(Mar 25, 2023)
VA loans offer a wide range of financial benefits you can't find in other home loans. They come with reasonable interest rates and don't require mortgage insurance or a down payment. If you are looking to save lots of cash on loan costs, you may want to consider them.
However, specific eligibility requirements apply when taking a VA loan. And if you want to use the mortgage to purchase a property in Gadsden County, Florida, here's what you should know:
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Gadsden County, Florida.
What is a VA Loan?
The first time service members and veterans have considered for government-sponsored benefits were in 1994. Back then, Congress had enacted the Servicemen's Readjustment Act (later referred to as G.I Bill). The bill sought to acknowledge the efforts of returning soldiers.
Today, the VA home loan program empowers veterans and service members to access home loans that were initially out of their reach. With over 20 million disbursed, the Department of Veterans Affairs continues to back the loan program.
VA loans are highly appealing since they allow you to finance a home with no money down and lower closing costs. Even more, their eligibility requirements are pretty relaxed compared to conventional home loans.
Different Types of VA Loans
If it's your first time considering a VA loan, it's essential to know how to distinguish the different types of VA loans. You only need to apply for a VA mortgage suited for a particular use case. Here are four options to consider:
VA Purchase Loan
As its name suggests, a VA purchase loan can help you realize your homeownership goals. The purchase loan can finance a new construction home, a multi-unit property, manufactured home, condo, or single-family home. You can use the mortgage to fully pay for a new or an existing home without a down payment.
VA IRRRL
Refinancing a VA home loan is easy with the Interest Rate Reduction Refinance Loan (IRRRL). The IRRRL can help you finance your current VA loan at a lower rate as one of the two refinance options under the VA loan program. The catch is that it doesn't require income verification, appraisal, or credit underwriting.
VA Cash-Out Refinance
The VA Cash-Out Refinance can help you refinance your existing VA loan by taking cash from your home's equity. It can allow you to refinance nearly 90 percent of your property's market value. However, certain loan-to-value and lending guidelines, which vary with the lender, apply.
VA Energy Efficient Mortgage
If you are enthusiastic about carrying out energy-efficient improvements on a property financed by a VA loan, the VA energy-efficient mortgage can come in handy. With this type of mortgage, you may get a maximum of $6,000 that will go towards qualified improvements. These tune-ups include installing cooling systems, solar heating appliances, heat pumps, and thermal/storm windows.
Do You Qualify for a VA Home Loan?
Meeting the minimum service requirements set by the VA can improve your chances of getting approved for a VA loan. You should also hold a Certificate of Eligibility (COE) and meet income and credit requirements set by the lender. As a service member, you need to satisfy the following conditions to be eligible:
- Served for at least 181 days during peacetime
- Served over 90 consecutive days at a time of war
- Served for six years in the US Reserves or National Guard
As a surviving spouse, you may only be considered for a VA loan if your spouse was a service member who passed on in the line of duty or due to a service-related disability. For veterans, qualifying for the mortgage is possible if you have a discharge categorized as follows:
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Discharged for hardship, at government convenience or force reduction
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Discharged for a disability connected to your service or medical condition
- Discharged for an early out, having served not less than 21 months of your 2-year enlistment
VA Loan Eligibility for Surviving Spouses
VA-approved lenders require surviving spouses to obtain a COE to confirm eligibility and maximize VA loan benefits. As a surviving spouse, you can obtain a COE depending on whether you receive Dependency and Indemnity Compensation.
If you are currently in the Dependency and Indemnity Compensation program, you must correctly fill out VA Form 26-1817. You also need to get a copy of DD Form 214, among other veteran separation documents.
On the other hand, if you aren't a recipient of Dependency and Indemnity Compensation benefits, you have to fill out VA Form 21P-534EZ. You should submit it to your state's VA Pension Management Center. A copy of the veteran's death certificate and your marriage license will also be needed.
