Overview – VA loans are available to prior military veterans and some spouses. VA loans operate very similar to FHA loans as far as loan qualifying, interest rates, and other terms are concerned. The biggest difference between the programs is that there is no down payment requirement for VA loans, thus no need for down payment assistance. VA does not charge any up front or monthly mortgage insurance, but they do charge a funding fee to utilize the program in most cases. The total monthly payment on a comparable VA loan is less due to the absence of the mortgage insurance requirement.

Credit qualifying is essentially the same as that required by FHA loans.

Income / Employment qualifying is also similar to FHA, although rather than rely on debt ratios, VA has a worksheet that determines residual income. Information on the borrower is gathered in regard to number of household members and personal child care expenses. VA qualifying seems to be more accurate since it takes into consideration debts that are applicable to certain borrowers only. It is obvious that a borrower with a family of five is going to have a harder time meeting all bills with the same income as a family of two has. Therefore, a family of two with no child care obligations can qualify for a larger payment than can a family of five. Employment guidelines are like those required by FHA.

The Certificate of Eligibility required for VA loans can be obtained at our office.  The VA system is fully automated, so we can obtain your COE online. Currently, VA will guaranty loans up to $417,000 for qualified vets.

The VA Funding Fee is the fee charged by the Veterans Administration to exercise your VA eligibility. This fee is applied to most loans, although it is waived under certain circumstances, such as in the case of a disabled veteran. The amount of the funding fee varies depending on whether or not the borrower wishes to pay funds toward a down payment. However, as of 1/1/2004, the first time use of the VA loan for regular military buying with zero down is 2.15%. This fee can be added to the loan or paid in cash at closing.

A buyer can use their VA eligibility more than once. However, VA will charge a higher funding fee for the multiple use unless the fee is waived.  Plus, a veteran may have more than one VA loan at a time.  If you have a VA loan and want to rent your current home and buy another, you may do so as long as you have sufficient eligibility.  Basically, you can buy up to a combined loan amount of $417,000.  Do note that the second purchase must have a loan amount in excess of $144,000.

Refinancing a VA loan is quite simple. Like FHA, VA has a simplified, non-intrusive interest rate reduction plan. The plan is called an Interest Rate Rollover, and it can essentially be considered to be a non-qualifying loan in the sense that the borrowers income, employment, and assets are not verified as is done on a home purchase. The credit is checked to ensure that the mortgage has been paid as agreed, but other consumer debt issues are not considered unless a borrower has declared bankruptcy or had a judgment filed that could effect the title to the property. There is no minimum time a borrower has to have owned their home, nor is there a limit to the number of times a rate reduction can be performed. The loan can be done with or without closing costs (explained in detail on the Refinance page).

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