What is a VA Loan?

The VA home loan is a benefit provided by the Veterans Administration. Eligible for active-duty, veterans, and select military spouses. The zero-down payment mortgage has many benefits for first-time home buyers. In addition, the benefit is reusable more than one time. The U.S. Department of Veterans Affairs guarantees lenders against losses should the borrower default. As a result, private lenders like banks, credit unions, and mortgage brokers originate zero down payment loans with less risk.

How does a VA loan work?

The Department of Veterans Affairs does not make home loans. Lenders make the loans, and the VA guarantees them against default. This guarantee gives lenders the confidence to finance 100% of the purchase price. The VA Funding fee, typically financed into the loan amount, is the “insurance” that the VA uses to pay the lender for any losses in foreclosure. Some veterans are exempt from this fee.

The process and steps for applying for a VA loan are like a conventional home loan, however, providing more accessible qualifications and additional consumer protections.

What are the benefits of a VA home loan?

• No down payment
• No monthly mortgage insurance
• Limited closing costs
• Lower interest rates
• Sellers and interested parties may contribute to closing cost up to 4% of the purchase price.
• Gift funds are acceptable. 

What are the qualifications for a VA Home Loan? 

 VA home a loan program does not have the traditional income and credit requirements that conventional loans have. The VA loan program does not have debt-to-income ratio limitations. However, lenders do limit their exposure to risk by applying additional restrictions over the minimum VA guidelines, such as credit score requirements and debt to-income ratio limitations. Mortgage brokers typically will have access to multiple lenders offering VA loan lenders and can match you to a lender less restrictions. Not to mention rates and fees with a mortgage broker are typically much lower. A Mortgage Broker provides the best source to fit your specific VA home loan needs.

What are the steps for a VA Loan?

• Obtain your COE Certificate of Eligibility
• Provide your income and assets and ID documents.
• Get a pre-qualification letter.
• Shop for a home
• Sign a purchase contract
• The application is sent to underwriting.
• Get a home inspection- recommended (condition of the home)
• We order the VA appraisal and pest inspection.
• Shop for homeowner’s insurance, and we help with this process.
• Provide any additional documents the underwriter request for final approval while waiting for the appraisal and title work.

Once the loan is final approved:

• You would have received a final Closing Disclosure is a list of closing costs, prepaid interest, one-year insurance premium, and the required escrow balance with the exact fees and any credit from the seller or interested parties.
• Prepare to wire any funds, if any, to the title company for the closing.
• The lender wires the loan funds to the title company.
• Sign the closing documents, generally at the title company location

Move into your new home!

How do I get a certificate of eligibility?

You may obtain it online at VA.gov, or we can do it through the lenders portal, WEBLGY.VA.gov portal. If it is not available online, we call the VA, and normally with some additional steps, the COE is issued while we are on the phone with them.

What is the VA funding Fee?

The VA funding fee is a percentage of the loan amount paid by the Veteran to “insure” the loan against default. This reduces the cost to U.S. taxpayers since the home loan does not require monthly mortgage insurance. Some veterans are exempt from paying this fee, such as veterans receiving disability payments and active-duty purple heart recipients. The COE provides the details if the Veteran is exempt.

There are two options for the VA funding fee: 

• Include the fee in the loan amount and finance it over the term of the loan. 
• The Veteran may opt to pay the fee as part of the closing costs.

Things to know about a VA Appraisal

Conventional loans sometimes allow the buyer to waive the appraisal. However, the VA requires an appraisal on all purchase and cash out refinance loans. The exception is the VA IRRL. Your loan team orders the appraisal through the WEBLGY VA portal.  

The appraisal is an assessment of the value and condition by an independent VA appraiser.  Appraisers look at recent comparable homes sales that are of similar size, age and quality of construction.

The VA appraisal has two purposes.

• To determine the fair market value of the home. The appraisal ensures the buyer is not overpaying for the home to protect the veterans best interest. 
• Ensure the property meets VA minimum property requirements (MPR). These guidelines ensure the home is safe and is move-in ready.

A VA-certified appraiser who is familiar with the market area is assigned the task. The appraiser typically has up to 10 days to complete and provide the appraisal. However, there are some exceptions to this rule.

What happens if the appraisal comes in low? 

You have several options:

• You may request a (ROV) recertification of value directly from the VA.
• Your agent can negotiate the purchase price down to the appraised value.
• You may pay the difference between the appraised value and the agreed purchase price or a reduced price that may still be over the appraised value.
• You may back out of the contract.

What happens if the home does not meet the minimum MPR?

Your agent will notify the seller. The seller may agree to repair the deficiencies before closing or place funds in an escrow account closing, discuss your options with your agent. 

Why do I need a pest inspection?

The VA wants to ensure you are buying a good and safe home. They require an inspection to detect if there are active wood-destroying organisms. A wood-destroying organism report (WDO report) is ordered by your loan team .  If the report shows active WDO, then treatment by a licensed pest company may be required before closing the loan. Damage from WDO is also noted in the report. The underwriter will determine if repairs are necessary or if further inspection is needed. Your agent and loan officer will walk you through this process. Termites are common, and often, this is a standard non-event.

Disclosure:

The information contained is for information purposes. This is not an offer to lend or extend credit. CharterStone Mortgage is not affiliated with any government agency. All applicants are required to meet agency guidelines as well as State and federal regulations. These may change without notice. In turn, it is assigned to an in-market VA appraiser.