A VA loan is a home loan that is guaranteed by the Veterans Administration. However, VA loans are not offered by the VA themselves. Instead, they are obtained through VA-approved lenders who choose to offer them.
The VA guarantees a portion of the loan amount to the lender in case of borrower default. This lessens the risk lenders take by offering these loans, which enables them to give veterans more favorable loan terms than they could otherwise qualify for. Because of the VA guarantee, VA loans do not require a down payment or mortgage insurance.
Most current or former members of the full-time military are eligible for the VA loan program. There are time-served requirements, but they are relatively short and vary depending on the years during which the veteran served.
For those veterans who have retired or are currently serving in the National Guard or Selected Reserves, these time-served requirements are a little bit longer. Generally, you can become eligible for a VA loan after 6 years of service.
Surviving spouses of veterans who died during service or from a service-connected disability are also eligible for the VA loan program.
VA loans can only be used to purchase a property which the borrower intends to occupy as his or her primary residence. They are used most commonly for single-family homes; however, in special circumstances, a multi-unit building can be purchased with a VA loan as long as you intend to occupy one of the units. A property being purchased with a VA loan cannot, under any circumstances, have more than four residential units and one commercial unit.
Yes. However, the VA does limit which closing costs a veteran can pay. Any other closing costs outside of those specified must either be the responsibility of the seller or the lender. The VA Lender's Handbook offers the following explanation for closing costs:
A general rule of thumb for the length of time it takes to do a VA loan is 45 days. However, it is very possible to do a VA streamline in as few as 10 days while a VA loan for a new home purchase could take as long as 90 days. A lot of this timeframe depends on how quickly you respond to your loan officer and how quickly you submit all of your documents. We suggest asking your loan officer this question as he/she will have a better understanding of all of the details pertaining to your individual situation and loan.
It depends. On a VA loan used to purchase a new home, you can only get cash back in the amount of your earnest money that you put down.
On a VA IRRRL or streamline loan, you are not allowed to get any cash at closing except for two situations:
On a VA cash-out refinance, the amount of cash you can take out at closing depends on how much equity you have available. The VA allows you to refinance up to 100% of your home's value, minus any closing costs you want to finance in.
The VA does not have any specific minimum credit score requirements. However, lenders are allowed to set their own credit score requirements. These are called overlays.
At Low VA Rates, we try to stick to the VA's guidelines as much as possible. In normal circumstances, we don't have any credit score requirement. We prefer to look more at your overall credit history and take a more human approach that considers the circumstances around why you have negative credit marks.
However, due to the coronavirus pandemic, we've currently had to have one implemented due to forces outside our control. The good news is that our current requirement is still lower than most other lenders and will, hopefully, be gone completely by the end of the year.
The VA loan program is unique because it actually has no stated maximum dollar amount for its loans, and there are no longer any loan limits for the amount they're willing to guarantee. However, how much you can borrow will depend on a few factors.
First, the amount you can borrow will primarily our loan amount will be determined by things such as your income and employment history, your entitlement amount, and how much residual income you'll have available. These will be used to evaluate how much you can reasonably afford.
Second, your loan amount will be affected by the reasonable value of the property as shown on the Notice of Value (NOV) provided by the official VA appraisal. However, if the sale price of the home is lower, then that is what your loan will be limited to.
Third, lenders themselves may be limited to offering loans capped at a certain amount. This is because many lenders sell their VA loans through a secondary market using a third party service, such as the Government National Mortgage Association. Many of these third-party services often prescribe maximum loan amounts, and VA loans are not granted an exception to those limits.
In theory, as many times as you’d like. However, the VA's occupancy requirement states that you must occupy the property being purchased as your primary residence. You cannot get a new VA loan unless you are moving (like with PCS order) and will have a new primary residence.
You are also limited by how much entitlement you have remaining. In order to get a second, third, or fourth VA loan, you must have enough remaining entitlement for the VA to guarantee the home. If you do not, you may be able to apply for a restoration of entitlement on any previous VA loans that have been paid off in full, however this can only be done once, and the only other way to get your entitlement back is to sell a property.
Generally no, though there are some cases where it may be allowed.
For example, VA rules state that you can purchase a multi-unit property if you will be occupying one of the units as your primary residence. So, you could use a VA loan to purchase a duplex if you live in one of the two units.
However, please not that the most units a property can have is four. Anything with more than four units will not be eligible for a VA loan.
While it can take longer or shorter, 45 days is generally a good rule of thumb when it comes to how long VA purchase loans take. VA loans can be affected by the timeframe of the appraisal, how motivated the seller is, and the responsiveness of your realtors. How long it takes you to submit all of the required documents also plays a big role.
