(Mar 25, 2023)
VA loans are unique mortgage loans guaranteed by the US Department of Veterans Affairs (VA). Approved lending institutions typically issue these loans to qualifying veterans, military members, and individuals whose spouses have served in the military. Nevertheless, if you're a veteran or active military service member, you can leverage the VA loan program to help you purchase a primary residence.
Since the government backs VA loans, lenders of these loans are generally willing to offer them to qualifying borrowers at favorable interest rates. Eligible applicants of these loans can also enjoy a wide range of benefits, including 100% home financing (zero down payment), no private mortgage insurance, and flexible lending guidelines.
With that being said, there are several requirements that you must satisfy to be eligible for this loan. In this article, we will look at VA loans' features, including their qualification requirements, loan limits, and funding fees. Hopefully, by the end of this post, you will have enough knowledge to make an informed decision about this loan. So, without much ado, let's dive right in.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Broward County, Florida.
Overview of VA Loans
The VA loan is a zero-down mortgage product for veterans, active military personnel, and qualifying military spouses. As highlighted, VA loans are offered by approved lenders such as mortgage companies or banks and insured by the United States Department of Veterans Affairs (VA).
The United States government established the VA home loan in 1944 to assist returning military service personnel in purchasing houses without requiring a down payment or good credit. Over 25 million VA loans have been issued under this historical program, assisting veterans, active service military members, and their families in affording homes or refinancing existing ones.
Types Of VA Loans
Several home financing options are offered to qualifying borrowers through the VA program. These are:
VA Purchase Loan
VA Purchase Loans are zero down payment mortgages that veterans and military service members can use to buy new or existing homes. Veterans can also use VA Purchase Loans to purchase single-family homes, condos, and manufactured homes and fund new construction.
VA IRRRL
The VA Interest Rate Reduction Refinance Loan (IRRRL) is one of two refinance choices available under the VA loan program and a popular refinance option for many Veteran homeowners.
These loans are desirable for their simplicity, low-cost refinancing options, and flexible lending guidelines. These loans often don't require credit underwriting, appraisals, or income verification.
VA Cash-Out Refinance
With the VA Cash-Out Refinance, eligible homeowners can refinance their mortgage and withdraw cash from the home equity; as a general rule qualifying homeowners are allowed to refinance up to 90% of their total home value. Veterans with or without outstanding VA debts are eligible for these loans.
It is worth noting that different lenders may have varying loan-to-value requirements and lending policies. Since these loans don't require homeowners to take out cash, Veterans with other mortgages can use this option as a straightforward rate-and-term refinance option.
VA Energy Efficient Mortgage
Veterans can use this VA program to obtain extra credit to fund home energy efficiency upgrades as either a purchase or a refinancing. Qualifying Veterans can borrow up to $6,000 to help pay for home upgrades such as heat pumps, solar heating and cooling systems, and storm and thermal windows. That said, homeowners can't use this finance option to buy home appliances, window air conditioning units, and any other non-permanent additions to their homes.
VA Loan Eligibility Requirements
To be approved for a VA loan, there are several minimum requirements that you need to satisfy. These include:
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You must be an active military member or a veteran who was honorably discharged
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You must have completed at least 90 days of active duty service
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You must have served at least 90 consecutive active days during wartime or at least 181 consecutive days of active service during peacetime
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Alternatively, you must have served in the National Guard or Selective Reserve for more than six years
- Or, you must be the spouse of a military service member who died in the line of duty or due to a service-related disability
To secure a VA loan, you'll need to provide your lender with a Certificate of Eligibility (COE). You can apply for a VA loan Certificate of Eligibility online through your eBenefits portal or directly through your lender
Depending on your situation, you will need to supply various details while applying. Veterans must submit a DD Form 214, and military members on active duty must sign a statement of service. Some of the details that should be provided in the statement of service include:
- Full name
- Date of Birth
- Social Security Number
- The date you commenced duty
- Any lost time (time not served)
- Name of the command providing the information
It is worth noting that your lender may require additional information if you're applying as a member of the National Guard or Reserve or the surviving spouse of a military member.
