The process of buying a home is challenging. But the U.S. Department of Veterans Affairs (VA) makes buying a home easy for veterans. Getting a VA home loan could be a great option and is as simple as pressing the “quick” button.
A VA home loan may be an option worth considering for veterans or surviving spouses. A VA loan will be approved if the applicant meets the requirements and conditions to qualify for a VA loan. Read on to learn more about VA home loans.
What Is VA Loan?
The VA home loan is a home mortgage different from conventional loans. The U.S. Department of Veterans Affairs guarantees the VA loans, which aim to help U.S. veterans, widows, military spouses, and active-duty service members buy a house.
The government repays your VA lender a portion of the loan if you default on making your mortgage payments and the bank has to repossess your home. The guarantee from the government reduces the risk for banks, making the VA loan easier to get than a standard loan. Interestingly, there are several types of VA loans that most people are not aware of:
VA-Backed Purchase Loan: You may qualify for a VA-backed purchase loan if you meet the requirements. This loan is available in financial institutions and has better terms and rates. It may sound unbelievable, but the loan has zero prepayment penalties, no down payments, and fewer closing costs.
Cash-out refinances: A VA loan allows you to borrow against the equity in your home and use the funds to refinance your existing mortgage, renovations, and other expenses.
Native American Direct Loan (NADL): Say you’re both a Native American and a veteran, you can use the NADL loan for refinancing, purchasing, renovating, or developing property on federal trust land, usually a Native American reservation.
What Is Needed to Obtain a VA Loan
You need the following documentation to obtain a VA loan:
DD214 – Discharge Certificate: A document verifying your discharge from the military, which you can get through the eVetRecs. Active-duty members must provide a duly signed statement of service to apply for a VA loan.
Certificate of Eligibility (COE): A certification of eligibility is essential to getting a VA loan. The COE verifies that you are eligible for a VA loan. A veteran, surviving spouse, or active-duty military member needs proof of service to get this certificate.
Form NGB-22: Discharge certificate for National Guard members or service records and operation reports
Statement of service: For active members of the National Guard or Reserves.
Depending on your situation, you may still qualify for a VA loan despite not meeting the required service length. For instance, a service-related disability led to your discharge.
Who Can Qualify for a VA Loan?
You must meet the following eligibility requirements to qualify for a VA loan:
- You’re currently serving in the military
- You are a war veteran who served during wartime for 90 consecutive days
- You served 181 consecutive days as a peacetime service member
- You served in the National Guard or Selected Reserve for more than six years
- You’re a spouse of a service member who died or became disabled in the line of duty and may qualify for this program.
VA loans are a benefit and worth considering by those serving in the military and qualified veterans.
Maximum Loan Limits
In 2022, VA loan limits increased significantly. Most U.S. counties now have a standard VA loan limit of $647,200, an increase from $548,250 in 2021. It is important to remember that VA loan limits do not set a maximum of how much you can borrow but instead determine your borrowing power without requiring a down payment.
Those with full entitlements can get as much as their lenders lend them without requiring a down payment. A veteran who has an active VA loan or has defaulted on their VA loan will be subject to limitations, affecting their ability to buy with no down payment.
Down Payment Options
The VA loan provides veterans an affordable way to buy their first home. The guaranty from the government protects the lenders in the event of a default. Lenders can offer more favorable terms, such as no down payment.
Most VA loans require no down payment, depending on eligibility. But there are exceptions if you have reduced entitlement due to an existing VA loan or defaulted payment. Take advantage of these benefits to save hundreds of dollars throughout the loan.
VA home loans are a great option if you qualify. There is no need to make a sizeable down payment, and the terms and rates are better, so you save money. Consider taking advantage of the VA loan if you are a veteran or military service member.