General VA Loan FAQS
| What is a VA loan? |
- A VA loan is a mortgage that is guaranteed by the Department of Veterans Affairs. The objective of a VA loan is to give military service members access to a federally guaranteed home loan without a down payment. The VA doesn't lend money. Lending institutions such as banks, savings and loans, and mortgage companies lend money. The VA guarantees a portion of the loan. This means the VA promises the lender that if the borrower doesn't repay the loan, the government will.
| What are the benefits of a VA mortgage versus a conventional loan? |
- VA home loans present several benefits to the borrower. The greatest benefit by far is that there is no down payment required on a VA loan, while conventional loans require a down payment of up to 20% of the purchase price. VA mortgages and conventional loans have similar interest rates and terms. However, VA loans allow borrowers to qualify for these rates with imperfect credit while not charging mortgage insurance. Conventional loans, on the other hand, require nearly perfect credit and normally charge mortgage insurance.
| What is meant when someone says "A VA loan is guaranteed"? |
- The VA does not lend money; they guarantee the lender that a portion of the loan will be paid if the borrower defaults on the loan. The guarantee is not to imply that eligible veterans are guaranteed to receive a loan; veterans must still qualify for the loan based on credit history and income.
| Is it true that for a VA loan, the lender only looks at the last 12 months of credit? |
- For a VA loan, lenders are generally most concerned with a clean credit history for the last 12 months. A clean credit history shows no collections, judgments, late payments, or missed payments. However, certain events, such as collections, tax liens, and bankruptcies, may affect your eligibility even if they occurred more than 12 months ago. Contact a VA loan specialist to see how your particular situation may affect your qualification.
| Does the VA offer interest-only loans? |
- No, at this time VA only offers loans that pay toward the principal of your loan with every payment. However, we would be happy to refer you to non-VA lenders who offer interest-only loans.
| Do you have stated or no-documentation programs with VA loans? |
- The only type of reduced documentation loan offered by VA is their Streamline Refinance (or Interest Rate Reduction Refinancing Loan) program. This product allows veterans who already have a VA loan to refinance into a lower interest rate or lower term without the hassle of a new appraisal, credit check or income verification. Please refer to our VA Refinance Info Page.
| Is there mortgage insurance with a VA loan? |
- No. The VA guarantee essentially performs the same function as mortgage insurance by guaranteeing the lender payment on the loan.
| Can I get extra cash at closing to make improvements on my home? |
- For purchases, borrowers may only get back the earnest money placed on the contract and any other deposits placed on the house. Some funds for specific energy-efficiency improvements may be available, but other types of improvements are not eligible. For refinances, borrowers may opt to refinance up to 90% of their home's value. If these borrowers have enough equity built up in their home then the result would likely be cash back, which can be used for anything, including home improvements. Please refer to our VA Refinance Info Page.
| Can I get the full $417,000 and then get a second loan to cover any additional amount of the purchase price? |
- Essentially, no. The guidelines for this type of two-loan structure have all but eliminated the option. The interest rates on second loans are always higher than first-position loans, but the VA requires the interest rate on the second loan to be equal to or below the VA loan. This is simply not possible. Also, most lenders will not allow a second loan behind a VA loan during purchase.
| What if the house I want to buy costs more than $417,000? |
- The only real option is to bring a down payment large enough to cover the difference between the sales price and the $417,000 loan maximum. Depending on your situation, non-VA loan options may be more worthwhile. We would be happy to discuss the benefits of both VA and non-VA lending options and how they relate to your specific situation.
| Does the VA offer home equity lines of credit (HELOCs)? |
- No, VA does not guarantee HELOCS. However, VA will guarantee a cash-out refinance of up to 90% of your home's value in most cases. This may allow you to accomplish the same goal as obtaining a HELOC.
| What is equity? |
- Equity is the unmortgaged value of a home. To calculate your equity, subtract your mortgage and any other liens against your property from the estimated value of your property. The difference is your equity in the home. For instance, a homeowner who owes $120,000 on a home appraised for $200,000 has $80,000 in equity.
| What is a discount point? |
- A discount point is a percentage of the loan amount which is paid upfront in exchange for a lower interest rate. Usually, buying down the rate will save the borrower money over the course of the loan.
