(Mar 25, 2023)
Most mortgage programs require you to put a pile of cash down, making it difficult to afford a home. However, once you qualify for a VA loan, it'll be possible to buy your dream home with no money down. VA loans partially support the US Department of Veterans Affairs, reducing the risk of lenders originating these loans.
Note that you still have to satisfy certain conditions to improve your chances of getting approved for the loan. And if you plan to finance a home in Orange County, FL, here's everything you should know.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Orange County, Florida.
What is VA Loan
Since its debut in the US mortgage market in 1944, the VA home loan has targeted service members and veterans looking to realize their homeownership dreams. It is a zero-down mortgage option offered by private lenders, including banks and mortgage companies, with the backing of the VA.
You won't need excellent credit or down payment savings to apply for this loan. With the lifetime benefits that VA loans offer, you get to occupy the home as long as you make the monthly loan payments. Lenders also allow you to use it when buying or refinancing a property of your choice.
Common Types of VA Loans
VA loans are split into four categories depending on the purpose they intend to serve. One of the most potent home financing options, they boast flexible requirements, unlike other loans. Your options for a VA loan may include the following:
VA Purchase Loan
As an eligible service member, veteran, or surviving, you can use a VA purchase loan to fund the purchase of existing or new homes. Your lender will institute the zero down payment incentive on loan and assure you of relaxed credit requirements; A VA purchase loan will be convenient for a multi-unit property, manufactured home, single-family home, or condominium purchase.
VA IRRRL
Refinancing a VA home loan with the VA Interest Rate Reduction Refinance Loan gives you a lower new rate. You get the full financial benefit of the loan since it has a cap on the time taken to recoup the loan fees and costs.
The VA IRRRL will only suit you if you have an existing VA loan. It's quite a simple, yet low-cost refinance option with minimum or no appraisal, credit underwriting, or income verification.
VA Cash-Out Refinance
Unlike the VA IRRRL, the cash-out refinance option allows you to take cash out during closing. It has no restrictions on where to use the money (be it a large purchase, a much-needed vacation, or home improvement).
The catch is that you can take this loan with or without an existing VA loan. However, loan-to-value and borrowing guidelines differ with the lender.
VA Energy Efficient Mortgage
The VA energy-efficient mortgage takes the pressure off energy-efficient improvements made on a property as part of a refinance or home purchase. It lets you enjoy an additional $6,000 to cater for expenses of qualified home improvements. These energy-efficient improvements include thermal/storm windows, solar heating/cooling systems, and heat pumps.
Who Qualifies for a VA Home Loan?
VA loans have various minimum service requirements established by the VA that you or your spouse must meet. As you begin the loan process, the lender will require you to present a valid COE (Certificate of Eligibility) and satisfy their income and credit requirements. Satisfying any of the following conditions may make you eligible:
- 90-day active wartime service
- 181-day active peacetime service
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At least a 6-year National Guard or Reserves service
- Be the surviving spouse of an eligible service member who lost their life while serving or due to a service-related disability.
For a veteran, your discharge type will largely determine your eligibility for the loan. You may qualify for the loan if your discharge is categorized as follows:
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Discharge for a reduction in force, hardship, or government convenience
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Service-related disability or medical condition discharge
- Early-out discharge when you had a 21-month service in a 2-year enlistment
Obtaining a Certificate of Eligibility (COE)
A COE is an official document used by lenders to verify if you meet the VA loan minimum service requirements. It confirms to lenders that you are eligible for the VA mortgage benefits.
If you are a veteran, your mortgage lender can obtain your COE using your date of birth and social security number. Other ways to obtain the document include applying through a VA-certified lender and filling a form online at the VA's eBenefits portal. Filling VA Form 26-1880 and submitting it to the VA can also help.
VA Lender Requirements
VA-approved mortgage lenders have a set of requirements that you need to satisfy. The requirements include a suitable credit score, acceptable debt levels, and enough reliable income to repay the loan.
