A VA loan is a mortgage loan backed by the U.S. Department of Veterans Affairs (VA). Its primary purpose is to help veterans, active-duty service members, and eligible spouses secure home financing with favorable terms. VA loans offer benefits like zero down payment, competitive interest rates, and no private mortgage insurance (PMI), making them a strong choice for eligible borrowers.
Are VA loans assumable?
Yes: Even if you’re not a military member, you can still take advantage of certain VA loan benefits. In fact, you can assume a VA loan, even if you have no connection to the military, as long as the lender agrees. This is a unique opportunity for homebuyers, as many VA loans feature low-interest rates (often below 3%), which can be a huge money-saver, especially in today’s high-interest environment.
Can I put no money down on a VA home loan?
Yes, you can often put no money down on a VA home loan. Here’s how it works:
- VA’s Role: The VA doesn’t actually give you the loan. Instead, it guarantees part of the loan amount to the lender. This guarantee helps you get a better deal, like no down payment.
- Full Entitlement: If you have full entitlement (meaning you haven’t used your VA benefits before or you’ve paid off previous loans), the VA will back up to 25% of your loan. This means you can borrow as much as the lender will approve without needing a down payment, as long as the sale price doesn’t go over the appraised value of the home.
- Loan Amounts: For loans over $144,000, the VA guarantees 25% of the loan. For loans of $144,000 or less, the guarantee is $36,000.
- Partial Entitlement: If you’ve used some of your VA benefits before or have other VA loans, your entitlement might be partial. In this case, you might need to make a down payment if you’re borrowing more than what your remaining entitlement covers.
- Certificate of Eligibility (COE): This document shows how much entitlement you have left and helps lenders understand your VA loan benefits.
In short, for most people with full entitlement, the VA guarantee allows for no down payment if the lender approves the loan amount and the home’s price is within the appraised value.
How do I use a VA entitlement calculator?
A VA entitlement calculator helps determine how much you can borrow under the VA loan program based on your entitlement. This tool considers your service record and any previous use of VA benefits.
What’s the difference between VA entitlement, the VA 25% guarantee and VA loan limits?
| Term | What it means | Example |
| VA Entitlement | The amount the VA is willing to guarantee for your loan based on your service and previous use of benefits. | If you haven’t used your full entitlement, you can borrow more. If you’ve used some, it might be less. |
| VA’s 25% Guarantee | The VA guarantees 25% of your loan to protect the lender if you default. | For a $300,000 loan, the VA guarantees $75,000 (25%). |
| VA Loan Limits | The max loan amount allowed, based on where you’re buying. The limit changes depending on the area. | In expensive places like Seattle, the limit could be $1.2 million. In cheaper areas like Harrisburg, it’s lower. |
What are the current VA mortgage rates?
What is a VA residual income chart?
A VA residual income chart is a tool used to evaluate a borrower’s ability to cover their living expenses after paying major monthly obligations like the mortgage, utilities, and debts. Essentially, it shows how much money remains after all these obligations are deducted from your monthly income. This leftover amount is crucial because it helps the VA ensure that borrowers can manage both their mortgage and their everyday living expenses without financial strain.
The residual income required can differ depending on your family size and the location of the property. Higher-income areas or larger families generally require more residual income to qualify for a VA loan. The goal is to ensure that the borrower’s finances are stable enough to handle unexpected costs.
Is this like Debt-to-Income (DTI)?
Both residual income and debt-to-income (DTI) are used to assess whether a borrower can afford a loan. However, there are key differences:
- DTI Ratio looks at the percentage of your gross monthly income that goes toward paying debts, like credit cards, car loans, and the mortgage.
- DTI = (Total Monthly Debts ÷ Gross Monthly Income) × 100
- A high DTI can signal that you might struggle to make monthly payments.
- Residual Income goes beyond just debts and looks at whether you have enough money left over to cover your living expenses after paying major obligations.
- It considers things like utilities, insurance, and groceries.
While DTI is a more straightforward measure of debt burden, residual income gives a clearer picture of your overall financial well-being and ability to pay for day-to-day living costs in addition to your mortgage. The VA uses both to ensure veterans are not overextended financially.
Example:
- DTI might approve a borrower with 40% of their income going toward debts, but the residual income calculation ensures they still have enough funds left to cover things like food, utilities, and transportation.
How can I get a VA loan statement of service?
A VA loan statement of service is a document that verifies your military service. It can be obtained from your unit, military personnel office, or through the VA’s eBenefits portal. This document is necessary to prove eligibility for a VA loan.
Do I have to get mortgage insurance with a VA loan?
VA loans stand out by not requiring private mortgage insurance (PMI) or ongoing mortgage insurance, unlike FHA or Conventional loans. Instead, they have a one-time VA funding fee, typically 2.15% of the loan amount for first-time users (ranging from 0.5% to 3.3%). This fee helps sustain the VA loan program, much like mortgage insurance does for other loans, but with key differences: it’s a single payment (not monthly), can be rolled into the loan, and some veterans may be exempt from paying it.
Will a VA loan hurt my chances of getting the home I want?
VA loans have stricter appraisal and inspection standards, which can unfairly make sellers hesitant. They also may take longer to close, which can be a disadvantage in competitive seller’s markets.
Misconceptions about VA loans can also make some sellers less likely to accept them. However, with no down payment, VA buyers can be more flexible in negotiations, especially in less competitive markets, buyer’s markets, or with military-friendly sellers.
What are VA loan closing costs?
VA loan closing costs typically include appraisal fees, title insurance, and recording fees. However, the VA limits the amount of closing costs that veterans can pay, and in some cases, sellers may cover these costs.
What are VA loan inspection requirements?
VA loans have specific inspection requirements to ensure that the property meets safety and livability standards. This includes checking for structural issues, safety hazards, and adequate sanitation. The inspection is typically performed by a VA-approved appraiser.
What are VA foreclosures?
VA foreclosures occur when a borrower with a VA loan defaults on their mortgage, and the VA repossesses the property. VA foreclosures are often sold at auction, and the VA may offer assistance to veterans looking to purchase these properties.
If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.
