Since Wednesday was Veteran's Day, I thought it was a good week to remind people about VA home loans.
If you have prior military service or are currently serving in the military, you may qualify for a VA mortgage. VA loans are usually 30 year fixed rate mortgages. Sometimes you can find a 3 yr adjustable rate mortgage, but most people just do a 30 yr fixed rate mortgage. The rates are about 5% right now – they are usually about where a FHA loan is, sometimes just a little higher.
Qualifying for a VA loan is similar to qualifying for any other mortgage. You need to have good credit, usually a minimum credit score of 620 now. You must have documentable income, if you are active duty, you need to show that your military income will continue for at least 12 months. If you have a VA retirement or if you are in the reserves, you can use that income.
VA loans are zero down and the seller can pay your closing costs. This is one of a couple true zero down loans that are left! VA loans require a VA funding fee and that is determined by your down payment and whether you are active duty or reserve plus if you have used your VA eligibilty in the past. A first time user of a VA loan with active duty history has a VA funding fee of 2.15% of the mortgage amount, this is added to the mortgage, you do not need to bring this to closing. If you are using your VA eligibility for the second time and you are still going zero down, your VA funding fee is 3.3%. VA loans do not require monthly mortgage insurance, which is a big plus!
The maximum VA loan is $417,000 with full eligibility. The typical qualifying ratios are 41% although there are times where you can go over that debt to income ratio. You can qualify for a VA loan with another person as long as that person is also a veteran or if they are your spouse. Co-signors are not permitted on VA loans.
VA also allows for refinances. You can do a VA Interest Rate Reduction loan (VA IRRL), the VA really just cares that you are lowering your interest rate on a current VA loan. You may have to have an appraisal if you are in a declining market (some investors automatically require an appraisal). Lenders also have credit score requirements for IRRL's – usually 660. If you want to do a cash out refinance on a VA loan, there is a maximum loan to value of 90%.
A special thank you to all service members, both current and retired! I appreciate your service to our country and the freedom it allows us. Happy Veterans Day!
