VA Loan
- VA Loan:
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Designed to offer long-term financing to American veterans, VA mortgage loans are issued by federally qualified lenders and are guaranteed by the U.S. Veterans Administration. The VA determines eligibility and issues a certificate to qualifying applicants to submit to their mortgage lender of choice. It is generally easier to qualify for a VA loan than conventional loans.
Here's how it works:
- 100% financing without private mortgage insurance or 20% second mortgage.
- A VA funding fee of 0 to 3.3% (this fee may be financed) of the loan amount is paid to the VA.
- When purchasing a home, veterans may borrow up to 100% of the sales price or reasonable value of the home, whichever is less.
- When refinancing a home, veterans may borrow up to 90% of reasonable value in order to refinance where state law allows.
Apply for a VA Loan with a VA Qualified Lender.
Important Changes in VA Eligibility
Before the Veterans Benefit Act of 2010, any veteran who qualified for disability compensation from the VA was also qualified as exempt from the VA loan funding fee. With the new law, that compensation has been extended to a new group of vets--those who have gone back into active military service and draw military pay instead of retirement or disability compensation.
The exemption from paying a VA funding fee is a substantial savings--VA loan funding fees are listed at 2.15% of the loan value for no-down payment VA mortgages. Any veteran exempt from having to pay the VA loan funding fee gets big savings they can use elsewhere or to get ahead on the VA mortgage.
Thanks to the Veterans Benefits Act of 2010, that exemption from paying the VA loan funding fee now applies to retired or separated veterans drawing or eligible for disability pay, and “individuals who were in receipt of compensation, but, either because they reenlisted or were recalled to active duty, are receiving active duty pay in lieu of compensation."
In recent years, this situation is more common than you might think--the military routinely makes offers to vets to come back on active duty in order to improve wartime readiness and increase manpower. Vets who were getting VA disability or retirement pay instead of disability pay had no problem qualifying for the VA loan funding fee exemption; but those who qualified under the old rules but came back to active duty were left out in the cold--no rule specifically addressing their situation existed to allow an exemption. Thanks to the Veterans Benefit Act of 2010, that loophole is closed and eligible vets have specific language addressing their situation in the VA loan rulebook.
