VA Home Loan Frequently Asked Questions
A VA loan is one of the most widely used benefits available to veterans and military service members. However, just because it’s popular doesn’t mean many service members understand how this exclusive benefit works.
VA Loan FAQs
Below, we’ve assembled some of the most frequently asked VA loan questions to help you understand your benefits.
What are the advantages of a VA loan?
There are a number of benefits of taking out a VA loan. One of the biggest advantages is the ability for veterans and service members to purchase a home with no money needed for a down payment. Additionally, VA loans don’t require private mortgage insurance (PMI).
VA loans are easier to qualify for than conventional loans and interest rates are generally lower as well. If you ever want to convert your home equity into cash, you can borrow up to the full appraised value of your home. This could make it easier for you to accomplish your financial, homeownership and personal goals.
Who qualifies for a VA loan?
You may be eligible for a VA loan if you meet one or more of the following conditions:
- You spent at least 90 consecutive days in active service during wartime.
- You spent at least 181 days in active service during peacetime.
- You have more than 6 years of service in the National Guard or Reserves or had at least 90 days of service under Title 32, with at least 30 days being consecutive.
- You are the spouse of a service member who has died in the line of duty or as a result of a service-connected disability.
Do VA loans require a home appraisal to qualify?
Yes, the property you purchase must also meet certain qualifications in order for you to obtain a VA loan. A VA loan appraisal is performed by an appraiser certified by the U.S. Department of Veterans Affairs.
The appraisal process is done to evaluate the value of the home and to ensure the house meets safety and living standards for a veteran homeowner. Foreclosures or fixer-uppers, for example, may not meet the minimum requirements for VA loan benefits.
An exception to this appraisal rule is VA IRRRLs, also known as Interest Rate Reduction Refinance Loans. These don’t require an appraisal.
What documents do I need to qualify for a VA loan?
Veterans and military service members need several documents to qualify for a VA loan. You are required to obtain a Certificate of Eligibility (COE) from the Department of Veterans Affairs.
If you don’t have it, you’ll need to apply for one using the VA Form 26-1880 (which will require a copy of your DD-214). Along with the COE, you will need all of the typical items required to document your credit, savings and employment information.
Do all lenders offer VA loans?
No, not all mortgage lenders offer VA loan benefits. Be sure to compare VA lenders to find the best one to suit your needs as a service member.
Do disability benefits affect my eligibility to receive a VA loan?
If you are a disabled veteran, you meet the service requirements to be eligible for a VA loan. In fact, if you are disabled, you are entitled to even more benefits. Veterans receiving benefits for service-connected disabilities, spouses of veterans who died in service or from service-related disabilities, and veterans entitled to receive service-connected disability compensation are not required to pay the VA funding fee.
Eligible surviving spouses and active-duty recipients of the Purple Heart are also exempt from the funding fee.
Can I use my Basic Allowance for Housing (BAH) to qualify for a VA loan?
Yes. Your BAH acts as verifiable and reliable income that helps reduce your debt-to-income ratio (DTI). Keeping a low debt-to-income ratio is a key factor that’s used when underwriters determine your qualifications for a mortgage.
Can I have a co-borrower who is not a veteran on my loan?
Yes. Sometimes it helps to use both your credit and your co-borrower’s credit and income to help you qualify for the maximum required loan amount. Keep in mind that if your co-borrower isn’t a spouse or another veteran, the guarantee only applies to the veteran’s stake – roughly half – of the loan. This means that the VA guarantee will only be around 12.5% of the loan instead of the usual 25%. For this reason, lenders may be more hesitant to offer joint VA loans.
This is a question of entitlement. You can have your entitlement restored one time only in order to purchase another home with your VA loan. In this case, you must have paid off the loan but still own the property and want to use your entitlement to purchase a second home.
However, if you’ve paid off the loan and you no longer own the property, you can have your entitlement restored as many times as you want. You can reuse your VA loan eligibility for every new home purchase.
If you have had a previous VA foreclosure or haven’t fully paid back a VA loan, you may have impacted, or partial, entitlement limiting how much you can borrow. Speak with a Home Loan Expert about your situation.
Does my entitlement expire?
Your entitlement does not expire. If you’re an active duty service member, your entitlement is good to use immediately if you’ve met minimum service time requirements. If you’re discharged or released from active duty, a new determination of eligibility must be made based on the length of your service and type of discharge.
Can I use my VA loan for a second home?
Yes, you can use your VA loan benefits to buy a second home. However, the second property must be considered your primary residence in order to qualify for a VA loan. Ultimately, if you are living in your second home or vacation house for more than six months of the year, you’re in the clear.
Can I use a VA loan to buy a rental property?
No, but you can use a VA loan to refinance an existing rental home you once occupied as a primary home. The VA’s Interest Rate Reduction Refinance Loan (IRRRL), also known as the VA Streamline Refinance, can be used to refinance an existing VA loan for a home where you currently live or where you used to live, but no longer do.
Additionally, it’s possible to make rental income from a VA loan-backed property of up to 4 units as long as you live in one of the units
How do I get my eligibility back after a divorce if my spouse was awarded the home?
When the property is awarded to the spouse as a result of a divorce, entitlement cannot be restored unless the spouse refinances the property and/or pays off the VA loan in full. If the spouse is a veteran, they substitute their entitlement for yours.
Are the children of a living or deceased service member eligible for VA loan benefits?
No, children of an eligible veteran or service member do not qualify for VA home loan benefits.
What is the VA funding fee and why do I have to pay it?
The VA funding fee is a cost associated with obtaining a VA loan. It helps to ensure that the loan continues to require no down payment and has no monthly mortgage insurance. In addition to the funding fee, you may also be responsible for paying closing costs, VA-approved appraisal fees and title insurance.
This can be anywhere between 1.25% – 3.3% depending on the amount of your down payment and whether it’s your first time using a VA loan or a subsequent use. The funding fee for VA streamlines a 0.5%.
There are some cases in which the VA considers a veteran to be exempt from the funding fee. If you receive or are eligible to receive disability benefits, or if you’re a surviving spouse of a veteran who died in service or from a service-connected disability, you may be exempt from the VA funding fee.
The Bottom Line
VA loans offer important benefits to military service members. Do you qualify for a VA loan or have additional VA loan questions? Get started online now to begin the mortgage approval process.