It’s an amazing loan, if you can get one – that’s what many loan officers say about the VA mortgage.
“It is the best loan out there,” says Margo Miller, senior mortgage loan consultant at Mann Mortgage, LLC, in Salt Lake City, Utah. “The USDA loan is somewhat close, but you have to have the right income for that one. There’s just nothing like the VA loan.”
This is the loan that allows no money down, no private mortgage insurance and low interest rates.
But what is the process of getting such a loan? First of all, you have to have suitable credit, sufficient income and be eligible for the loan – meaning you are serving in the military now, or you are a veteran. Here are the perimeters looked at for eligibility to be in line for a VA loan:
- Served 90 consecutive days of active service during wartime
- Served 181 days of active service during peacetime
- Have more than six years of service in the National Guard or Reserves
- Married to a service member who has died in the line of duty or as a result of a service-related disability (such as a Vietnam vet who died of lung cancer caused by Agent Orange, Miller says.)
“That last one does confuse people sometimes. We do get spouses all the time requesting VA loans. So, I have to ask them how the veteran passed away,” she explains.
Sometimes, the situation can be iffy, but she sends in the request anyways.
“They can make exceptions and give them eligibility. It doesn’t cost anything to send it in and have it reviewed. Over the years, I’ve been surprised who was eligible sometimes,” she says.
One of those exceptions to the rules is someone who served less than six years in the reserves or National Guard but was discharged for a service-connected disability.
Miller works with all ages of veterans and their spouses to buy a home. But many of them tell her that their real estate agent or even the military never informed them of the VA loan. So, she suggests they find a loan officer who is quite experienced in handling these loans and can guide them through it all.
“Some lenders say VA loans take longer to process. But they just don’t know how to do it,” she says.
Anyone seeking a VA Loan must have a Certificate of Eligibility (COE), which is a document explaining their VA entitlement through the Department of Veterans Affairs.
A loan officer familiar with the VA loans can help the borrower obtain the COE online quickly.
“It takes about five minutes. The longest it has ever taken was two weeks because of some complications,” Miller says.
Otherwise, the borrowers can seek it out themselves by visiting the VA website and filling out a request.
A loan officer can help get you started with a preapproval letter for your VA loan. It’s a lot of paperwork but worth the time to receive a zero-down loan, Miller states. You’ll need pay stubs, tax returns, employment history, bank and investment statements and any real estate asset information.
A preapproval letter shows your real estate agent that you have the finances to buy a home.
Finding a good real estate agent that understands VA loans or has worked with other VA loan recipients should be a priority, Miller says.
“A lot of them aren’t educated enough about these loans, and have myths about them,” she says. “Many think that VA loans are for those who don’t make any money. That is so not true. I just finished one with a veteran who is a doctor.”
One thing to think about when looking for that dream house is that the VA loan program does not impose a maximum amount that an eligible veteran may borrow. However, there are limits to how much will be guaranteed – which is about $484,350 for 2018 in many areas. The maximum guaranty is higher for more expensive counties in states such as California, Utah and New York. Lenders can make loans to veterans greater than the maximum county loan limit. But those lenders can require the borrowers to put down money to cover that excess.
“It is usually very rare when lenders ask for a down payment. Getting a loan without a down payment is a benefit for them for serving our country,” Miller says. “But to get the loan approved, they might have to put in a down payment. They can’t go forward till the underwriting is approved. But that’s very rare.”
Once you find the home that you want to make your own, you make an offer. With an educated real estate agent who knows about VA loans, the offer can be structured to make sure you can buy the house with no money down.
The VA requires the home be appraised. The house must be move-in ready, and if something is wrong, the seller has to fix it before the loan ever gets approved.
Once everything is approved, then it’s time for the closing which means you’ll get the keys to your home.
Closing costs can be up to 2-5 percent of the loan amount. But the VA loan also helps out in that respect, too. There are certain fees that a lender cannot charge a veteran or military person. And a lender can choose to charge the borrower a 1 percent origination fee, which is 1 percent of the loan amount. For example, 1 percent of a $200,000 loan is $2,000.
“A lot of lenders forgot about the VA loans. And VA loans can be used over and over again. Some can even have two VA loans at the same time,” Miller says. “Just don’t listen to your real estate agent or lender tells you to go conventional loan when you can go VA. Plus, the VA loan could be ½ to 1 percent lower in interest rate. That can make a big difference.”