| What is a statement of service? |
- A statement of service is a letter from your commanding officer stating how long you have served in the military and your current status. It is one of the required documents to receive your Certificate of Eligibility (COE), if it is not available online.
| What are title fees? |
- Title fees are costs charged to a borrower by a title company for services such as title search and title insurance. Before a home is purchased or refinanced, a title company will search all available records on the ownership record of the home, looking for unexpected liens or ownership claims. When the title search comes back as "acceptable", a title insurance policy is issued. The intention is to guard the new homeowner against potential future legal issues in regards to ownership of the property. Later, if a lien is uncovered or if another party is found to have a legitimate claim against the property, the title insurance company will settle the claim. Title insurance is a one-time charge that protects the homeowner for as long as they own the property.
| What is a child care letter? |
- A child care letter is a required document on a VA loan if the borrower has children under the age of 13. The VA requires childcare expenses to be included in the borrower's liabilities for qualification purposes.
| What sort of paperwork will my real estate agent need from the lender? |
- Most real estate agents would like a copy of your pre-approval letter which shows the amount you have been pre-approved up to. It is also a good bargaining tool with the sellers because it proves you have taken the proper steps to secure financing.
| Do I need to have a property picked out? |
- No. We recommend that you get pre-approved for a loan before you even start shopping for a new home. The pre-approval process helps you solidify your budget by showing you what the mortgage payment is likely to be at different price points. If you have already chosen a property, please start the financing process immediately by calling a VA Loan Specialist or by using our secure online application form.
| How long is the process for getting a home loan? |
- We generally recommend 30 days from initial application to closing to allow all the involved parties to finish their parts. However, it is possible to close in substantially less time, as short as two weeks in some cases.
| Why is my local bank discouraging me from using my VA loan? |
- Many banks and credit unions are not approved to do VA loans or are unfamiliar with the VA process. Check to see if your bank or credit union is approved by the VA. For the majority of buyers needing 100% financing, VA is usually the best option available. Since many local banks and credit unions are not approved to offer VA loans, they usually have limited knowledge about this product and may have misconceptions about the benefits associated with it.
VA Home Purchase FAQs
| Are conventional mortgage rates better than VA rates? |
- Conventional rates are usually very similar to VA rates. However, the best conventional rates assume that the borrower has an excellent credit score, near-perfect credit history, and a 20% down payment for a purchase. VA rates are usually just as low, but with less strict credit requirements and no need for a down payment.
| Do I have to pay my closing costs out of pocket? |
- Generally, closing costs must be paid out of pocket for purchases but can be rolled into the VA loan amount for refinances. For purchases, if the seller agrees, a clause can be included to allow the seller to pay up to 6% of the loan's value in closing costs for the buyer. Otherwise the buyer must pay the closing costs out of pocket. For refinances, if the homeowner has enough equity to pay the closing costs, then those costs can be included in the loan amount. If there is not enough equity then the homeowner must pay the closing costs out of pocket.
| If I have my Certificate of Eligibility, am I guaranteed to get a VA loan? |
- The Certificate of Eligibility is the document that proves to lenders that you meet the service eligibility requirements to apply for a VA loan. You must still qualify for the loan based on your past 12 month's credit history, income, and assets. This is to ensure that you can pay back the loan amount that you have requested.
| What are the benefits of a VA loan vs. conventional loan? |
- VA home loans provide a number of benefits to the borrower. The best benefit is that there is no down payment required on a VA mortgage, while conventional mortgages require a down payment of up to 20% of the purchase price. VA loans and conventional loans have comparable interest rates and terms. But VA loans let borrowers qualify for a good rate with imperfect credit and do not charge mortgage insurance. Conventional loans, however, require nearly perfect credit and usually charge mortgage insurance.
| I've had a past bankruptcy; can I still get a VA loan? |
- Yes, borrowers who have declared bankruptcy in the past are still eligible for a VA loan. If you filed Chapter 7 bankruptcy, you will need to wait two years after it has been discharged to be able to qualify. If you've had late payments on anything credit-related after the discharge, it will be very difficult for you to qualify for any loan. If you filed a Chapter 13 bankruptcy, you must wait one year after it has been discharged. Note that it must be a year after discharge, not filing. Just like Chapter 7, any late payments during or after bankruptcy will make it almost impossible to qualify for any loan.