The VA allows lenders to set minimum credit score requirements when approving your loan application. Though these limits vary with the lender, expect a 620 credit score limit when looking to finance a home with a VA home loan.
The VA improves borrowers chances of earning adequate income with the home program to cushion you in an emergency. Besides your credit score, the VA requires you to have enough income remaining each month once you settle all major expenses. The residual income needs to satisfactorily cover basic family needs, including food, medical care, and transportation.
Your debt-to-income ratio will come into play as you apply for a VA loan. The DTI ratio gives a holistic look at your ability to get pre-approved for the loan and purchase power.
VA Loan Application Process
VA loans follow a particular protocol before being disbursed to eligible veterans and active-duty service members. The process may take between 30 and 45 days and doesn't tie you to any particular lender as you inch toward home ownership. Expect the following procedures as you consider signing up for the loan:
Apply for a Certificate of Eligibility (COE)
Your lender will ask you for the COE to prove that you are eligible for the home loan benefit. You can apply for this document with your lender or obtain it online.
Review Your Current Finances
Like other home loans, VA loans can prove expensive if you don't carefully plan your finances. Lenders may lock you out of the mortgage program if you don't review your monthly budget, expenses, income, and credit profile to know your financial situation. In this case, it's essential to calculate the amount you wish to spend on the loan, including the closing costs.
Choose a Lender
One of the most daunting parts of applying for a VA loan is choosing a reliable VA-approved lender takes time. Your options include a credit union, private bank, or mortgage company. Since each lender offers different interest fees and rates, shopping around can get you a good VA loan to meet your homeownership goals.
You should also prepare to pay the lender fees, including the loan origination fee capped at 1 percent. Depending on the loan product, the lender may also require you to pay an additional fee. Seek clarification on these hidden costs and find out whether they are negotiable.
Hire a Real Estate Agent
A real estate agent familiar with VA mortgages can help you navigate the loan process and find a home within your budget. With recommendations from neighbors, friends, or relatives, schedule a meetup with agents who share your vision.
Please review all agreements before hiring the agent and understand their billing methods. The contract should also enshrine your obligations and rights as a buyer.
Go for House Hunting
With the expert help of a real estate agent, you can start looking at properties within your price range. Consider factors that appeal to you and your household members when comparing the options. Make an offer once the home satisfies your conditions and proceed to close the loan.
Do VA Mortgages Have Amount Limits?
A VA loan limit is the highest amount the VA will guarantee or pay to your mortgage lender when you default on the loan. Though the VA doesn't limit the loan amount, you can only borrow within your VA loan entitlement as specified by the lender.
As an eligible veteran, service member, or surviving spouse, a full VA loan entitlement allows you to take a zero-down loan as much as your lender can. Expect loan limits if you have less than your full VA entitlement due to losing your previous property to foreclosure or having several active VA loans. You have to satisfy any of the following conditions to enjoy the full VA entitlement:
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It's your first time getting the VA home loan benefit
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You repaid a previous VA mortgage in full or sold the home (the full VA entitlement will be restored)
- Repaid the loan in full after using your home loan benefit despite having a compromise claim and a foreclosure
Understanding the VA Funding Fee
As a one-time fee that you need to pay on a VA home loan, the VA Funding Fee allows the US Department of Veteran Affairs to lower the costs of VA loans for American taxpayers. The VA charges this fee since VA loans don't have a monthly mortgage insurance or down payment requirement.
You must pay a VA Funding Fee on a VA loan used to purchase, build, repair or improve a home. It is also charged on VA refinance mortgages. The only exceptions to paying this fee include:
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Be a recipient of VA compensation for a service-related disability
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Recipient of active-duty or retirement pay despite being eligible for VA compensation for a service-related disability
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Be a recipient of DIC (Dependency and Indemnity Compensation) as a surviving spouse of a veteran or service member who perished in service or due to a service-related disability
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An active-duty service member who is a Purple Heart recipient who provides proof of this benefit before or on the VA loan closing date
- A service member with a memorandum/proposed rating who proves before the VA loan closing date eligibility for compensation related to a pre-discharge claim
You can pay the VA Funding Fee during the closing, include it in your loan, and pay it along with the monthly loan payments. The amount to be paid depends on the type of VA loan and loan amount. Your down payment amount and first-time homebuyer status also affect this fee.
