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Veteran Loans

VA mortgages began in 1944 when President Theodore D. Roosevelt signed the GI Bill of Rights into law. VA mortgages are federally guaranteed home loans (guaranteed against a loan default) and issued by a private mortgage companies or banks. VA loans can be of great benefit to eligible veterans who are looking for 100% financing for a home purchase and up to 90% on a refinance. They do not include any pre-payment penalties. Nor do VA loans require private mortgage insurance.

The Veterans Administration was created by the Federal government. Like the Federal Housing Administration, The VA is not a lender. Rather, the VA guarantees 25% of the home loan amounts up to $144,000 and is used in lieu of a down payment so borrowers don't have make a large down payment to obtain financing and can obtain more favorable terms. Only a VA licensed broker can assist in obtaining this type of loan from a VA licensed lender.

Many people incorrectly assume that all veterans are guaranteed a VA mortgage. However, the guarantee is not automatic. Rather, veterans must qualify based on a number of parameters including credit rating and qualifying ratios. Veterans must also be honorably discharged and have a certificate of eligibility. You will need your discharge paperwork your DD214 form. If you have lost your discharge papers, replacement DD214's can be obtained by writing a letter to the national Personnel Records Center. Members of the National Guard and the Persian Gulf Conflict with honorable discharges are free to apply for VA loans as are members of the selected Reserve with six years of service. There is no automatic disqualification for veterans who do not have an honorable discharge: however the process does become more complex.

Candidates for VA mortgages must first obtain a certificate of eligibility. This is done by simply filling out the VA Form 26-1880 and submitting along with your military discharge papers. Candidates must be able to fully document their income with W2's or tax returns, have decent credit for the last year, and generally have above a 580 FICO score, (there are exceptions to FICO scores if borrowers have compensating factors such as reserves or a solid work history). The mortgage amount must be within the loan limits for VA mortgages -- these loan limits will vary by region and must be a primary residence in most cases (www.homeloans.va.gov). The borrower must be able to document a two year residency. Any bankruptcy must have been discharged at least 2 years ago. Lastly they must have the appropriate qualifying ratios (monthly debts divided by monthly income). There are exceptions for these ratios, but generally the borrower/s must be below a 41% overall debt ratio.

If you plan on buying a home with a VA loan, make sure the loan amount does not exceed federal VA loan limits and calculate your debt to income ratio to make sure you are within guidelines. Try to avoid making any large purchase prior to your loan application and if possible pay down any debt that you can. VA does not require assets, although assets may help in the event your ratios are excessive.

A VA mortgage allows a homebuyer a low down payment and up to 6% seller concessions. Because second mortgages are now capped at 85% loan to value VA loans have become an important option for eligible veterans. And VA loans do not have private mortgage insurance an important distinction that separates them from the other prime loans such as FHA, Fannie Mae and Freddie Mac.

Eligible veterans looking to refinance their non-VA loans into a VA loan can certainly do so and can get up to 90% on a cash-out refinance. There are "streamlined VA refinances" for current VA mortgage holders whose loans are in good standing. Streamline refinances are an expedited process over traditional refinances. You do not need to have a VA loan to refinance into a VA loan. However, keep in mind that the VA loan is not automatic. Rather it is an entitlement provided you still live in the home, have good credit, and can prove your income. .

VA loans have caps on the closing costs but there is an up front fee required by law called the VA funding fee. This fee is slightly over 2% for the first time home buyer for 100% financing and for a subsequent home, it's almost 3%. The same fees apply for refinances into VA mortgages.

Most property types are eligible for VA financing including: single family dwellings, town homes, condos, and manufactured homes and even farms if the borrower intends to inhabit a residence on the farm. VA offers loan options including: 30 year fixed, 15 year fixed and various adjustable rate mortgages as well as graduated payment mortgages. They offer rehab loans to improve a property. VA has "Energy Efficient Mortgages" which allow for greater purchasing power when buying or renovating a green home. All VA loan terms include principle and interest.

All in all, VA mortgages are fantastic home loan opportunities for eligible veterans. For more information on VA mortgages, call Envision Lending Group or Apply Now!