What Is Escrow & How Does It Work with a VA Loan?

What Is Escrow?

Quick Definition of Escrow
Money used for your homeowners insurance, property taxes, or as part of your offer on a home.

During the mortgage process, escrow can refer to both an escrow account and the money you put into that account.

While the VA itself does not require escrow as part of its standards for the VA loan program, you will likely still encounter it when you get a VA loan. That’s because most lenders do require it as part of their internal loan guidelines.

In fact, you may even encounter two different forms of escrow and escrow accounts at different points in the process: once before closing and then after.

Escrow before Closing

The first point in the process where you’ll encounter escrow is often after you’ve found your dream home and decided you want to make an offer.

Because of today’s competitive market for homes, where sellers still have a slight advantage, you’ll need to focus on making your offer as enticing as you can.

What Is Earnest Money?
Money given as a show of good faith when you make an offer on a home that also helps makes your offer more attractive.

One way to do this is by putting what’s called earnest money into an escrow account as part of your offer. Earnest money shows a seller that you’re serious about buying their home—and you have the funds to back it up.

If the seller accepts your offer, your earnest money is taken out of the escrow account and applied to your loan. On other loan types, escrow usually gets applied to the down payment. However, since VA loans don’t require any money down, your funds will usually get applied to your closing costs instead.

If your offer is rejected, you should get your money back, minus a small fee.

Escrow after Closing

The second time you’ll encounter escrow during your VA home loan process is after closing. However, how escrow works in this situation is a bit different than how it works before.

After closing, you won’t be making just one deposit into an escrow account. Instead, every month, a portion of your mortgage payment gets separated and placed into an escrow account by your lender.

Because your payment is made all at once, you might not even realize that you’re contributing to an escrow account. However, most mortgage payments are actually divided into four different parts, often referred to by the acronym “PITI,” which stands for:

  1. Principal
  2. Interest
  3. Taxes
  4. Insurance

It’s the last two of these four that get separated out and held in escrow, and they refer specifically to property taxes and homeowners insurance.

Though your lender takes this money from you, it’s not theirs to keep, which is why it gets placed in a separate escrow account until it’s due. The first two portions (principal and interest), however, are theirs to keep.

Benefits of an Escrow Account

Setting up an escrow account for part of your mortgage payment comes with a lot of pros. Not only does it protect your finances and home in a variety of ways, but it also ends up protecting your lender as well. That makes it a win-win situation for everyone involved!

Budget for Your Insurance & Property Tax Payments

Easily one of the biggest benefits of using an escrow account is the ability to simplify budgeting for your homeowners insurance and property tax payments.

Essentially, your lender does the budgeting for you when they calculate what these bills will be. This calculation combines your home’s property taxes from the previous year and adds them to your homeowners insurance premium. This total is then divided over 12 months.

The number that comes out is the amount you have to budget each month in order to have enough when your taxes and insurance are due.

While this kind of budgeting is certainly something you could do yourself, many homeowners don’t realize how difficult it is when each payment is often thousands of dollars each, and they’re only due once or twice each year.

Having a forced budget that’s integrated into your mortgage payment makes being able to afford your taxes and insurance simple.

Prevent Late Payments & Fees

Because your lender controls your escrow account, they are also responsible for making sure your money gets distributed on time, which means you don’t have to worry about remembering due dates.

It’s easy to forget about things that only come around once per year, especially when life gets busy or stressful. Especially since, as a servicemember or veteran, you have a lot on your plate.

If your due dates happen to coincide with new PCS orders, a deployment, medical appointments, or even just family events, it’s easy to see how you might not remember something that used to be 365 days away.

Avoiding late payments is important because they can have pretty dire consequences. If you are late on your property taxes, for example, you will have to pay late fees, which can sometimes be as much as thousands of extra dollars. In addition, making late property tax payments is usually considered a default on your loan agreement, which means your home could be placed in foreclosure.