Other Requirements
In addition to the aforementioned minimum requirements, there are various other eligibility requirements that you must meet to be approved for a VA loan. These include:
Property Requirements
As mentioned, VA loans can be used to purchase various types of homes, including single-family homes, condos, manufactured homes, and multi-unit properties. You can't use a VA loan to buy a vacation home or a commercial property. More than that, you must demonstrate an intention to use the home as your primary residence.
Credit Requirement
While VA lenders typically don't pay much attention to a borrower's credit history, having a good credit score (620 or more) is still recommended when applying for the loan. If your credit score exceeds 620, you might have difficulty getting approval from specific lenders.
Income Requirement
When evaluating applications for the VA Loan Program, lenders typically look at the borrowers' income to determine whether they are likely to repay the loan. Your lenders will also be interested in your debt-to-income (DTI) ratio to ensure you don't have heavy debts you're servicing when seeking the loan. In general, VA lenders prefer to lend to applicants with a DTI ratio not greater than 41%. However, you can still qualify for the loan even if you have a higher DTI if you have enough residual income.
Loan Limit
VA loans typically do not impose any loan limits on qualifying veterans with a full VA loan entitlement. However, specific lenders will impose loan limits on borrowers with less than their full entitlement. This is common with applicants who have one or more active VA loans or have lost a previous loan due to property foreclosure.
Reserve Funds
Before allowing you to close on your loan, most VA lenders require that you have enough cash reserves, typically two to three months' worth of mortgage payments.
VA Loan Funding Fee
Like other government mortgage programs, the VA loan carries a funding fee payable to the Department of Veterans Affairs. This fee is meant to offset the costs of the VA's operations to ensure that future Veterans and active military personnel benefit from this program without adding an extra burden to taxpayers.
The VA funding fee typically varies based on a borrower's specific circumstances. For instance, if you're purchasing a home for the first time through the VA program, you will be required to pay a fee equivalent to 2.3% of the property's purchase price whereas, for subsequent use of your VA benefits, you will need to pay a fee of 3.6%. The fee for VA IRRRL loans is capped at 0.5% regardless of how many times you've used the benefit.
You are not required to pay the fee upfront; instead, you can have it rolled into the overall loan amount. In some circumstances, the VA exempts specific borrowers from paying the funding fee. This is often the case for Veterans who are receiving compensation for service-related disabilities and Surviving Spouses of military service members who qualify for the VA program.
Benefits Of VA Loans
With numerous mortgage products in the market, you're probably wondering why you should opt for a VA loan to fund your home purchase. Well, there are, in fact, several unique benefits that VA loans offer to qualified homebuyers. These include:
100% Home Financing
When it comes to most conventional loans in the market, borrowers are typically required to make a down payment which can range between 3% and 20% depending on the type of loan. However, this is not the case with VA loans. VA loans require no down payment, so that you can benefit from 100% home financing with this option.
Flexible Lending Guidelines
Whereas most conventional loan programs set specific DTI ratios above which applicants are considered ineligible, the DTI requirements for VA loans are typically set by the lenders. This means you can still qualify and be approved for the loan even with a high debt load.
No Mortgage Insurance Payments
One remarkable feature that makes VA loans more attractive compared to other home financing options is the absence of mortgage insurance payments. As a general rule, private mortgage insurance is required for conventional loans with a down payment of less than 20%. By contrast, you don't need to pay any mortgage insurance for a VA loan which makes it a more affordable home financing option in the long run.
Low-Interest Rates
It is not uncommon for lenders to impose high-interest rates on borrowers of conventional loans to buffer themselves against the risk of a borrower defaulting. However, since the government guarantees VA loans, lenders are usually more than happy to offer these loans to borrowers at favorable interest rates.