Perks of Getting a VA Loan
VA loans are unmatched by other mortgage options on the market thanks to their competitive rates, zero mortgage insurance requirement, and no down payment. You can count on them to realize your homeownership dreams. As you consider taking a VA loan, expect the following perks:
No Down Payment
VA loans are among the few government-guaranteed loans with zero down payment requirement. This advantage allows you to buy a home without saving for a lump-sum payment, provided you qualify. You can save money and build credit as you live in your dream home.
Relaxed Credit Requirements
Unlike conventional mortgages with strict credit requirements, VA loans have lenient credit score minimums. Your lender will use these minimums to evaluate your risk of default. Though the credit score cutoffs differ with the lender, they are usually lower than you expect on a conventional home loan.
No Private Mortgage Insurance
Instead of private mortgage insurance, the VA charges a VA Funding Fee to cushion lenders if you default on a loan. Mortgage insurance premiums tend to increase the loan costs over time and are required on mortgages with a 20 percent down payment requirement.
Unmatched Interest Rates
VA mortgages can help you save monthly and over the loan duration, thanks to their low fixed rates. Once approved, you enjoy a 30-year fixed rate of 0.5 to 1 percent on loan.
Lifetime Benefit
Once enrolled in the VA loan program, you can use the loan repeatedly without worrying about an expiration date. You also don't have to make total repayments on a VA loan to use your VA benefit again. And with a second-tier entitlement, you can take more than one mortgage simultaneously.
Things a Veteran Can Do in Orange County, Florida
In the Sunshine State's central part, Orange County offers plenty of parks, recreational facilities, and trails. It's a hub for fishing, horseback riding, hiking, bike riding, canoeing, and tent and RV camping. Here are five outdoor activities to consider in Orange County, Florida:
Take a Self-Guided Tour to Disney World Animal Kingdom
A self-guided tour through Disney's Animal Kingdom will take you through hauntingly beautiful sceneries that feature barking deers, exotic boars, giant anteaters, and wallabies. To witness exotic creatures, you can also enjoy a self-guided cruise through Discovery Island Trails and Gorilla Falls Exploration Trail.
Ride Through Gatorland
The 110-acre Gatorland features thousands of crocodiles and alligators with thrilling reptilian shows. It offers a unique yet natural alternative to big modern theme parks. You'll also find a gift shop, nature walk opportunities, petting zoo, bird rookery, and breeding marsh at the facility.
Take a Plunge at Aquatica
As one of Orlando's infamous water parks, Aquatica is a 59-acre park featuring plenty of high-adrenaline attractions. If you are not sliding through a transparent tube with swimming dolphins, you can take a ride at Ihu's Breakaway Falls. Other spots to explore at Aquatica include Tassie's Twisters, KareKare Curl, Omaka Rocka, and Ray Rush.
Go Water Skiing at Sammy Duvall's Watersports Center
If you are a fan of wake surfing, water skiing, tubing, and parasailing, Sammy Duvall's Watersports Center is the place to be. If you are a first-timer, there are instructors on board and watercraft rentals for entertaining and memorable experiences.
Enjoy Scenic Flights Courtesy of Orlando Heli-Tours
Thanks to their Robinson R66 helicopters, OrlandoHeli-Tours offers aerial views of world-famous attractions across Florida. The helicopter service guarantees high safety levels and air-conditioned flights.
Final Thoughts
VA loans can come in handy if you have served your country and want to own a home but meeting strict eligibility requirements is an issue. Thanks to their zero down payment and no mortgage insurance incentive, you enjoy reduced loan costs if you qualify. Good luck getting approved for this mortgage and realizing your homeownership dreams.
(Mar 25, 2023)
