VA Home Loan
What is a VA home loan?
A VA home loan is a mortgage loan backed by the U.S. Department of Veterans Affairs (VA). Its primary purpose is to help Veterans, Servicemembers, and eligible surviving spouses become homeowners. As a core part of the VA's mission, they offer a home loan guarantee benefit along with other housing-related programs. While VA Home Loans are issued by private lenders like banks and mortgage companies, the VA guarantees a portion of the loan.
At Brighton Bank, we recognize that the path to homeownership can often seem intricate and overwhelming. With this understanding, we've crafted our VA landing page to be more than just a digital touchpoint. It's not merely about presenting loan options; it's about equipping you, our valued customer, with a comprehensive understanding of what a VA Loan entails. Through interactive tools, easy-to-grasp information, and on-demand assistance, Brighton's VA landing page serves as a guiding light for all aspiring homeowners, ensuring clarity, confidence, and a closer step to the home of your dreams.
Benefits of Choosing a VA Home Loan
A VA (Veterans Affairs) home loan is a mortgage loan available to eligible veterans, active-duty personnel, and certain members of the National Guard and Reserves. The VA loan program was established to help veterans and their families achieve homeownership. Here are some of the primary benefits of choosing a VA home loan:
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No Down Payment Required: One of the most significant advantages of a VA home loan is the ability to finance 100% of a home's purchase price, meaning no down payment is necessary in most cases.
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No Private Mortgage Insurance (PMI): Conventional and FHA loans often require PMI if the down payment is less than 20%. With a VA home loan, there's no PMI, which can save borrowers a significant amount of money each month.
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Competitive Interest Rates: VA home loans tend to have lower interest rates than conventional loans because the VA guarantees a portion of the loan. This makes the loan less risky for lenders.
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Flexible Credit Requirements: VA home loans are often more accommodating when it comes to credit scores and history, allowing more veterans to qualify.
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No Prepayment Penalty: Borrowers can pay off their VA home loan earlier than the agreed-upon term without facing prepayment penalties.
Are You Eligible?
To be eligible for a VA home loan, you or your spouse must meet the below-stated requirements:
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Service Eligibility: The primary requirement for VA home loan eligibility is service in the U.S. armed forces. This includes:
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Veterans who have served 90 consecutive days of active service during wartime, or
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181 days of active service during peacetime, or
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6 years of service in the National Guard or Reserves, or
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Some spouses of service members who have died in the line of duty or as a result of a service-related disability.
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Certificate of Eligibility (COE): To prove your eligibility for a VA home loan, you'll need a Certificate of Eligibility (COE), which can be applied for directly through the VA.
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Credit and Income Requirements: The VA doesn’t set a minimum credit score, but most lenders have their own criteria. Generally, a credit score of 620 or higher is favorable but credit scores from the 500's can also be acceptable. Borrowers also must show they have a reliable income that's sufficient to cover monthly expenses, including the new mortgage payment.
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Primary Residence Requirement: VA home loans are intended for primary residences, meaning you'll live in the home. They aren’t for vacation homes or investment properties.
Quick Loan Limit Overview
No Loan Limit for First-Time Users: For first-time VA home loan benefit users, there is no cap on how much they can borrow without a down payment. In other words, if they qualify, veterans can purchase a home without any down payment, regardless of the home's price. Buyers may purchase up to the VA loan limits per county.
Subsequent Use: For veterans or service members who have already used their VA home loan benefits and have their full entitlement restored, the no-limit rule also applies.
Partial Entitlement: For those who have used some of their entitlement and cannot have it fully restored, there will be a loan limit that may require a down payment. The amount of the loan limit will depend on the county's conforming loan limit and how much of their VA loan entitlement has been utilized.
Conforming Loan Limits: The VA typically references the Federal Housing Finance Agency's (FHFA) conforming loan limits to determine county-specific limits for those with partial entitlement. These limits can change yearly.
Down Payment for Loans Above the Limit: If a veteran chooses to buy a home that costs more than the county loan limit (and they don't have full entitlement), they might need to make a down payment. The required down payment will typically be 25% of the difference between the home's purchase price and the county's loan limit.
Types of VA Home Loans
Simple Application Steps
1. Purchase Loan & Cash-Out Refinance:
- Process: VA home loans are acquired through a lender of your choosing. The initial step is to get a Certificate of Eligibility (COE).
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​Obtaining COE: You can secure a COE via your lender, through VA.gov, or by submitting a mail request.
2. Interest Rate Reduction Refinance Loan (IRRRL):
- COE Requirement: For IRRRL, a new COE is typically not needed. To demonstrate the previous utilization of your entitlement, you can either present your existing COE or your lender might opt for the e-mail confirmation procedure in place of the COE.
3. Native American Direct Loan (NADL) Program:
- ​Initial Step: Verify that your tribal organization is a participant in the VA direct loan program.
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​Process: After confirmation, NADL loans are acquired via a lender of your choice. The prerequisite is obtaining a Certificate of Eligibility (COE).
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Obtaining COE: Secure a COE through VA.gov or by mail.
4. Adapted Housing Grants (SAH or SHA grant):​
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Application Process: For an SAH or SHA grant, you can begin your application by:
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Downloading and completing the VA Form 26-4555 (PDF). Once filled, submit it to the closest Regional Loan Center.
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Alternatively, you can also opt for the online application method.
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Terms Explained
VA Home Loan: A mortgage loan in the U.S. backed by the U.S. Department of Veterans Affairs. Intended primarily for Veterans, Servicemembers, and eligible surviving spouses.
Certificate of Eligibility (COE): A document that proves you're eligible for a VA-backed loan. It's based on your service history and duty status.
Private Mortgage Insurance (PMI): Insurance that protects lenders from losses if a homeowner defaults on their mortgage. Not required for VA loans.
Interest Rate Reduction Refinance Loan (IRRRL): Commonly referred to as the VA Streamline Refinance, this is for homeowners with an existing VA home loan to refinance to a lower interest rate.
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Native American Direct Loan (NADL) Program: This program provides loans to Native American veterans to buy, build, or improve homes on Federal Trust Land.
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Adapted Housing Grants (SAH or SHA grant): Grants provided to veterans with certain severe service-connected disabilities to help buy or build an adapted home or modify an existing home.
Conforming Loan Limits: Limits set by the Federal Housing Finance Agency (FHFA) on the maximum amount for a mortgage. They can affect the loan limits for VA loans in certain situations.
Entitlement: Refers to the portion of a loan that the VA guarantees to a lender. It can be 'full' or 'partial' depending on how much of the VA loan benefit a borrower has used.
VA Purchase Loan: A loan used by eligible individuals to purchase a primary residence without needing a down payment, as long as the purchase price doesn't exceed the loan limit for the county.
VA Cash-Out Refinance Loan: Allows homeowners to refinance their non-VA or VA loan and convert their home equity into cash, which can be used for various purposes.
Primary Residence: The main place where an individual lives most of the time. VA loans are intended for financing primary residences.
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Disclaimer: A loan of $300k for 30 years at a simple interest rate of 6.25% would yield a payment amount of $1,887 per month and an annual percentage rate (APR) of 6.660%. Payment does not include taxes and insurance. All rates are subject to change without notice. The rate posted may vary depending on past credit history, down payment, and approximate term. All loans are subject to approval. Other terms and conditions may apply.