| I was turned down for a conventional loan. Can I possibly qualify for a VA loan? |
- It is possible for borrowers who were denied a conventional rate to be approved for a VA loan. Conventional lenders typically give more weight to credit score and history whereas VA puts a higher importance on a stable two year work history. The VA mainly wants to see a clean 12 month credit history and proof that you earn enough to reasonably make the monthly payment on the loan amount you are requesting.
| What is the maximum I can borrow with a VA loan? |
- The current VA loan maximum is $417,000 ($625,000 in select high-cost areas). Even if you qualify for a VA loan, you may not qualify for a $417,000 loan amount based on your income and assets. If you would like to purchase a home with a sales price in excess of $417,000, you will need to place a down payment on the home to cover the difference.
| Do I need a down payment? |
- Generally, a down payment is not needed to get a VA loan. VA allows for 100% financing of the purchase price of a home without mortgage insurance. The only situation in which you would need a downpayment would be if you purchased a home with a sales price above the loan limit.
| What is the VA funding fee? |
- The VA funding fee is the amount that the VA charges the veteran to guarantee the loan. This is not a charge that must be paid at closing, but is added to your base loan amount and paid over the life of the loan. This fee takes the place of traditional morgage insurance and is typicallly much less expensive over the course of the loan.
| Will I have mortgage insurance on my VA loan? |
- No, you will not have mortgage insurance on your VA loan even if you finance 100% of your home's value. Instead, the VA charges a small funding fee that is paid over the life of your loan. This fee takes the place of mortgage insurance and allows the VA to guarantee payment of your loan to the lender if you default.
VA Home Refinance FAQs
| What is an IRRRL? |
- IRRRL stands for Interest Rate Reduction Refinancing Loan, but is also known as a VA Streamline Refinance. It allows borrowers to refinance their existing VA loan into a new VA mortgage with a lower interest rate or to change from an adjustable rate to a fixed rate. Since you have already been approved for a VA loan, there are fewer documentation requirements, as well as reduced funding fees and lower closing costs. Please refer to our VA Refinance Info Page for more information on IRRRLs.
| Do I have to be eligible for a lower rate in order to qualify for a VA IRRRL? |
- Yes, to qualify for an IRRRL, you must obtain a lower interest rate if you are refinancing from a fixed rate mortgage to another fixed rate mortgage. However, if you are refinancing from an adjustable rate mortgage (ARM) to a fixed rate mortgage, the rate on the new fixed rate mortgage may be somewhat higher.
| If the program is called an Interest Rate Reduction Refinancing Loan, why does the VA allow me to refinance my arm to a higher interest rate? |
- With an adjustable rate mortgage, or ARM, interest rates will start out low, but gradually increase based on the specifics of that loan. For example, an ARM for which the borrowers are presently paying 5% could jump to 11% over the course of the loan. This means the effective interest rate is really much higher than 5% over the life of the loan. VA allows borrowers to refinance an ARM into a slightly higher fixed rate because there is a future benefit. At the time of the refinance, the new rate may be slightly higher than that of the old ARM loan, but ARM loans offer less constancy than fixed rate mortgages given that they could adjust much higher over the years. The long-term advantage of a fixed rate mortgage is usually greater.
| Can I refinance with the VA if I am already using my Loan Guarantee entitlement with my current mortgage? |
- Yes, if you are refinancing your VA-guaranteed mortgage, then you can utilize the VA's Streamline Refinance, or IRRRL, to improve the terms of your mortgage. Please refer to our VA Refinance Info Page for more information on IRRRLs.
| What out-of-pocket expenses will I have when refinancing? |
- Typically, there are no out-of-pockete expenses incurred with a VA refinance. The VA loan allows all closing costs, including lender fees, to be rolled into the new loan.
| Do I have to use my current lender to refinance? |
- No. Borrowers may choose any VA-approved lender to refinance their home. Be wary of lenders who claim they are the only lender who can finance a VA IRRRL. If your current lender claims that you must refinance with them, they are most likely trying to discourage you from shopping for better loan terms.