Credit and Income Requirements for VA Loans
VA-approved lenders set credit and income requirements to filter out borrowers based on their ability to repay the loan. While the credit score cutoffs vary by lender, you should have a minimum FICO score of 620 to obtain VA home financing.
Besides satisfying the credit score minimums, you must have a certain income remaining once all significant expenses are subtracted. The remaining income (residual income) must be adequate to cater to basic family needs, including food, transport, and quality medical care. The VA enforces residual income requirements to allow you to have some finances left in an emergency.
Getting Started with the VA Loan Application Process
One good thing about VA loans is that you don't need to know if you are eligible to begin the loan process. Provided you are a service member, veteran, or surviving spouse; you get to know whether you qualify at the loan pre-approval stage.
Though the loan process lasts less than 45 days, the timeline may depend on your situation. Even more, you have the freedom to switch lenders when applying for a mortgage.
As you start the loan process, you'll have first to contact a VA-approved lender. The mortgage lender will then verify your eligibility by asking you to submit a Certificate of Eligibility.
If you meet the requirements highlighted in the COE, you can finalize the loan application by providing all relevant paperwork to the lender. These documents may include tax returns and W-2s, among other documents that capture your financial information.
Understanding VA Loan Limits
VA loan limits in most US counties grew from $578,250 back in 2021 to $647,200 in 2022. The limits also skyrocketed in counties with a high cost of living, standing at $970,800 for a typical single-family home.
Since these limits don't usually represent a maximum loan amount or a cap on the loan, you can qualify for a more significant loan amount with your full VA entitlement. A VA loan entitlement, in particular, is the maximum amount lenders are willing to give you without requiring a down payment. If you defaulted on a previous VA home loan or have one or more pending VA loans, you will have a reduced VA loan entitlement, which will lower your loan amount.
Can VA Loans be Used More Than Once?
In this context, the general rule of thumb is that there's no cap on the number of times you can use a VA loan in your lifetime. However, you have to be eligible and qualify with a VA-approved lender.
What the VA Funding Fee Entails
The VA Funding Fee is among the fees that usually form part of the total loan costs of a VA mortgage. As a one-time fee paid to the VA, it helps support veteran-centric programs, including the VA home loan program.
You may choose to pay this fee upfront or roll it into your mortgage. If you choose to include it in your mortgage, expect it to be included in the monthly loan payments. As a result, you get to lower the fees needed during closing.
How the VA Funding Fee is Calculated
The fee is expressed as a percent of the total VA loan amount. Factors such as disability status, first-time homebuyer status, and down payment size also affect how the fee is calculated.
If it's your first-time enrolling into the VA home loan program, the fee is capped at 2.3 percent of the loan amount. The VA funding fee is also 3.6 percent of the loan amount for subsequent VA loans. One way to lower your VA funding fee rate is by making a 5 percent down payment on the loan.
Exemptions
If you are a veteran awarded a disability rating greater than 10 percent, you are exempt from paying this fee. The same applies to surviving spouses of veterans who perished while on duty and Purple Heart recipients. Either way, inquire whether this exemption applies to your case from your lender.
Benefits That VA Loans Offer
VA loans are undeniably the only zero-down mortgage with no mortgage insurance, competitive interest rates, lifetime benefits, closing cost limits, and no prepayment penalties. Here's a deeper dive into these advantages:
No Down Payment
Most eligible borrowers are drawn to VA loans for their zero down payment requirement. Since you won't be making a down payment, you can save more in your journey of becoming a homeowner.
Relaxed Credit Requirements
Lenders set various credit requirements to evaluate your risk of default. The credit score cutouts for VA home loans are relatively lower than what is required for conventional mortgages. Your loan can also be forgiven after going through bankruptcy, short sale, or foreclosure.
Competitive Interest Rates
With one of the lowest average fixed interest rates on the mortgage market, the VA home loan program can help you save money. You get to pay between 0.5 and 1 percent of the loan amount as the interest rate throughout your loan. These rates stand even when you don't make a down payment.
