What is a VA Loan?
The VA Home Loan Guaranty Program, better known as a VA Loan, is offered through lenders and backed by the Department of Veteran Affairs. Most veterans and active military men and women can get one, and the loan can be used to purchase, build or improve a home.
Some of the most recognized benefits of the loan include no down payment, no private mortgage insurance and easier qualification standards.
Who is Eligible?
You are eligible if you have served:
- For at least 181 days during peacetime (active duty)
- For at least 90 days during war time (active duty)
- In the National Guard or Reserves for at least 6 years
- You are also eligible if your spouse died while serving in the line of duty
There are other conditions on the loan, such as the home that you wish to purchase, build or improve must be your primary residence. There are also limits for the amount you can borrow, which vary according to geographical area. The maximum amount for most areas is $417,000.
What Will I Need?
Certificate of Eligibility: This proves that you have completed the necessary service time and type of discharge in order to be eligible for the VA Loan benefit. Most lenders can help you obtain this via the Automated Certificates of Eligibility system online.
Credit score: You will not be automatically disqualified for a low credit score. Rather your credit history instead of your score is examined and must be in good standing. Most lenders only look at the past 12 months.
Income verification: Your income and that of your spouse (if your spouse is going to be on the loan) will be looked at to ensure you can make the mortgage payments.
VA Loan Process:
Underwriting:This part of the process tends to take longer than any other. In order to determine whether you are a low-risk borrower, all of your information, such as employment, income and credit history, is analyzed. Often the underwriter will request more information before a decision is made.
Appraisal:The loan amount that you apply for cannot exceed the VA’s estimate of the value of the property. Therefore, the VA will assign you a home appraiser when you have found the home that you wish to purchase. You cannot choose the appraiser yourself, as the VA has a list of approved appraisers, and they will assign you one at random.
Do remember that an appraisal is different than an inspection. It is very important to have the home inspected before you purchase it. If you are working with a real estate agent, he or she should have an inspector that they use often or know of one that they recommend.