Paying your home insurance late could also cause you to lose coverage. So, if your home were damaged, you’d have to pay for repairs out of pocket, which can also be incredibly expensive.

When you use an escrow account, you don’t have to worry about these issues. By turning the responsibility over to your lender, they also become financially responsible for any consequences of being late.

Protect Your Home from Liens & Disasters

In general, lenders are highly motivated to remember your payments and due dates—and not just because they don’t want to pay the late fees for you. They also want to avoid more serious consequences.

One of these additional consequences is that not paying your property taxes can lead to having a lien on your property.

Because this lien is placed by the government, it actually takes priority over the VA loan you owe to your lender. So, until your property taxes are paid and the lien is removed, your lender won’t be able to recoup the money you owe them.

Then, when it comes to insurance, your lender needs your home to be protected because it serves as collateral on your loan. Normally, this means that if you don’t pay your loan, the lender can resell the home to regain most of the money they lose out on when you can’t pay. But if the house is damaged (and uninsured), then they have no way to get that money back.

With an escrow account, a lender knows that your home will be insured against damages and you’ll have the money to cover your property taxes. It also means that you won’t have to worry about losing your home because of a government lien or natural disaster.

Problems with Escrow Accounts

While escrow accounts have more positives than negatives, they aren’t perfect. While some concerns are more serious than others, it’s important to be aware of all the issues you could potentially face so that if you do encounter them, you won’t be surprised or unprepared.

Did You Know . . .
The account fee might not be the only escrow-related closing cost. Lenders can legally require a deposit for up to 2 months of escrow payments when you close.

Extra Money Due at Closing

Because the company managing your escrow account is a business, they need to make money. Usually, they get paid a small portion of your home’s price, and you pay them just once, when you close on your home.

Even though the additional fee for your escrow account is only about 1–2% of the loan amount, in real cash, it ends up being multiple thousands of dollars extra you have to bring to the closing table. Here’s an example of what those numbers might look like:

As of May 31, 2019, the median sale price for homes in the US was $234,900. At 1–2%, that means you could be paying an extra $2,349 to $4,698 at closing.

That’s a hefty chunk of change for the convenience of using an escrow account. But you might not have to cover all of it yourself.

When you’re negotiating closing costs and who will pay what, you may be able to convince the seller to split the escrow account fee with you. Or, if you’re lucky, you might even be able to get them to pay all of it.

Mortgage Payment Increases Caused by Shortages

Shortages are one of the more serious complications you can experience with an escrow account because they can potentially cause the most financial strain.

When projecting what your property taxes will be next year, your lender has to base them off of what they were this year. However, even though it’s pretty common for property taxes to go up, your lender only finds out about it when they get the bill, which means you’ve been paying less than what’s due.

The good news is that your lender will usually cover the shortage themselves in order to get the bill paid on time. However, you will have to pay them back plus cover the new increased estimate for next year, which means that the property tax portion of your mortgage payment doesn’t just go up, it goes up double.

To help illustrate what that means, here’s an example with some numbers:

A flowchart that illustrates how an escrow shortage increases your monthly payment

Last year your property taxes were $1500. So, this year, to cover that amount, your lender charged you $125 each month as part of your mortgage payment. But when the received your tax bill, your property taxes actually ended up being $2,100, so you were actually short $600.

So, for this year, the new property tax estimate is $2,100, which means your monthly payment will increase to $175 ($50 more per month). But that only covers the future bill. You still have that $600 shortage from last year to cover.

Most lenders will give you time to pay that back over the next year, so they take that $600 and divide it by 12 months as well, which means another $50 increase to your monthly payment.

So now, thanks to just one increase, your monthly payment didn’t just go up $50, it went up by a total of $100.

Luckily there may be a few options here for you. If you are a disabled veteran, you could qualify for a property tax waiver, if your state offers one. However, if you aren’t disabled or otherwise qualify, or if your state doesn’t offer a waiver, you’re still not out of luck quite yet.