No Private Mortgage Insurance
Mortgage insurance premiums tend to be a burden on your loan payments. Though some lenders use them to protect themselves in case of a default, they can be challenging for many service members and veterans.
The good thing with a VA home loan is that you won't have to pay these premiums. This is even though mortgage insurance is a requirement for most zero-down mortgages.
Lifetime Benefit
Rather than offering a one-time benefit, the VA mortgage program offers a lifetime benefit to eligible and qualified borrowers. This means that you can take a VA loan over and over again. You can also apply for the loan without paying back an existing one, provided you still have some VA entitlement.
No Prepayment Penalties
Most loans usually involve a prepayment penalty if you pay them off before they mature. The penalty helps lenders recoup some of the interest payments on the loan.
With a VA home loan, you won't have to worry about prepayment penalties if you pay it off before maturity. You are even free to shop for houses or consider refinancing options without incurring a penalty.
As one of the safest mortgages on the market, the VA loan program can help you avoid foreclosure. This is because the VA continues to advocate for veterans who can no longer afford monthly payments, ensuring they stay in homes financed with a VA loan.
Five Fun Outdoor Activities in Gadsden County, Florida Suited for Veterans
Located in the panhandle of Florida, Gadsden County is full of recreational activities suited for veterans. From fishing and camping to paddling and hunting, there's something for everyone.
If you plan to visit Gadsden County, Florida, or already live there, here are five of the fun outdoor activities you can consider:
RVing at The Chattahoochee RV Campground & Fishing Resort
The Chattahoochee RV Campground and Fishing Resort is an authentic outdoor escape spot in Tallahassee. It boasts miles of beautiful landscapes, plenty of attractions, and pleasurable local activities.
If you are into RVing, you can engage in different activities at the campground. Your options may include scenic viewing, horseback riding, golfing, wildlife viewing, biking, hiking, kayaking, and canoeing. Onsite amenities at the campground include a boat ramp, laundry facilities, electricity, sewer line, and water hookup.
Wildlife Viewing at Lake Talquin State Forest
With over 492 acres of nature and hiking trails, Lake Talquin State Forest offers lots of recreational opportunities. You can access its vast tracts of land through established trails, roadbeds, and existing roads.
Lake Talquin State Forest is a great wildlife viewing spot with wildflowers and birds awaiting visitors. You can also register for the Living Forest Trail, an audio-enhanced learning experience that will educate you about the forest's biodiversity.
Paddling at the Apalachicola River Blueway
Stretching over 107 miles from the Jim Woodruff Dam, the Apalachicola River features magnificent sceneries, including bluffs, coves, and sloughs to explore. It also comprises numerous twisting creeks growing through the surrounding forest.
You can experience the area and the river's natural habitat through canoes and kayaks. You can paddle through the Apalachicola River Blueway, specifically established and mapped for safe paddling.
Hunting at the Joe Budd Wildlife Management Area
The Joe Budd Wildlife Management Area is a great place for deer hunting. Considered one of the best deer hunting grounds in Florida, the area features plenty of topography and habitats stretching over 11,000 acres.
Hiking at Angus Gholson Jr. Nature Park
Hiking at the 100-acre Angus Gholson Jr. Nature Park is a great way to spend your time outdoors when living in Gadsden County, FL. The nature park boasts several trails and a picnic facility to improve your hiking experiences. There are also plenty of high-quality slope forests featuring many rare plants and springs for your exploration.
As one of the three trails that make up the Chattahoochee Nature Trail System, the Angus Gholson Nature Trail is surrounded by ravines and bluffs. It is also an excellent place for short hikes since it is less than half a mile long.
The Bottom Line
By backing VA loans, the Department of Veteran Affairs enables veterans, service members, and eligible surviving spouses to become homeowners. The VA also offers other home loan programs convenient for buying, building, repairing, retaining, or adapting a home for personal occupancy. Good luck taking advantage of these loans in your journey of becoming a homeowner.
(Mar 25, 2023)
