There are many different types of loans available for people today. If you are considering a VA mortgage, otherwise known as a Veteran Affairs mortgage, this post will reveal everything you need to know.
What is a VA mortgage?
A VA mortgage is a type of home loan that is available via a program that the United States Department of Veterans Affairs has established. The qualifying standards are set by the US Department of VA, as well as the terms of the mortgage. They will also guarantee a portion of the loan, but the department does not actually provide the financing. Rather, private lenders will provide VA home loans, such as mortgage companies and banks.
What are the eligibility requirements for a VA mortgage?
There are a number of different eligibility requirements you will need to meet if you are interested in a Veteran Affairs mortgage. The government has service requirements for those on active duty or veterans, and it also provides a chance for certain military spouses to be entitled to a VA mortgage.
The three basic requirements that you will need to fulfill are as follows:
- You must be either a veteran who has been honorably discharged and meets the minimum service requirements or currently on active military duty.
- You must have served a minimum of 181 days of active service throughout peacetime or a minimum of 90 days consecutively throughout wartime.
- Alternatively, you must have served a minimum of six years in the Selective Reserve or National Guard.
You may also qualify for a VA mortgage loan if your spouse has died in the line of duty. To make an application for a VA mortgage, you must obtain a COE, which is a VA Certificate of Eligibility. You won’t be able to get this type of loan with the said certificate.
How do VA loans work?
You will need to verify that you are eligible for a VA mortgage by filling out the paperwork. You will receive what is known as your entitlement, which is the amount guaranteed by the VA on each loan. Private mortgage insurance (PMI) will not be required, yet you do need to pay a VA funding fee when you close the account, which is a percentage of the total value of the loan. This fee basically ensures that the program runs for future borrowers.
When compared with conventional mortgages, there are a few differences to expect. We’ll explain the five steps entailed when it comes to acquiring one of these loans below:
1. Get prequalified for a VA mortgage - The first thing you need to do is locate a suitable VA lender and get prequalified so that you can get an estimate of how much you can afford to lend. This will be based on a number of financial factors, including entitlement, credit, and income.
2. Get preapproved for a VA loan - Once you have gotten prequalified, you can then get preapproved for a loan. This is a critical step in the process, putting you in the driver’s seat should you find a property you want to purchase. Your financial information, including your income, will be verified by the lender so that they have a thorough understanding of your purchasing power. Once this has all gone through, you will receive a letter of pre approval. This letter shows the estate agent and home seller you deal with that you are a serious buyer who is in a valid position to purchase the property in question.
3. Put an offer in - Once you have found the perfect home, it is time to put in an offer and begin the negotiation process with the seller. It is vital to find an agent who has dealt with VA mortgages before.
4. VA underwriting and appraisal - Your lender is going to order a VA appraisal of the home once you are under contract. This is not an inspection, but it is a requirement of the VA mortgage to make certain the home meets the minimum VA property requirements and fair market value. At the same time, the mortgage underwriters will assess your financial documents and income along with the appraisal so that everything can be finalized.
5. Close the deal - At your loan closing, a number of legal documents will need to be signed. After which, you can get the keys to your new home!
Final words on VA mortgages
So there you have it: a good start to know about VA mortgages and how they operate. We hope that this has helped to give you a better understanding of this type of mortgage and how it works.