Is it difficult to apply for VA loans?
Since its inception, more than 20 million people have used the VA Guaranteed Home Loan Program to help them pay off a home loan at favorable rates. If you’re wondering how to get a VA loan, and if these loans are hard to come by, read more about this helpful program for veterans:
VA does not provide home loans
The Veterans Administration does not provide funds for home loans. Rather, the loan money is provided by many types of lenders, who participate in the program and know its requirements. If you’re looking for a mortgage for a new home, always ask the lender if they participate in the VA-guaranteed home loan program. Many institutions have special departments or specially trained staff to help apply for these loans. They can make sure you understand the steps involved in acquiring the loan.
A certificate of eligibility is required
VA loans require a Certificate of Eligibility documenting your past or current military service. Lenders with trained staff who work with the VA Home Loan Program can easily purchase this document. However, in some cases, the applicant must complete a DD 26-1880 or other form online or by mail to receive the document.
Must have a reasonably good credit history
Lenders generally require applicants for the VA-guaranteed home loan program to have a credit score of 620 or higher. This requirement is to ensure that you can repay the loan and have a history of paying off your debts.
Certain income requirements apply
You will need to provide documentation of your income to assure the lender that you can repay the loan. This information can be in the form of W-2 forms from your workplace, income tax forms from two years prior if you are self-employed, as well as receipts from your military pension or other sources of income.
You will pay a one-time financing fee
A one-time financing fee is required to help pay for the VA home loan program. Currently, the financing fee is 2.15 percent if you have a zero down payment. This fee is reduced to 1.25 percent if you make a 10 percent down payment on the house. These rates may vary, depending on the type of military service and how often you use your entitlement benefit.
A down payment is not always required
Your military service gives you some right to the loan amount. That is, the government will guarantee payment of the loan calculated using the amount of your basic entitlement, which is currently set at $36,000. However, bonus rights may also apply that allow you to obtain a home loan of up to $417,000 or more, depending on the area. You can usually get a loan with no down payment up to this amount.
The house must be appraised
An appraiser must physically visit the property and determine its market value, based on the structure itself, as well as other homes in the area. The VA provides a list of minimum property requirements that must be included in the appraisal report. These requirements include adequate housing; if it is a residential and non-commercial property; Electrical and water installations in good working order and other details. If the property is not appraised at the sales price, the buyer may have to renegotiate the sale.