| Do I have to go through a credit check and appraisal process again when refinancing with the VA? |
- Typically, yes. The VA approves the loan guarantee and does not require any additional documentation. However, a refinance is a new loan from the lender's perspective, so the lender wants to be assured that the borrower still has a clean credit history and the property still has a higher market value than the loan amount being requested. Conversely, if the borrower already has a VA loan and is applying for a VA Streamline Refinance, or IRRRL, then a credit check and appraisal is not needed. Please refer to our VA Refinance Info Page for more information on IRRRLs.
| I already have a VA loan and want to refinance. Do I have to get another Certificate of Eligibility? |
- No, if you already have a VA loan and want to refinance you do not need a new Certificate of Eligibility. You have already been approved by the VA for your home loan. Refinancing does not require re-approval from the VA, only from the lender.
| What fees does the VA charge for an Interest Rate Reduction Refinancing Loan (IRRRL)? |
- The VA requires a 0.5% funding fee on an IRRRL. The funding fee is 0.5% of the total loan amount. Although there are no other fees charged by VA, there may be fees charged by the lender.
| What are the requirements to be qualified for an Interest Rate Reduction Refinancing Loan (IRRRL)? |
- To qualify for the IRRRL (also known as the VA Streamline Refinance) program, the following conditions must be met...
- Current mortgage must be paid up-to-date
- Current mortgage must be guaranteed by VA
- Proposed Principle and Interest payment must be reduced unless...
- Veteran is refinancing from an Adjustable Rate Mortgage to a fixed rate
- Term of IRRRL is shorter than current mortgage (so long as payment does not increase more than 20%)
- Energy-efficient improvements are included in the IRRRL
| Can I take cash out of an Interest Rate Reduction Refinancing Loan (IRRRL) refinance? |
- No, you may not take cash out of an IRRRL refinance beyond $250 for overages in estimated costs and prepaids. An IRRRL from the VA is a "rate-term" refinance meant to improve your mortgage terms, either by lowering or fixing your interest rate.
VA Application, Qualification, and Approval FAQs
| What kind of information will I need to provide on the application? |
- The following information will be needed for both you and your spouse (if applicable). Please note that additional information or details may be required.
- Personal information such as name, date of birth, social security number, residence address, and two year residence address history.
- Income information such as salary and wages, pensions, alimony, child support, dividends, rental income, etc.
- Asset information such as retirement capital, savings, etc.
| Is the information I provide to you kept completely confidential? |
- Yes, all information you provide us is kept completely confidential. Our company maintains strict security procedures including aggressive firewalls against outside intrusion to our database, screening processes and privacy standards for our business partners, and screening, training and supervision of all our employees. Your information is not shared in any way with companies that are not directly involved in your specific loan and closing process.
| How long will it take to fill out an application over the phone? |
- It generally takes between 10-15 minutes to complete an application over the phone, but it can take less time depending on the complexity of your finances. If you must stop in the middle of an application, simply call your loan specialist back when you have time to finish. Or, you can complete an application on our secure website.
| How long does it take to get pre-approved? |
- It generally takes less than two business hours to get pre-approved; however, it may take slightly longer if your financial situation is particularly complex. Your VA Loan Specialist must take your application, pull and check your credit, calculate your debt to income ratio (what you pay monthly versus what you earn monthly), and compare lender rates. After completing this process, you will be contacted with the maximum loan amount for which you qualify.
| If I get pre-approved through your company, do I take that approval to my bank to get the loan? |
- No, we handle your loan process from beginning to end. There is no need to go elsewhere, and if you do, your bank will go through the same pre-approval process again themselves.
| Once my loan is in process, who should I contact with questions or concerns? |
- Your original VA Loan Specialist will be your contact throughout the loan process, from application to closing.
| What is the difference between pre-qualified and pre-approved? |
- Pre-qualification is based on estimated, unverified information you provide during the application process. Pre-approval is based on verified information supported by documentation, such as pay stubs, tax documents, and bank statements. Pre-approval is a stronger indicator that your loan will be issued final approval by the lender.
| How do I know how much I qualify for? |
- The most accurate way to know how much you qualify for is to speak to a VA Loan Specialist to complete the pre-approval process. There are many factors that determine qualification, including your credit history, requested loan amount, type of income, and current liabilities.
| Does becoming pre-qualified obligate me to anything? |
- No, pre-qualifying and pre-approval are simply tools used to give you the most information possible about your new loan. You are not obligated to anything until the day of closing when all papers are signed.
