Mortgage Foreclosure & Refinance Resource

Following up on our last post, we had a number of inquiries about VA mortgages. Here is an in depth explanation.
VA mortgages offer the kind of benefits that would make most lenders wince, which is why the Veterans Administration guarantees the loans in the event the borrower defaults. They have become a viable lending option for active military personnel and veterans. With 100 percent financing and affordable rates, they’re a small token of our nation’s appreciation.

Who Qualifies for a VA Loan?

There are several different standards you must meet to qualify for a Veterans Administration loan. If you are not sure if you will qualify, you should speak with a mortgage broker or a VA loan professional. One of the first steps towards getting a Veterans Administration loan is to complete a Certificate of Eligibility.

Criteria to qualify for a VA loan:

• Active-duty veterans discharged during WWII or later, without the status of “dishonorable”
• Active-duty veterans with at least 90 consecutive days of service during major conflict
• Peacetime veterans and active duty personnel with at least 180 days of consecutive service
• Enlisted veterans whose service began after 1980 or officers whose service began after 1981 and who have served at least 2 years.

National Guard and Selected Reserve members may also qualify. Check your eligibility with a qualified VA loan specialist if you have any questions.

Benefits of a VA Mortgage

Financing without PMI

Veterans are allowed 100 percent financing on a home without having to pay private mortgage insurance (PMI). This offer is extended to veterans or their surviving spouses, providing that they do not remarry.

No closing costs, streamlined refinance

To receive a VA mortgage, veterans are required to pay a funding fee of 0 to 3.3 percent of the loan, which can be rolled into the mortgage. This fee replaces traditional closing costs, which can typically run from 3 to 5 percent of a loan’s value. Another benefit for veterans is the VA mortgage’s streamlined refinance: Veterans are allowed to refinance their current loans to a lower rate without having to re-qualify. As a result, they can bypass income verification, income documentation, and home appraisals.

Lending choices

VA mortgages do have some restrictions when compared to general mortgages in the marketplace. For instance, they don’t include “no document” or “no income verification” loans, or interest-only loans and home equity lines of credit (HELOCs). What’s more, candidates are not allowed to receive cash back at closing on a new home purchase.

VA mortgages do offer a cash-out refinance option, in which veterans may borrow up to 90 percent of the value of the home. And even though HELOCs aren’t available, home equity loans are. These allow borrowers to tap up to 100 percent of their home’s equity.

Credit history

During the qualification process, most lenders only consider the last 12 months of a veteran’s credit history. However, applicants should be mindful of the fact that bankruptcies, tax liens, and collections could have a negative impact on the qualifying process. Being in active duty, or recently discharged can mitigate an older bankruptcy.

Maximum amount

The highest mortgage that a lender will allow for the 100 percent financing option is $417,000. If you want to purchase a more expensive house, the difference between the purchase price and the $417,000 would need to be brought to the closing table as a down payment.