A VA (Veterans Administration) guaranteed home loan is the preferred loan program for active, non-active, Reserve, National Guard, and retired military of the armed forces because there is no down payment needed and no private monthly mortgage insurance required. A VA home loan can be used to purchase a home or refinance an existing mortgage.
VA Does Not Offer Loans Directly and Does Not Guaranty You Will Qualify: VA does not actually lend money to you directly. They offer a guaranty to a lender that should you default on the loan, they will pay the lender a percentage of the loan balance. The word GUARANTY does not actually guaranty that you as a veteran will qualify for a VA home loan.
IRRRL Facts (Interest Rate Reduction Refinance Loan)
- No appraisal or credit underwriting package is required when applying for an IRRRL.
- An IRRRL may be done with “no money out of pocket” by including all costs in the new loan or by making the new loan at an interest rate high enough to enable the lender to pay the costs.
- When refinancing from an existing VA ARM loan to a fixed rate loan, the interest rate may increase.
- No lender is required to give you an IRRRL, however, any VA lender of your choosing may process your application for an IRRRL.
- Veterans are strongly urged to contact several lenders because terms may vary.
- You may NOT receive any cash from the loan proceeds.
An IRRRL can only be made to refinance a property on which you have already used your VA loan eligibility. It must be a VA to VA refinance, and it will reuse the entitlement you originally used. Additionally:
- A Certificate of Eligibility (COE) is not required. If you have your Certificate of Eligibility, take it to the lender to show the prior use of your entitlement.
- No loan other than the existing VA loan may be paid from the proceeds of an IRRRL. If you have a second mortgage, the holder must agree to subordinate that lien so that your new VA loan will be a first mortgage.
- You may have used your entitlement by obtaining a VA loan when you bought your house, or by substituting your eligibility for that of the seller, if you assumed the loan.
- The occupancy requirement for an IRRRL is different from other VA loans. For an IRRRL you need only certify that you previously occupied the home.
Primary Benefits of a VA Home Purchase Loan
- 100% financing
- No monthly private mortgage insurance is required
- There is a limitation on buyers closing costs
- The loan is assumable, subject to VA approval of the assumer’s credit
- 30 year fixed loan
- Seller can pay up to 4% of the veterans closing costs and even pay down your debt to help lower your debt-to-income ratio
- Interest rates are similar to FHA rates
- You don’t need perfect credit
Eligibility for a VA Home Loan
Veterans with active duty service, that was not dishonorable, during World War II and later periods, are eligible for VA loan benefits. World War II (September 16, 1940 to July 25, 1947), Korean conflict (June 27, 1950 to January 31, 1955), and Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90 days of service.
Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 days of active service. Veterans of enlisted service which began after September 7, 1980, or officers with service beginning after October 16,1981, must in most cases have served at least 2 years.
VA Documentation Needed
The three specific pieces of documentation a lender will need to determine your eligibility is a DD214 for discharged veterans, a statement of service for active military personnel, and a certificate of eligibility (COE) to determine you have VA entitlement.
Because each lender has different qualifying guidelines, a good next step is to contact your lender to find out if you meet their qualifying criteria such as minimum FICO/credit scores, debt-to-income (DTI) ratios, and find out what your county’s maximum loan amount is. Your lender can help you attain your certificate of eligibility on your behalf.
Frequently Asked Questions
Q: Are the children of a living or deceased veteran eligible for the home loan benefit?
No, the children of an eligible veteran are not eligible for the home loan benefit.
Q: How can I obtain proof of military service?
Standard Form 180, Request Pertaining to Military Records, is used to apply for proof of military service regardless of whether you served on regular active duty or in the selected reserves. This request form is NOT processed by VA. Rather, Standard Form 180 is completed and mailed to the appropriate custodian of military service records. Instructions are provided on the reverse of the form to assist in determining the correct forwarding address.
Q: Is the surviving spouse of a deceased veteran eligible for the home loan benefit?
The unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability is eligible for the home loan benefit.