Top 5 Things To Do in Broward County, Florida
Located southeast of Florida, Broward County is the second-most populous county in the Sunshine State and the 17th most populous in the entire country, with a population of 1.94 million residents according to the 2020 census. Its county seat is the city of Fort Lauderdale, which is renowned for its glistening white beaches.
Broward County is undoubtedly the place to be if you're down for an exhilarating outdoor adventure in the Sunshine State. Besides its world-famous beaches like the lovely Lauderdale-By-the-Sea Beach and Central Beach, Broward County has a ton of other exciting attractions that you need to experience.
Here are a few must-do activities and attractions when living in Broward County:
Take a Day Trip to Las Olas Boulevard
Las Olas Boulevard is the place to be if you want to get familiar with Fort Lauderdale's social scene. Numerous tourist attractions and activities are available, including shopping at over 100 stores and restaurants. Las Olas Boulevard is home to some of the best high-end boutiques, jewelry shops, and art galleries in Fort Lauderdale.
If you're looking to enjoy some good cuisines in Fort Lauderdale, you'll be pleased to know that Las Olas Boulevard offers many dining options. The street is lined with numerous cafés and restaurants, many of which have patios with ample sitting space. Grab yourself a prime seat and enjoy relaxing people-watching as you dine. You can also enjoy a beautiful candle-lit dinner after a long day's work while enjoying the sights and sounds of Fort Lauderdale's nightlife.
Relax and Unwind at Bonnet House Museum and Gardens
Bonnet House Museum and Gardens is a Fort Lauderdale landmark that offers visitors an eclectic mix of history, architecture, art, and ecology. The beautiful house erected in 1920 is home to numerous art collections, antiquities, and other personal memorabilia.
The 36-acre estate was previously the winter home of the Birch/Bartlett family before it was open to the public. The estate's grounds remain a virtual haven of coastal nature, tucked among the commercial growth of the Fort Lauderdale oceanfront.
The property serves as a barrier island habitat, with a beach, a maritime forest, dunes, and even a mangrove wetland. The estate's formal gardens include a desert garden, Orchid Display, and a hibiscus garden.
Visit the Museum of Discovery and Science
The Museum of Discovery and Science in Fort Lauderdale features many captivating programs and exhibitions to entertain the whole family. The Prehistoric Florida exhibit allows you to meet dinosaurs and examine actual fossils. You can explore modern-day ecosystems available in Florida, including one of the most extensive living coral reefs.
The Storm Center and the Wall of Wind investigate hurricanes and their effects on many parts of life. One of the most exciting activities offered here is the Everglades Airboat Adventure. You can also enjoy a wide range of nature films at the IMAX theater.
Other displays include the environmentally-conscious singing robot Harry the Heap, which educates visitors on the importance of recycling, and the Keller Science Theater, which features live shows and demonstrations.
Experience Modern Art at NSU Art Museum
Located in Fort Lauderdale's upmarket Las Olas district, The NSU Art Museum is a contemporary art museum home to more than 7,000 works of art. The museum also features notable exhibits focused on the work of female artists, multi-cultural artists as well as African and Latin American art.
Some renowned artists whose works are on display here include Cecily Brown, Kiki Smith, and Catherine Opie. The museum also hosts various educational programs and special events throughout the year.
Watch Butterflies at Butterfly Park
Butterfly World in Coconut Creek is famous for not only being the largest butterfly house in the US but also the largest worldwide. More than 20,000 butterflies in over 50 species live here, each as colorful as the last. If you're a nature lover, visiting Butterfly World is essential.
A Final Word
If you're a veteran or active military member looking to purchase a home in Broward County, Florida, applying for a VA loan can help you achieve your goal without saving for a down payment for years. Through this dedicated home financing program, you can enjoy access to zero down payment loans and benefit from low-interest rates and flexible lending terms from lenders. And the best part is you don't have to worry about private mortgage insurance as you won't be required to pay any.
(Mar 25, 2023)