If you'd like a more detailed estimate tailored to your specific loan, we suggest you ask your loan officer, as they will have a better understanding of the individual details of your situation.
Yes, if you made an earnest money payment or you plan on adding an energy efficient mortgage (EEM) to your purchase loan.
If you made an earnest money payment, you will need to talk with your loan officer about how to structure the loan so you get that money back at closing.
Outside of these two situations, you will not be able to get money back. Many times new buyers want to know if they can get cash to furnish the home or do upgrades that aren't energy efficient, and that's just not possible with a VA purchase loan.
A VA streamline loan is a refinance option that allows the underwriters to reuse a lot of the same information from the original loan. The official name for the VA streamline is the Interest Rate Reduction Refinance Loan (IRRRL).
Only an existing VA loan can be refinanced with the VA streamline refinance option. At closing, IRRRLs allow you to roll most, and sometimes all, of the closing costs into the loan amount, including up to two discount points.
To qualify for a VA streamline loan, you must:
In addition, the refinance must pass the net tangible benefit (NTB) test. In order to pass, your IRRRL must provide one of the following benefits:
The main benefits of a VA IRRRL are the reduction in your interest rate and a lower monthly mortgage payment. Another benefit could be moving from an adjustable-rate loan and into a fixed-rate loan before your interest rate starts to rise.
Some other benefits you might experience are dependent on how your IRRRL is set up. These include:
In terms of the actual loan process, IRRRLs also have some advantages over other loan types, including the fact that there's no need to verify your income, assets, or employment, and you don't have to pay for an appraisal.
Technically, the number is unlimited as long as both you and the loan being refinanced meet all of the conditions, including the net tangible benefit test.
Yes, but they tend to be less than for other loan types because we can reuse a lot of your original loan information.
Closing costs you can expect include the VA funding fee, which is required on all VA loans, and any allowable fees listed in chapter 8 in the VA Lender's Handbook. A lender may also charge you for discount points.
The good news is that, most of the time, you can roll all of the closing costs into the loan amount. The only exception is for situations where there are more than two discount points. Any points above two cannot be rolled into the loan and will need to be paid out-of-pocket at closing.
In general, it's best to expect a streamline loan to take 30 days. However, they can be done in less than 10 days. Your loan officer will be able to give you the best estimate for the timeline of your specific streamline refinance.
One of the reasons for this accelerated timeline is that streamline loans are much faster to process because we don't need an appraisal or home inspection, and we also don't need to verify your income or assets.
The main answer is no. VA streamline loans are sometimes referred to as no-cash-out refinances. However, you could get a refund of any existing escrow balance from your original lender, though some lenders may simply subtract this balance from your payoff amount.
Another way you might get some money out is if you bundle an energy efficient mortgage (EEM) with your IRRRL. EEMs can provide up to $6,000 to make approved improvements to your home's energy efficiency.
Finally, if there were calculation errors, some states will allow you to get up to $500 at closing to make up the difference.
According to federal law, you can only get a VA IRRRL is your current loan has been seasoned long enough. In order to be considered "seasoned," you must have:
The short answer is no. In order to qualify for an IRRRL, your interest rate must, generally, drop at least 0.5%. Even just dropping this minimum amount can have a big impact on your monthly mortgage payment, so a 1% drop is not necessary.
Another thing to consider is how much you're actually saving. You can only get a streamline refinance if you experience enough savings within a specific time period. Basically, when you add together the amount you save each month for the first 36 months, it has to offset how much you paid in closing costs.
It's also important to note that your interest rate doesn't need to drop at all if you're using an IRRRL to move from an adjustable-rate mortgage to a fixed-rate. This can be a great option with potential for savings if the fixed-rate portion of your ARM loan is set to expire, especially if rates are currently climbing.
If you choose to roll the closing costs from your IRRRL into the total loan amount so you don't have to bring any money out-of-pocket at closing, this can cause your loan balance to go up.
Additionally, if you defer one or two of your mortgage payments because of how the timing on the IRRRL works out, these payments don't just disappear. Instead, the interest owed to the current lender from those payments get added to your payoff amount, increasing the balance of your IRRRL.
However, we've found that even if your balance goes up, most people still benefit from the savings they experience. Often, the cost of rolling your closing costs into the loan is recouped by the amount you save within 6–18 months, if the loan is structured properly.
Your escrow refund is mailed to you by the lender we paid off with the VA IRRRL, usually within 30 days of the loan funding. Low VA Rates has no control over when this occurs or how much you'll receive.
Also, while an escrow refund occurs on over 95% of the loans we refinance, you are not guaranteed one. If you don't get a refund, it's usually because your lender either reduced the payoff amount by your escrow balance or you didn't have anything in escrow when the IRRRL closed.
If you want to be certain of what escrow refund you will get, then we suggest calling your loan officer and having them get you a definitive answer from your previous lender.
