• (404) 954 1645
  • NMLS #1264653, GA # 45567; FL # LO28885; VA # MLO-30293VA; CA # CA-DBO1264653

VA Mortgage Loans – how they work

veterans at Iwo Jima

The first thing you need to know about VA loans may surprise you. The VA does not make loans, rather it issues a loan guarantee of up to $50,750 to the lender if a borrower defaults on their loan. This reduces the risk lenders face when making a VA loan and encourages lenders to look at VA borrowers favorably. The level of your guarantee depends on what’s on your Certificate of Eligibility.

What can you do with a VA loan?

Be prepared to occupy a residence you are buying as that is a crucial requirement of the VA program. And be cautious about buying condos as the VA must certify that you are buying in an approved condo development. The VA program can be used for refinancing an existing VA loan to get a lower rate or to switch from a non-VA to a VA loan. Most VA loans can be obtained without a down payment but exclusions may apply if you have used some of your entitlement previously.

Unless you are on active duty, you are required to certify that you will occupy a property you are buying within 60 days. If you are on duty or work far from home, your spouse – and only your spouse– can satisfy the occupancy requirement.

As with any other type of loan, if you are buying property you will want to go through the pre-qualification process with a VA-approved lender, giving yourself time to get your COE paperwork in order or to show proof of your ability to afford a VA loan.

Funding Fee

VA loans are attractive for one other major reason: you can get one without making a down payment in most instances. However, VA loans attract a funding fee based on your military category, the type of loan and whether you have used your entitlement before. You can finance the funding fee or pay it in cash at closing or you may be exempted from the funding fee if:

  • you are a Veteran receiving VA compensation for a service-connected disability.
  • you are a Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay.
  • you are a surviving spouse of a Veteran who died in service or from a service-connected disability.

We hold our veterans in high regard and will be happy to help you.
Call today: (404) 954 1645.
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Other Things to Note

As with any other loan, the lender sets rates, discount points and closing costs. Some of these costs can be paid by the seller but may not exceed four percent of the loan amount.

You may borrow as much as you like to purchase a home but the VA has limits on how much it will guarantee. Lenders will usually lend up to four times your available entitlement without a down payment provided you qualify for the loan and the property appraises for the price being asked. The VA loan limits are the same as those set by the Federal Housing Finance authority which regulates the FHA and they can be found HERE.

If you are refinancing using a VA loan program you may want to note that adding the funding fee and other costs to your loan may put you in a position where the new loan does not make sense. It’s always a good idea to plan carefully and talk to a lender in the early stages of considering a VA loan.

photo courtesy of Don Graham, Creative Common License 2.0, modified from the original 419x640 to 320x568.