(May 30, 2023)
And what's more, a VA loan can make your home-buying process more accessible, thanks to the zero down payment clause. Read more about VA loans, eligibility criteria, and how to apply for your first VA mortgage.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Lake County, Florida.
Understanding VA loans
A VA loan is a government-backed lending program under the Department of Veteran Affairs. The mortgage is available to military service members on active duty, veterans, and their eligible spouses. Although the US government guarantees the lending program, VA loans are issued by private lending institutions such as banks and mortgage companies.
The VA Lending program began in 1944 as a government initiative to help service members own homes without having a down payment. Since then, more than 25 million veterans and service members have benefited from the program.
Types of VA Loans
The Department of Veteran Affairs offers attractive loan products under the VA Program. Qualified members can apply for one or more loan types depending on their home buying needs. Below are common types of VA Loans:
VA Purchase Loan
The loan enables service members and veterans to purchase homes without a down payment. Qualified members can buy single-family homes, multi-unit homes, condominiums, or even construct a new home using the loan.
Interest Rate Reduction Refinance Loans (IRRRL)
The IRRRL, also known as a VA Streamline, is one of the most preferred mortgage products of the Department of Veteran Affairs. The loan has a simplified underwriting process that sometimes doesn't require income verification to obtain.
IRRL is a refinancing package for service members and veterans who have an existing VA mortgage and wish to refinance at a lower rate.
Cash-Out Refinance
The loan is available to veterans and service members with or without current loans. Like IRRRL loans, the cash-out lending program allows refinancing a conventional mortgage or VA loan up to 90% of the total home value. In addition, the loan allows qualified applicants to draw cash from their home equity.
Although you can use the loan to refinance other loans, lending guidelines may vary from one lender to another.
Energy-Efficient Mortgage
Are you a veteran and would wish to improve your indoor energy efficiency? The Veteran Affairs Department offers convenient lending programs tailor-made for energy efficiency. Using this loan, you can finance efficient improvements like thermal windows, solar heaters, and indoor cooling systems. However, you can't use the loan to purchase home appliances or install non-permanent energy modifications.
VA Renovation Loan
Sometimes, you may wish to revamp your existing home to enhance its aesthetic appeal. A VA Rehab and Renovation loan enable you to finance essential home improvements on existing residential property.
Who Is Eligible for a VA Loan?
Not everyone serving in the US military is eligible for a VA loan. Besides tenure of service, the government has additional benchmarks determining eligibility for the loan. Therefore, before applying, ensure you meet one or all of the following minimum requirements:
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At least 90 consecutive days of service during wartime.
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At least 180 days of active service during peacetime.
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At least 6 years of active service in the Reserves or National Guard.
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Cumulative 90 days of service under Titles 10 or 32.
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If you've served under Title 32, at least 30 days of your service must be consecutive.
- A spouse of a former service member who passed away in the line of duty or sustained a service-related disability.
Other Eligibility Requirements
A valid proof of service in the military is just one of the many eligibility requirements for a VA mortgage. In addition, lenders may verify your income and credit score and ascertain your property condition before approving your application.
Other eligibility requirements include;
Property Occupancy Requirements
Government-backed mortgages have a stringent occupancy requirement for the type of property you may buy.
Generally, the property you wish to buy using a VA Loan must be your primary residence within 60 days of acquiring the home. Thus, you may not use the loan to purchase a vacation home, secondary residence, or investment property.
Credit Score
The Veteran Affairs Department doesn't cap a credit score for potential borrowers. As a result, lenders apply different limits for the credit score.
Debt-to-Income Ratio (DTI)
Your DTI shows how much of your gross monthly income you use to pay your debts. Although the VA Department doesn't have a limit for DTI, some lenders might consider your DTI in determining your ability to repay the loan. A DTI not exceeding 41% is generally safer regardless of the lending institution.
