If you have served in the military or the National Guard, you are probably eligible for a loan guaranty from the US Department of Veterans Affairs.
They are low risk for lenders and a fantastic benefit for veterans. Over 631,000 people were approved in 2015.The goal of the loan guaranty program is to ease the transition of veterans into civilian life while also spurring the US economy – it was part of the 1944 GI Bill of Rights.
Members of the military are eligible for a VA loan guaranty after they have actively served for 90 days during wartime or 18- days during peace time. Member of the National Guard and reservists are eligible after six years – or if they have been called for active service during wartime, 90 days.
If your spouse died during active duty or due to a service-related disability, you are also eligible.
You must also meet loan guidelines for credit and income eligibility. Typically, with a VA loan a co-borrower’s income can be considered only if the borrowers are married, two veterans who aren’t married can get a VA loan together. A veteran who wants to buy with a non-spouse, non-veteran co-borrower must make a down payment of at least 12.5 percent.
You can finance 100 percent of your home purchase. There is no down payment requirement and you don’t have to pay mortgage insurance. The interest rates are comparable to the best conventional loan rates.
There’s no rate adjustment for a lower credit score and the funding fee for the program pays for a government guarantee to protect lenders in case of a default.
Funding fees range from 1.25%-2.4%
You can use your eligibility multiple times. You can even have more than one VA loan at a time depending on how much of your eligibility you used the first time. However, if you do take a second loan your funding fee will be higher – as high as 3.3%.
Where Can You Use a VA Loan?
The VA loan limit is conform to the limits for conventional financing established by the Federal Housing Finance Agency. The limit is $417,000 in most areas and up to $625,000 in high cost housing markets.
You can buy a house for up to $625,000 in the DC area without a down payment. If you want a jumbo VA loan to buy a more expensive property you just have to make a down payment of 25 percent of the difference between the home price and the home limit.
Here's how to apply:
Obtain a certificate of eligibility for a VA loan through the VA office or a lender. Then find a lender experienced with VA loans. You can work with a lender to decide how to pay the funding fee – which varies depending on your service and the amount of the down payment. If you are disabled, you may be able to have the fee waived.
Once you’re approved, you can being your house hunt and make an offer. Loans for veterans require a VA appraisal and a VA home inspection to make sure the property is priced appropriately and is habitable.