American Flag with VA Homes behind it

Veterans Administration (VA) loans provide one of the most valuable benefits to those who have served in the United States military. It provides them with a path to homeownership, both while actively serving and after discharge. The program is similar to the Federal Housing Administration (FHA) loan program except it is open only to qualified veterans and provides more extensive borrower benefits. It is one of the few options for borrowers without a down payment that also provides relaxed underwriting standards.

Are you curious to know more about VA mortgage loans? Here is a list of the most frequently asked questions regarding this popular loan program.

What is a VA Home Loan?

A VA home loan is a loan that the government backs in case the borrower defaults. In cases where the borrower fails to make payments and the bank forecloses on the home, the VA reimburses the lender for most of its losses. Because the government backs the loan, lenders offer much more generous terms than available in the general mortgage market. Better terms include no down payment requirement, lower interest rates, acceptance of lower credit scores and lower waiting periods after life events like bankruptcy. VA home loans offer the unique benefit of no mortgage insurance requirement, though borrowers must pay a 2.15% funding fee, which can be financed.

How did the VA Home Loan Program Begin?

The U.S. Congress created the VA loan program in 1944 as part of the Servicemen’s Readjustment Act, also known as the GI Bill of Rights. The government created the GI Bill of Rights to help World War II veterans re-start their civilian lives and develop the post-war economy. In addition to the VA loan program, the bill also provided veterans with funding for post-secondary education, health care, and other important life benefits.

Who Qualifies for a VA Home Loan?

All military personnel and veterans with six months or more of active duty are eligible. Veterans with a dishonorable discharge are disqualified. Spouses of personnel who died during military service are also eligible. VA loans require no minimum credit score, though lenders often impose a minimum FICO requirement between 580 and 620. Borrowers with a previous bankruptcy or foreclosure must wait two years from the end of those events. If a previous foreclosure was a VA loan, in some cases the borrower needs to reimburse the government for losses before a new VA loan origination can take place.

How to get a VA Home Loan

The first step toward getting a VA loan is obtaining a Certificate of Eligibility (COE). The Veterans Administration issues COEs after it verifies the borrower’s eligibility. Applicants need to submit documentation of their military service to the VA. Alternatively, a VA loan qualified lender can obtain the COE on behalf of the borrower. Once the COE is issued, the borrower completes the mortgage application.

How to apply for a VA Home Loan

Since VA loans are issued by most mortgage companies across the country, borrowers can apply at any number of banks, mortgage brokers or credit unions. The USAA Credit Union specializes in VA loans and other financial products for servicemembers and veterans. Most mortgage brokers and banks also have departments and loan officers who specialize in VA mortgage loans. Borrowers can complete applications online and send in the documentation or seek the assistance of a loan officer in completing the application. Working with a loan officer is a good idea because they understand what’s needed for the application’s approval.

How does a VA Home Loan Work?

From the borrower’s perspective, a VA mortgage works like any other. The only difference is the easier qualification standards, no down payment option and no mortgage insurance requirement. VA loan limits range between $484,350 and $726,525, depending on housing values in the county where the property is located.

VA home loan requirements make it far easier for veterans and servicemembers to achieve the American dream. As a result, the program is immensely popular. Veteran home loan applications have increased by 370% since 2007, largely because credit standards for other types of loans were tightened since 2007. The VA loan program allows those who have served our country to still achieve home ownership despite the difficulties of the mortgage market. For over 70 years, the VA loan program has made millions of veterans proud homeowners.

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