The Home Buying and VA Application Process
Like any mortgage, acquiring a VA loan involves a series of steps. If unsure, you may talk to a trusted lender who understands the VA loan process.
Below are essential steps to follow to get your loan:
Obtain Pre-approval From a Lender
The home buying process begins with getting pre-approved for a VA Mortgage. A pre-approval letter assures property dealers and lenders that you have the financial capability to purchase a home of your choice. Therefore, if you have a negative loan history rating, it pays off to visit your preferred lender for further negotiation.
Obtain a Certificate of Eligibility
A VA-approved lender will issue a certificate of eligibility upon verification of your service eligibility for the loan. To obtain a certificate of eligibility, you may need to demonstrate your proof of service in the military by submitting several documents.
For instance, if you're in active service, you'll need a statement of service signed by your unit commander or personnel officer. Alternatively, veterans can submit DD Form 214 verifying their lawful discharge from the service.
You can also obtain a certificate of eligibility by making an online request to the Department of Veteran Affairs.
Locate Your Preferred Property
You should identify and locate the property you wish to buy within a preferred neighborhood. An approved real estate agent can help you find a home that matches your size, location, and budget preference.
Make an Offer
Once you identify a suitable property you wish to purchase, it is time to place an offer to the property owner. A real estate agent comes in handy at this stage to help you weigh your options and place a reasonable offer.
If your offer is too low, the seller may put you on hold with other bidders while waiting for a higher offer. On the other hand, if your offer is too high, you risk paying more than the market value of your dream house.
While placing an offer, ensure you include a deposit to assure the seller you're interested in buying the property. Moreover, your offer should include a pre-approval letter from the lender.
VA Appraisal
Once the seller accepts your offer, you should inform the lender of the positive development. The lender will initiate a VA appraisal process involving verification of your credit score and income-to-debt ratio. In addition, the lender will assign an approved inspector to ascertain the property's condition.
If the home passes VA appraisal, meets the property requirements, and the lender verifies you qualify for the loan, an underwriter will issue a stamp of approval. You'll then receive an assigned date and venue to sign the paperwork required to possess the property having fulfilled all the requirements. However, if your dream property has structural flaws, you may need to repair it before approval.
Loan Closing
Loan closing is the stage where the property legally changes ownership from the seller to the buyer. At closing, you'll sign the required documents affirming you understand and accept all the loan terms. Before then, you should have valid homeowners' insurance and settle any pending closing costs.
VA Loan Limits
The VA loan limit is the maximum amount your lender can extend to you without a down payment. Since 2020, VA loans have no borrowing limits for veterans and service members entitled to full VA benefits. However, loan limits may apply if you have an existing VA mortgage or defaulted on a previous mortgage.
How Many Times Can You Use a VA Loan?
A VA Loan is not a one-time lending deal; hence you can reuse your loan benefit to get another primary residential property. If you have an existing VA mortgage, you can apply for and get another loan if;
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You sell the current property and settle the outstanding loan balance.
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You sell the current property, and an eligible veteran buyer assumes your outstanding loan balance.
- You repay your loan in full and retain the property.
Benefits of VA Mortgage Lending
Unlike conventional lending, VA-backed mortgages offer numerous benefits, making them an all-time favorite for many veterans. Below are the significant advantages:
Zero Down Payment
VA Loans are among the few lending programs that require no down payment. You can own a home without the 20% upfront cost required in conventional mortgages. As a result, you can save extra cash for home furnishings and other essential projects.
Zero Primary Mortgage Insurance (PMI)
In conventional mortgages, financiers may require you to buy mortgage insurance if your upfront payment is less than 20% of the total home value. However, the Veteran Affairs Department doesn't require you to buy PMI when applying for a VA Loan.
Competitive Interest Rates
Since the loan has a government guarantee, it carries a lower risk of financial loss to the lender. As a result, you'll enjoy lower, fixed interest rates in the mortgage market.