| Can I get pre-approved for more than I originally asked for? |
- That depends on your credit history, income, and assets. Normally, your loan specialist will factor in a cushion on your approval for just such an instance. If you decide you want a larger loan amount, call your loan specialist immediately to discuss your ability to be approved. In most cases, he or she can tell you right away if your requested amount is feasible.
| How soon should I apply for a VA loan if I do not have a house picked out yet? |
- It is not necessary to have a property picked out prior to starting the home loan process. In fact, we encourage borrowers to become pre-approved for a mortgage before starting to house-hunt. Getting started sooner rather than later leaves more time to solve any problems that may arise, such as insufficient documentation or incorrect credit history information, without jeopardizing your contract with the sellers.
| How far in advance should I get pre-approved? |
- We recommend you begining the pre-approval process as soon as you decide to purchase a home. This will help you accomplish two things. First, talking to a loan specialist about your options will help you determine what price range you are qualified for and whether or not you are happy with the payment options available. Second, it allows for plenty of time to resolve any issues that may come about, like obtaining missing documentation or disputing inaccuracies on your credit report. While problems are rare, it is better to learn about them at a time that will not jeopardize your contract on your new home.
VA Loan Eligbility FAQs
| What is a Certificate of Eligibility (COE)? |
- A COE is the document issued by the VA which certifies that the veteran is eligible for a VA loan based upon service requirements. It is requested by or on behalf of the veteran, issued by the VA, and given to the lender. Please refer to our VA Loan Qualification Info page for information on service requirements.
| Do I need to get my COE before contacting you? |
- No, we will help you get all the documentation you need during the loan process, including your COE. We can usually obtain your COE in mere seconds by using the VA's Automated Certificate of Eligiblity (ACE) system. Please contact your VA Loan Specialist for more information.
| How do I get my COE? |
- The easiest way to get your COE is during the loan process. Our VA Loan Specialists can normally request and get your COE for you within seconds by using the VA's Automated Certificate of Eligibility (ACE) system. If for some reason we are unable to obtain your COE from the ACE system then we can request it through the traditional route (which essentially involves mailing in Form 26-1880, COE Request Form, along with your DD-214, Statement of Service, to the VA's Winston-Salem, NC office). The sooner we request your COE, the better, as this document is required before a lender will underwrite your VA loan.
| How long is my COE good for? |
- A COE is valid until it is used. However, many lenders will require an updated COE within 60 days of closing to ensure it has not been used already.
| I heard that every veteran is guaranteed a home loan. Is that true? |
- No, it is not true that every veteran is guaranteed a home loan. Veterans must meet the minimum service requirements and qualify for the loan based on credit history and income. VA guarantees refer more to the payment of the loan than a guarantee of loan approval. Please refer to our VA Loan Qualification Info page for further info on service requirements.
| How long do I have to be in the military to qualify for a VA loan? |
- There are many factors that determine service qualifications, but a good guideline is 90 days in wartime and 181 days during peacetime. Reserve versus active service and any service-related disabilities also have a major impact on qualification. Please refer to our VA Loan Qualification Info page for further info on service requirements.
| How many people can I have on my VA loan? |
- Two people are allowed on a VA loan: the eligible service member and his or her spouse. There are some programs for two eligible veterans, but they are uncommon.
| Can I add someone to the title of my VA loan later? |
- You may add whomever you choose to the title of your home. However, you may not add another person to your mortgage note without refinancing. If the second person is not your spouse, you will not be able to refinance with a VA mortgage.
| Am I eligible for a VA loan if my husband was in the military? |
- Widows whose husbands died while on active duty or from a service-related disability are eligible for VA loans and are exempt from the funding fee.
| Can I use my girlfriend/boyfriend on the loan? |
- No, you may not have your girlfriend/boyfriend on the note. Only veterans and their spouses can be on a VA loan.
| I am deployed. Can I still purchase a home with a VA loan? |
- Yes, you may still purchase a home with a VA loan while deployed, but the home you purchase must be your primary residence when you return from duty.
| Am I eligible for a VA loan if I am in the National Guard? |
- Yes, you may be eligible for a VA loan if you are in the National Guard, as long as you meet the service requirements of 181 days. Without being activated, this typically corresponds to about six years of service.
