected Reserve, you must obtain a copy of your annual Retirement Points Statement with proof of honorable service and discharge.

Surviving Spouses

Surviving spouses who do not receive dependency benefits can get a COE so long as you possess your spouse’s DD Form 214, your marriage license, and your spouse’s death certificate. The spouse needs to go on the VA benefits website to print and complete VA form 21P-534-ARE.

Surviving spouses who get dependency benefits need to print and complete VA form 26-1817. You can find the free form to download from the VA benefits website. Once you’ve got your evidence, you can apply online for your COE through the VA’s eBenefits website, or you can mail your documents and a completed VA Form 26-1880.

Other VA Loan Requirements

Once you’ve shown that you meet the service requirements for a VA loan, you need to make sure your income, assets, and credit check out, and that the property you’re buying qualifies.

Property Type

VA loans can be used on single family homes, townhomes, condos and manufactured homes, but not all lenders will finance loans for these property types. 

Whatever property you decide to buy, it must meet the VA’s minimum property requirements (MPRs). MPRs ensure the home is safe, structurally sound, and sanitary.A VA appraiser conducts an inspection to make sure the home meets the MPRs' standards. If any MPRs are not met, repairs will be required before the loan can close.

Credit Score 

The VA doesn’t require a specific minimum credit score for VA loans, so the credit score requirement varies from lender to lender.

Income

Your lender will look at your debt-to-income ratio (DTI), which shows how much of your monthly income goes toward paying back debt when considering your ability to pay back the loan

VA Loan Limit 

The VA doesn’t limit how much you can borrow, but there is a cap on the VA’s guarantee – which is the amount of money they’ll back if you default on your loan. According to the VA, the loan limit for a no-down-payment VA loan is $510,400 in most of the country.

Certain high-cost areas have higher limits. For example, the VA loan limit for Arlington County Virginia (VA), Fairfax County Virginia (VA), and Washington DC is $765,600 (for Alexandria City the limit is $510,400). If you need a loan higher than your area VA loan limit, you may be able to look into a VA jumbo loan, which doesn’t require a downpayment and may offer a lower rate than regular jumbo loans.

Down Payment And Assets 

VA loans do not require a down payment. But your lender may have specific requirements for a no-down-payment VA loan.For instance, they may require that you have a higher credit score if you have less than 10% to put down.  It’s crucial to bear in mind that “no down payment” doesn’t mean “zero cost.” Prepare for other costs if you’re putting 0% down:

 Most VA members who get a VA loan are required to pay a funding fee to cover the cost to taxpayers. The range is between 1.25% to 3.3% (2.3% – 3.6% beginning J     January 1, 2020) of your loan amount.The cost of the fee is determined by your type of service, the size of your down payment, whether it’s the first time you’re     obtaining a VA loan and whether you’re buying or refinancing. If you don’t have the money for the funding fee upfront, in many cases the funding fee can be added to     the loan amount.

Reserve funds:

Most loans require you to have additional money in the bank to make sure that you’ll be able to make payments after your loan closes.

The reserve fund amount required hinges on the cost of your mortgage payment, which includes principal, interest, taxes, and insurance. It’s best to demonstrate reserves equivalent to at least 2 months’ worth of mortgage payments even if it's not always required.

VA Loan Vs. Conventional Loan: What Are The Benefits?

There are many benefits VA loans provide over conventional loans, like lower interest rates, no down payment requirement, no mortgage insurance, lesser credit requirements, and additional pluses for disabled veterans.

VA Loan Rates Are Typically Lower

VA loans carry lower risks because they’re backed by the government. They typically have lower interest rates than conventional loans. The difference can be 0.25% or more.

VA Loans Don’t Require A Down Payment

Like a USDA loan, a VA loan does not require a down payment. Therefore, you’ll have lower closing costs and you will be able to put it toward furniture or future savings. 

To refinance your VA loan into a lower rate, you don’t need any equity. You can refinance up to 120% of your home’s value with a VA Streamline loan, for a lower rate. You can refinance even if you owe more on your home than it’s worth.


VA Loans Don’t Require PMI

VA loans don’t require PMI, which can reduce your VA mortgage payment anywhere between 0.5% - 1% of your loan amount. PMI is a form of mortgage insurance required on conventional loans if your down payment is less than 20%. 

VA Loans Have Lenient Borrowing Requirements 

VA loans allow you to qualify with a higher Debt-to-Income ratio. The limit is 50% if you have an adjustable-rate mortgage (ARM), but if you get a fixed-rate loan, that limit can go as high as 60%. The VA loan is also the only program that lets you access 100% of your equity in a cash-out refinance, a key differentiation from other options.   

Additional Benefits For Disabled Veterans

Disabled veterans do not have to pay VA funding fees at close. To qualify, you must currently receive some form of disability benefits. This exemption can save veterans or their surviving spouse thousands.

For example, if you buy a home worth $200,000, you would typically pay between $2,500 – $6,600 ($2,800 – $7,200 starting January 1, 2020) in VA funding fees when you close. Disabled veterans can completely avoid this fee.

Access To Specially Adapted Housing Grants:

If you have a disability that affects your mobility or sight, you may qualify for a Specially Adapted Housing (SAH) grant, which allows construction of a special home for the disabled individual. SAH grants can also go toward the unpaid balance of an adapted home that was already purchased without VA grant assistance.

For 2019, you may qualify for a grant of up to $85,645 ($90,364 in 2020), and you may use the grant up to three times as long as your disability qualifies. Because the SAH is a grant and not a loan, you don’t need to pay back the money you receive from the government.

Access To Other Adaptation Grants:

If you have a disability that affects your mobility or sight, you may qualify for a Specially Adapted Housing (SAH) grant, which allows construction of a special home for the disabled individual. SAH grants can also go toward the unpaid balance of an adapted home that was already purchased without VA grant assistance.

 For 2019, you may qualify for a grant of up to $85,645 ($90,364 in 2020), and you may use the grant up to three times as long as your disability qualifies. Because the SAH is a grant and not a loan, you don’t need to pay back the money you receive from the government.

Access To Other Adaptation Grants:

Disabled veterans may also qualify for a Temporary Residence Adaptation (TRA) grant to add modifications to your property that make it easier for you to navigate if you live with a family member. Like SAH grants, you won’t need to pay back your SAH or TRA grant, which makes them a powerful tool for veterans with mobility-related disabilities.

Property Tax Exemption:

Property taxes are taxes that you pay to your local community to fund things like libraries, fire departments, and local road and development projects. Disabled veteran's property tax exemptions can lower the amount you must pay in property taxes.

These tax exemptions aren’t a federal program, and they vary by state, so make sure you check with your local VA office to learn more about what kind of exemptions you’re eligible for. Some states offer an exemption to all veterans, while other states limit this benefit to veterans who are currently receiving disability payments. Disabled veterans are 100% exempt from property taxes in some states.

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Dell Jeanty

Dell Jeanty is a licensed real estate agent serving Arlington VA County, Fairfax County VA, Washington DC, Prince Georges County MD, Montgomery County MD, and Alexandria City VA and in a real estate ....

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