No. Legally, lenders are not allowed to report you to the credit agencies as late until after the 30th of the month. However, many people often confuse their lender's late charge with being reported late.
Many lenders like to apply a late charge to payments that haven't been made by their "late date." This date can vary from lender to lender, but it's usually either the 10th or 15th of the month.
At Low VA Rates, we do our best to help you avoid any late fees or derogatory marks on your credit while you wait for your IRRRL to fund.
Mortgage payments are due on the first day of every month, and most lenders have a collections department that will start calling for mortgage payments that have not posted by the 20th. Often these calls are used as scare tactics to get you to make your payment.
However, if your loan has closed, been approved to close, or is in the final stages of approval, then we suggest that you work closely with your loan officer to determine just how serious these collection calls are and if your streamline loan will close in time for you to avoid any late or delinquent reports that could damage your credit.
In your loan closing documents, you will receive a temporary payment statement or coupon that will instruct you on where to send your mortgage payment. Once 60–90 days have passed, you should receive an official welcome letter that will tell you how to set up recurring payments.
If you ever have any questions or confusion on where to send your payments, you can always contact accounting for assistance at 801-701-3804.
Our goal here at Low VA Rates is to make your loan process as effortless and easy as possible. VA streamline loans are almost always done in your home at whatever time you prefer. However, there is a lot of flexibility and we are willing to do whatever will work best for you.
For example, we have closed loans at truck stops in the middle of the Alaskan tundra and at US embassies overseas. We can close your loan wherever you'd like.
Technically, you are never actually skipping any payments. Instead, you are simply deferring them.
Basically, this means that when we set up your VA streamline, we can time it right so that we roll one or two of your payments into your new mortgage. Instead of paying them each month, you will pay them off over time.
We've found that most veterans prefer this approach because it allows them to use those months to attack high-interest rate credit cards, pay other bills, take a much-needed vacation, or just save the money for a rainy day.
While the VA cash-out refinance can lower your interest rate, it is more commonly used to get cash out of your home's equity.
This cash can be used for a variety of purposes, and the VA doesn't have any rules that limit what these uses can be. For example, you may want to use the cash to pay for home improvements, buy a car, pay for schooling, consolidate your debt, and more.
Finally, a cash-out refinance can also be used to move from another loan type into a VA loan.
The qualifications for a cash-out refinance are almost identical to the qualifications for a normal VA purchase loan.
You must have a Certificate of Eligibility. In addition, your lender will evaluate your credit history, income, employment, etc.
Finally, if you are using a cash-out to take money out of your home loan, you may also be required to explain your reason for needing the money.
Theoretically speaking, there isn't a maximum number of times that a you can refinance using a VA cash-out loan. However, there are plenty of practical restraints that will limit most borrowers to two or three refinances throughout the term of the loan.
For starters, you can only do a cash-out loan if you have equity available. This can take years to build, especially if you've already done a cash-out refinance previously. In addition, your loan must meet one of the VA's net tangible benefits which, for a cash-out refinance, are:
Finally, if you are doing a cash-out refinance on an existing VA loan, you must have made 6 monthly payments and waited at least 210 days from the due date of your first payment.
Yes, but what these closing costs can be is limited, just like with a VA purchase loan.
There are also limitations on what closing costs you can roll into your total loan amount. For cash-out refinances, you can only roll the funding fee into the loan amount. For the other allowable closing costs, you can cover them using the cash you take out.
The exact amount will depend on how much equity you have in your home. But one of the benefits of a VA cash-out loan is that you can take out the full amount of equity, which means your new loan will be equivilent to 100% of your home's value.
One thing to keep in mind, however, is that you cannot increase the loan amount by financing in your closing costs. These must be paid for either out-of-pocket or by using some of the cash being taken out at closing.
Closing costs can be a very tricky thing for many home owners because a lot of lenders aren't transparent about what theirs are. It can also get confusing because what these costs are, and even what they're called, can vary from lender to lender.
So, while it's not possible to list every possible closing cost, here, you can check out Chapter 8 of the VA Lender's Handbook where all of the allowable and non-allowable closing costs are listed.
However, just because a charge is allowable doesn't mean it will always be included in every lender's closing costs. So the best way to know what closing costs a lender plans on charging you is to look at the Good Faith Estimate (GFE) they've provided you. On page 1 of the GFE, Box A explains the adjusted origination charges, which is where most lenders differ. If you want to compare the closing costs between lenders, this is section you should be looking at.
For most loan types, you are required to pay some kind of mortgage insurance if you make a down payment of less than 20%. This insurance gets paid every month as part of your monthly mortgage payment.