| If someone has a dishonorable discharge, are they still eligible for a VA loan? |
- No, an honorable discharge is required to be eligible for a VA loan. However, other discharges, including medical, are acceptable.
| Is there an age limit on VA loans? |
- No, age is not a factor in VA loan approval.
| Can I get a VA loan if I am self-employed? |
- Yes, you may be eligible for a VA loan if you are self-employed, as long as you can prove your income through tax returns. If you have not been self-employed for two full years, we may not be able to sufficiently prove your income. However, there are non-VA programs that may be applicable. Please contact a loan specialist to discuss your particular employment situation and what programs may best fit.
| I have used my VA loan before. Am I still eligible? |
- Yes, you are still eligible for a VA loan even if you have had one before. However, you will have an increased funding fee and will also have to either have your entitlement restored or have enough entitlement left over to cover your new loan. To fully restore your entitlement, the previous VA loan must be paid in full.
| I have no credit. Can I still get a VA loan? |
- Yes, even if you have no credit you may still be eligible for a VA loan. You will have to prove that you have been paying other monthly bills, like rent, auto payments, cable, utility payments, etc. on a timely basis.
| My credit is bad, but my spouse's is good. Can we still get a VA loan? |
- Possibly. Many lenders qualify a couple off the worst of the two credit reports. Qualification also depends on how long ago the derogatory incidents occurred. Please contact a VA Loan Specialist for the most accurate analysis of your situation.
| Can I buy a home with a tax lien on my credit report? |
- You may still qualify for a VA loan with a tax lien on your credit report. However, the lender will require the tax lien to be paid before closing. Often lenders will allow the lien to be paid on the day of closing.
| My last VA loan was foreclosed upon. Can I get another VA loan? |
- It is possible to get a new VA loan even if you have had one foreclosed upon in the past but it depends on the foreclosure cost to the bank. Generally, you will have a reduced entitlement and have to pay the VA back before your eligibility is restored.
| How long do I have to wait on my VA loan if I have had a bankruptcy? |
- Depending on the type of bankruptcy, you will have to wait between one and two years from the date of discharge before you will be approved for a VA loan. For a Chapter 7 filing, you will have to wait two years from the date of discharge, and for a Chapter 13 filing, you will have to either wait one year from the date of discharge or prove that you have made timely payments for at least 12 months. In both cases, if you have not made timely payments during the waiting period, it is unlikely you will qualify for a VA loan.
| Can I use a VA loan to get a business or commercial loan? |
- No. VA loans are only for the purchase or refinance of residential properties.
| Can I use a VA loan for investment properties? |
- No. VA loans are only for the purchase or refinance of properties that serve as your primary residence.
| Can I use my VA loan to purchase a foreclosed property at auction? |
- Yes, you may use a VA loan to purchase a foreclosed property at auction, but the appraisal will have to cite that no repairs are needed. If repairs are cited, they will have to be completed prior to closing.
| Can I use my VA loan to buy land to build a house on? |
- You cannot buy vacant land with a VA loan. Although VA construction loan options do exist, many lenders do not offer them at this time.
| Can I buy a condo with my VA loan? |
- Yes, you may purchase a condo with a VA loan, but only in VA-approved condo complexes.
| Can I use the VA loan to purchase a log home? |
- Yes, you may use a VA loan to purchase a log home, but there must be other similar log homes in the area so the appraiser may complete a satisfactory appraisal.
| Can I buy agricultural land using a VA loan? |
- You may not purchase agricultural land by itself using a VA loan. You may buy land if it includes a home that you intend to live in as your primary residence. However, you cannot use any type of farm equipment or livestock for qualification purposes.
| Can I use a VA loan for a houseboat? |
- No, you may not use a VA loan to purchase a houseboat.
| Can I use my VA loan overseas? |
- No. VA loans are only offered for the purchase of homes located in the United States.