One option would be to contest the assessment that made your taxes increase in the first place. However, just be warned that this can be a time-consuming process, and the specific laws regarding how to do it and when it’s due can vary.

Another option would be to work out a different payment plan for the shortage with your lender.

If you happen to have enough extra money, you could just pay the shortage all at once instead of adding it to your monthly payment. In this example, you’d pay the $600 right away and then your monthly bill would only go up by $50 instead of $100.

You could also just pay one part of the shortage and then budget the rest over the next 12 months. So, for the previous example, maybe you have an extra $300 you can give to your lender right away. Now you only have to budget an additional $300 for the next 12 months, and your monthly mortgage payment would only need to go up $75 total instead of $100.

Finally, you could see if your lender would be willing to give you more than 12 months to pay back the shortfall. Just be cautious of going this route, in case your property taxes keep rising. A longer payment plan could mean you just keep getting further and further behind on paying back your lender.

Not Earning Interest on Your Money

If your property taxes decrease, you get the opposite problem of a shortage, which is called an overage. While this might seem like a “good” problem to have because it means you get money back, it can still impact on your finances negatively.

For starters, you only get overage money back from your lender if it’s above a certain amount. If it doesn’t meet that threshold, you lender may hold onto it in case you experience a tax increase in the future. Again, still not the worst problem to have.

The biggest financial issue, however, with an overage is that you are most likely missing out on having that money—typically thousands of dollars—earn interest while it waits to get used.

Currently there is no federal law that requires your lender or escrow company to pay you interest. As for state laws, only 15 states currently require interest on escrow accounts in their legal code:

A map showing the fifteen states (Alaska, California, Connecticut, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Oregon, Rhode Island, Utah, Vermont, and Wisconsin) that require escrow accounts to earn interest
Sadly, if you live in any of the other 35 states, you’re out of luck when it comes to earning interest on your escrow money.

How Escrow Works to Actually Pay Your Property Taxes & Homeowners Insurance

The process for how escrow is used to pay your homeowners insurance and property taxes

The process for how your lender uses your escrowed funds to pay your tax and insurance bills is kickstarted when they first calculate your monthly payment.They do this by estimating your property taxes and adding that number to your homeowners insurance premium, then dividing the total by 12.

After calculating what your monthly escrow payment needs to be, they add it into your monthly mortgage payment. Then, when you send your payment each month, they separate out the escrow portion and deposit it into your escrow account.

Did You Know . . .
Escrow refunds during refinance aren’t guaranteed because your lender can pay your taxes early.

The third step occurs when your lender receives your property tax or homeowners insurance bills. This happens once or twice a year for property taxes in most counties and typically just once a year for your homeowners insurance premium.

After receiving your bill, your lender may choose to pay it before the due date, if there is an early payment discount. Otherwise, they’ll simply arrange for the payment to come out of your escrow account closer to the due date.

Still Have Questions about Escrow?

Now that we’ve covered all the basics for the question “What is escrow?,” we hope you have the confidence to move forward through the VA loan process. If you do have any questions about escrow or any other topic, we’re happy to answer them when you call us at (866) 569-8272.

The Coolest New Military Technology & Research Projects

Screen lit up with digital rendering of new technology

The United States military has long been one of the biggest inventors of new technology. In honor of its history and continued role as a place for scientific research and innovation, here are 10 of the coolest new things the military is researching and developing.

1. Infrared Camouflage

Icon of infrared night vision gogglesWith the rapid advancement of technology, the camouflage of the past is no longer sufficient. Even when a servicemember or military vehicle is able to visually blend into its surroundings, infrared sensors can now locate them based on their body heat and the electromagnetic signatures they give off.

During recent testimony before the House Appropriations Committee, Army officials shared their plans to continue developing infrared camouflage that can disrupt and diffuse these signatures in order to better protect their troops and vehicles.