VA loans, on the other hand, do not require a down payment AND they don't require any mortgage insurance. That's because the VA uses a funding fee. Rather than being a recurring charge you pay monthly, it's a one-time fee that you can either pay at closing or roll into your loan amount. The amount of the funding fee varies depending on your loan type and whether you've had a VA loan before. The VA's funding fee table shows how much it is for each of the variables.
In addition, the funding fee is used to help fund the VA loan program. Because the VA is guaranteeing 25% of every VA loan, they need to have the money to make good on that promise if a borrower ever defaults. The funding fee allows them to have that reserve and protects the VA loan program as a whole.
We get asked this question all the time. On the surface, it can seem to you that your closing costs are too high. However, at the end of the day, all loans have some kind of cost associated with them, and that cost usually shows up either as closing costs or a higher rate that costs you more in interest over time.
And, if we're being truly honest, closing costs are one of the ways a lender is able to make money. Since they're a business, making money is an essential part of success, both in the short and long term.
However, at Low VA Rates, we do our best to keep the closing costs as low as possible, because we want to help veterans as much as possible. That's why we offer our $250 guarantee. Basically, if you can find another lender with a lower APR (which takes into account both interest rate and closing costs), then we'll give you $250. You can contact us for more information about our guarantee if it's a challenge you're interested in.
While it is possible, the trade-off for getting a VA loan without closing costs is a higher interest rate, which can end up still costing you thousands of dollars extra in interest over the life of the loan.
Because of this extra interest, the only time we really consider doing a loan with no money out of pocket is when you are planning on moving or refinancing within about 12–18 months. However, this is not a black-and-white rule.
We prefer to maximize both a lower rate and low closing costs, especially during refinancing. In many cases, we can structure your refinance loan so that you're able to recoup your closing costs within 12–18 months.
VA hybrid ARMs are a type of VA home loan that combines aspects of both fixed-rate mortgages and adjustable rate mortgages. In a hybrid, your interest rate is fixed for the first 3–10 years of the loan, depending on what option you choose. Then, after the fixed period ends, your loan's interest rate can be adjusted annually.
On a VA hybrid ARM loan, the rate cannot adjust more than 1% above or below the previous rate. Hybrid ARM loans also have a lifetime rate cap of 5% from the original rate. This means that if the original interest rate was 3.5%, the rate could never rise higher than 8.5% throughout the duration of the mortgage.
VA hybrid ARMs have a variety of advantages and disadvantages. Generally, the initial interest rate is lower than they are for purely fixed rate loans, and they could always adjust lower. In addition, they are tied to the CMT index, which is one of the most stable out there. However, they will eventually transition into the adjustible period, which means the rate could go higher, putting more of a strain on your finances and making it harder to plan your budget.
There are two main kinds of VA hybrid ARMS: the 3/1 ARM and 5/1 ARM. However, 7/1 and 10/1 ARMs also exist.
In all of these ARMs, the first number indicates the number of years the initial rate will remain fixed, and the second number represents the maximum percentage it can be adjusted each year once the loan moves into the adjustible period.
So, for example, on a 3/1 ARM, the initial interest rate will remain fixed for three years, and each year after that the interest rate can be adjusted no more than 1% in either direction.
While asking this kind of question isn't always the most productive way to make an informed decision, since it inherently indicates a worst-case scenario, we'll still do our best to answer it.
While it's true that history generally shows an upward trend for mortgage rates, they have actually done down more than they've gone up over the last couple of decades. In addition, over the past 10 years, they've never gone up for more than 3 years straight.
Rates go up and they go down. And when they do go up, the VA has done a lot to protect you. On VA hybrid ARMS, your rate will never increase by more than 1% each year, no matter how high or fast the index rises. In addition, they will only rise once per year and only 5% total over the life of your loan.
Finally, if you're worried about rising rates, you can always refinance into a fixed rate loan before your adjustable period begins.
No, we're definitely not a scam! Just 10 years ago or so, the mere thought of doing a mortgage over the internet without meeting face to face seemed foreign to most of us. But we live in a digital age, and just because we conduct most of our business online doesn't mean we're scamming you.
We aren't. No VA home lender is because the VA itself does not do loans or lend money to buy homes. Instead, they guarantee a portion of your loan to lenders like us in order to help reduce some of the risk we assume when lending you money.
And, while we don't represent the VA, we are an approved VA lender who is authorized by the Department of Veterans Affairs to originate VA home loans. We even have a VA lender ID number, 9797520000, to show we're legit.
As our name may suggest, we take great pride in providing hard-working veterans with affordable financing. In fact, we're so confident in our ability that we created our $250 guarantee. Basically, if you find a lender who's able to offer a lower APR than we are, we'll either beat it or give you $250. You heard that right—$250! To learn more, you can check out our Official Rules & Regulations.