VA Home Loan Requirements FAQs
| Does the VA require a home inspection? |
- No, the VA does not require a home inspection, although they are generally a good idea. Home inspections give the borrower a better sense of the property and the opportunity to learn about potential problems prior to purchasing the home.
| Why do you need my previous address and employer information? |
- Lenders require a two-year residence and employment history to prove credit worthiness and income continuance.
| Why do you need to verify my earnest money if it is in the contract? |
- Earnest money is verified so it may be counted as an asset. A cancelled check or bank statement will suffice as proof.
| Are the requirements different for a VA new construction loan? |
- Yes, the requirements are a bit different for a VA new construction loan. The home must have a warranty and be built by a VA-approved builder. Your VA Loan Specialist can check whether your builder is VA-approved. If your builder is not approved your Loan Specialist can help him or her get approved.
| Does the VA require insurance to be paid one year in advance? |
- The VA requires both your real estate taxes and homeowner's insurance to be escrowed. Generally, when setting up an escrow account, the first year's homeowner's insurance must be paid upfront.
| I don't currently escrow my taxes and insurance. Why do I have to with a VA loan? |
- The VA requires escrow of real estate taxes and homeowner's insurance on all properties secured by a VA loan. The escrow of real estate taxes ensures the taxes get paid, which prevents tax liens from being placed on the property for non-payment. It also keeps the homeowner from having to come up with a large payment for taxes at the end of the year. Homeowner’s insurance must be escrowed because the VA will not have an interest in an uninsured property.
VA Loan Costs and Rates FAQs
| What does it cost to apply for a VA loan? |
- The only upfront cost incurred during the VA loan application process is the cost of the appraisal. Appraisals today typically cost between $350 and $450.
| Do I get additional benefits for having a service-related disability? |
- Your VA funding fee will be waived. Also, medical collections are not counted against you in the qualification process.
| Do VA loans have closing costs? |
- Yes, all VA loans have closing costs of some sort. The amount and type fluctuate depending on the lender, the interest rate, and the costs charged by other pertinent service providers (such as the appraiser and title company).
| What is the difference between closing costs and pre-paid items? |
- Closing costs are associated with third-parties who are involved in getting your VA loan approved and processed, such as the broker, lender, and title company. Pre-paid items are fees that would have been due at some point in the future; these generally include your taxes, insurance, and loan interest.
| Can the seller pay my closing costs for me? |
- Yes, if the seller agrees, the VA will allow them to pay up to 6% of the home's value in closing costs.
| Can I buy a home with no money out of pocket? |
- Yes, it is possible to purchase a home with no out of pocket costs using a VA loan. VA allows you to finance up to 100% of the purchase price of the home and allows the seller to pay up to 6% in closing costs for you.
| How much of a down payment will I need for a VA loan? |
- As long as the purchase price of the home is below the VA loan limit of $417,000, you do not need a down payment. If your home is above the loan limit, you will need a down payment to cover the difference.
| Is the rate on a VA loan better than rates on other types of loans? |
- Rates on both VA loans and conventional loans change daily, so it's difficult to give a blanket statement. But since VA loans are guaranteed by the government, they are less risky than other types of loans available in today's market. This means lenders are able to offer VA interest rates that are sometimes significantly lower than other loan programs.
| Does VA control the interest rates? |
- No, VA doesn not control interest rates. The individual banks and investors holding the mortgages control the rates by buying and selling mortgage bonds like stocks on the stock market. Rates change daily. The VA guarantees a portion of the loan against default, which often allows lenders and investors to charge lower interest rates than private, nongovernment-backed loans.
| Why is my APR higher than my actual rate? |
- Your payment amount is based off your actual rate. Your APR is an indication of the actual cost of credit and includes some of the fees associated with the loan, including origination fees, loan discount points, prepaid interest, and mortgage insurance. APR allows you to more accurately compare the actual cost of credit between lenders.
| How much will it cost me to buy my rate down? |
- Like the interest rates themselves, buy-down rates change daily due to market changes. If you would like to buy-down your rate, contact your VA Loan Specialist for the cost that day.
| When can I lock in the rate and what does it cost? |
- When purchasing, the rate is locked in after you have a contract on the home. When refinancing, the rate can be locked after you submit your application, income documentation, and appraisal to the lender. In both cases, locking the rate does not cost you anything.
| What is a floating rate? |
- A floating rate means the rate has not been locked and is floating up and down with the market conditions. Our loan specialists generally allow rates to float if market conditions indicate that rates will improve soon. If you would prefer to lock your rate sooner, please contact your VA Loan Specialist.
| Is there a pre-payment penalty on a VA loan? |
- No there are not pre-payment penalties on VA loans. You are allowed to pay off your loan at any time, either by selling the home or refinancing, without additional fees.