Zero Equity When Refinancing
You don't need substantial home equity if you wish to refinance an existing VA Loan into a lower rate. For instance, a VA Streamline loan allows you to refinance up to 90% of the total home value without equity.
Lower Closing Costs
The VA Department limits lenders to charge up to 1% of the total loan to cater to closing costs. As a result, the loan has lower closing costs than conventional lending programs.
Exception From Funding Costs
Disabled veterans who qualify for VA borrowing are exempt from paying funding fees to close the loan. Therefore, disabled veterans or surviving spouses can save substantial costs, thanks to the government exemption.
Top 5 Recreational Activities for Veterans in Lake County
Lake County is a popular tourist destination in Central Florida. It lies strategically at the center of the State with two major intersecting highways and over 1000 named lakes. Moreover, its proximity to Walt Disney World makes it a hub of activities throughout the year.
Lake County has bountiful activities to explore, including sparkling waterfronts, a serene environment, cultural festivals, and unique shops. Whether you're a resident or a first-time visitor, you'll find something to compliment your tour of the county.
Here are the top 5 activities to add to your bucket list when you visit Lake County.
Fishing at Harris Chain of Lakes
The Harris Chain of Lakes is a suitable spot to spend your summer in Lake County. The lake has a superb setting ideal for boat cruising, paddling, and wakeboarding.
If you love fishing, you'll meet professional anglers from around the world who come for bass fishing. Angling on the Harris Chain of Lakes is also an incredible opportunity to hone your fishing skills and try other fishing gear.
Watching Wildlife at Leesburg's PEAR Park
The Palatlakaha Environmental and Agricultural Reserve (PEAR) Park in Leesburg is an excellent site for local outdoor activities. At the 314-acre park, you can view wildlife and explore Central Florida's pristine nature.
The park is home to more than 180 bird species, alligators, tortoises, and unique butterflies, among other animals. The park also features unique nature trails, a community garden, and a pavilion.
Besides watching wildlife, you'll get a rare opportunity to stroll along the vineyards, have a lovely view of the Palatlakaha River, and relax with your family.
Boat Riding on Lake Dora
Lake Dora is the home of Florida's only known inland freshwater lighthouse. However, a ride on the lake allows you to explore not just the lighthouse but other outdoor adventures.
For instance, you can board a catboat and sprint across the calm waters. You can also travel the entire length of the lake through the Dora Canal to the nearby Lake Eustis. Watch aquatic animals like water birds, alligators, turtles, and snakes during your boat ride.
Biking Along the South Lake Trail System
The South Lake Trail attracts cyclists worldwide, thanks to its scenic nature trails and lovely views. Biking on the course allows you to view the local community and ride on Central Florida's hilly terrain.
A connection from the South Lake to the nearby West Orange Trail lands you into the eye-catching Winter Garden for a summer vacation.
Shopping and Dining at the Downtown Lake County
If you love shopping, a visit to Lake County will never be complete without visiting the downtown. The Downtowns streets of Tavares, Clermont, Mount Dora, and Leesburg offer a convenient atmosphere for local shopping.
For instance, you can get niceties and gifts for your loved ones from the numerous antique shops and try mouthwatering cuisines like barbecue, wine, baked items, and beverages from local restaurants.
VA Loans - Final Thoughts
Having a place to call home after your military service is a significant investment you should consider. However, the challenge comes if you have a lower credit score, high DTI, and no substantial money to put down upfront. You'll need to reduce your debt bill and improve your credit score to negotiate better loan terms.
Despite the complexities in mortgage lending, VA loans now offer flexible terms for veterans and active service members. You can have your dream home in any VA-approved neighborhood without a down payment. Additionally, the government's guarantee on VA loans means eligible members can enjoy lower interest rates, closing costs, and zero equity during loan refinancing.
If you're a veteran or serving military member in Lake County, do not hesitate to contact a VA-approved lender to check if you qualify.
(May 30, 2023)