Credit Report and Scores FAQs
| What does it mean when I hear that VA loans are not credit-score driven? |
- The VA does not set a minimum credit score, focusing mainly on the applicant's credit history for the last 12 months. Many lenders, however, currently require that applicants have a minimum credit score of 620, in addition to a 12 month history of timely payments. If you are unsure whether you meet the credit requirements for a VA loan, contact a VA loan specialist today for a free consultation to determine your eligibility.
| Can you use my credit report that I got off the Internet? |
- No. We have to pull your credit report ourselves to qualify you. Our lenders require the report in a specific format and a specific type of credit pull to properly analyze your credit situation.
| Does pulling my credit affect my score? |
- Generally, several credit pulls in a short period of time will not affect your credit score. Several credit pulls over a longer period of time may have an affect, but it is generally very small. Any change in your credit score is not a factor is qualifying for a VA loan, though, as your credit history is important, not your credit score.
| What is a clean credit history? |
- A clean credit history would mean a history free of collections, judgments, late payments, or missed payments.
Appraisal FAQs
| Who orders a VA appraisal? |
- The lender requests the appraisal through the VA. The VA then randomly assigns an appraiser to your property. They ensure an objective appraised value for you, the lender, and the VA.
| How much is the fee for ordering an appraisal? |
- The cost of appraisals vary by state, but generally run between $350 and $450. This fee is usually paid when the appraiser inspects the home.
| When is the appraisal ordered? |
- In the case of a purchase, the appraisal is ordered when you have a signed contract on the home. In the case of a refinance, the appraisal can be requested as soon as you like. Generally, we recommend ordering the appraisal as early as possible to avoid any delays on the part of the appraiser.
| Can I use the same appraiser that I used before? |
- No. The VA randomly assigns an appraiser to your property from its list of approved appraisers. This system prevents any conflict of interest and gives a more impartial appraised value.
| Are VA appraisers more critical than conventional appraisers? |
- Not necessarily. VA appraisers are required to note needed repairs, especially those which present safety hazards. VA appraisers represent the VA and the lender and are trained to provide the most impartial and accurate value of a home based on similar properties (comps) which have recently sold.
| What sorts of problems might there be with an appraisal? |
- Generally, any defect that affects the safety of the home must repaired before closing. Examples of safety problems include stairs without railings, paint containing lead, or mold infestation.
| Do the repairs have to be done before closing on my VA loan? |
- All repairs noted on your appraisal must be completed before closing. In the event that the repairs cannot be completed due to outside circumstances (such as inclement weather for outdoor repairs), the lender may allow you to set up an escrow account and complete the repairs when circumstances permit.
About Us FAQs
| Are you affiliated with the VA government agency? |
- No, we are a privately-held company that specializes in VA loans. We have no affiliation with the VA or any other government agency.
| What are the benefits of going through VeteransLoans.com instead of my local bank? |
- Many local banks are not approved to do VA loans. Also, banks often have higher rates to compensate for their high overhead costs. VeteransLoans.com has very low overhead with lower rates to match. Finally, we specialize in VA loans and are more familiar with the product than most banks are, leading to a smoother experience for you.
| Do you loan the money or do you broker it to a third party? |
- We have the ability to do both, but decide whether to lend or broker based on who has the lowest rate and quickest turnaround time for you.
| Do you set-up my homeowner's insurance? |
- No, we do not set-up your homeowner's insurance; you are free to choose any agent and provider you want. We do need the name and contact information of the insurance agency that you choose to work with, though, because we need to share information with him or her to complete the loan.
| Will you work with my real estate agent? |
- Yes, we absolutely will work with your real estate agent. Your real estate agent is an important member of your loan team and is vital in helping with inspections and other tasks.
| Does your company also provide financing on conventional loans? |
- Yes. While we specialize in VA loans, we realize that VA loans are not always the best choice for a client. In every instance, we strive to match the client with the program that best suits their needs, whether that means a VA loan, conventional, or another program.
Visit our Common Misconceptions page to learn about VA loan misconceptions