To us, it kind of sounds like the real-life version of Harry Potter’s invisibility cloak.

2. Wearable Robot Suits

Icon of soft robotic suit legsThe Soft Exosuit from the Department of Defense’s Defense Advanced Research Projects Agency (DARPA) is essentially a wearable, lightweight robot that troops can use to increase their endurance and strength.

With integrated sensors and cables that transmit extra support where it’s needed, the exosuit allows the wearer to move naturally, but with additional support where they need it most. This support is provided automatically and is tailored to the individual wearer’s needs by a microcomputer.

3. Cyborg Insect Spies

Icon of a cyborg mothAs part of another DARPA project, the military is developing technology that would allow them to control the brains of bugs and direct their flight paths.

These cyborg insects (seriously, how cool does that sound?!) would then be used to perform reconnaissance and spying missions in areas people can’t easily access.

4. Self-Guiding Bullets

Icon of three self-guiding bulletsLike something out of a cartoon or comic book, DARPA is also working on developing self-guided bullets that can change their own trajectory in order to hit their target.

Called the EXACTO bullet, which stands for Extreme Accuracy Tasked Ordnance, it uses optical sighting and guidance systems to adjust its path in real time.

5. Biodegradable Ammunition

Recycling icon representing biodegradable bullet casingsAnother bullet-related development that the Army is looking into is the creation of biodegradable ammunition.

Though only intended to be used for live-fire training purposes (and not combat), the goal of the new ammunition is two-fold: to make the cartridges biodegradable and to have them contain bioengineered seeds.

These seeds will sprout into plants that can remove the toxins and pollutants released into the environment by the training ammunition.

6. Submarine-Stopping Slime

Icon of a submarine being stopped by slimeInspired by the hagfish (Google it at your own risk!), the Navy is currently developing a type of synthetic slime that can be used to stop enemy submarines by clogging up their propellers.

The slime works by expanding up to 10,000 times its original size when it comes into contact with water. It’s primarily made up of two different proteins, one of which is tightly curled until the water causes it to unravel and expand, creating a physical barrier in a matter of minutes.

Another cool part about this slime? It doesn’t have any long-term environmental effects, since it will naturally dissipate with time.

7. Laser Cannons

Icon of a military plane shooting lasersLike something out of Star Wars, the military is looking to arm a variety of its vehicles, including trucks, fighter planes, and Navy ships, with lasers.

The laser cannons on aircraft would allow pilots to overcome the difficulties they face to correctly time and aim at threats approaching from behind. In addition, they could also be used to protect aircraft from surface-to-air missiles.

The lasers mounted to ships would help defend them against attacks by drones and boats, while truck-mounted lasers would neutralize mortar shells or incoming drones.

8. Smooth-Surface Wall Climber

Icon of a man climbing a smooth, vertical wallThe Z-Man wall climber was inspired by geckos’ ability to climb a variety of smooth, vertical surfaces. But we also like to think Marvel’s friendly neighborhood Spiderman also played a role.

With the ability to climb up walls—even those made of glass, metal, or fiberglass—troops would have a greater element of surprise, especially in urban settings.

9. Super-Strong Copper & Tantalum Alloy

Icon of a shield made of a super-strong metalIn another development reminiscent of superheroes, the Army has created a new alloy that is incredibly strong—it’s even been compared to Captain America’s fictional vibranium shield.

Just like Cap’s shield, this new alloy is able to withstand extreme impact without deforming, as well as drastic temperature changes. Because of these attributes, it can be used in a variety of capacities, including protective gear for servicemembers.

10. Metal Foam

Icon of a square of metal filled with holes to represent metal foamAnother metal-based technology, a material coined Composite Metal Foam (CMF) has been engineered by the Army as part of a research partnership with North Carolina State University. Like its name suggests, CMF is a metal that is filled with foam-like air pockets.

Thanks to its composition, CMF is much lighter than traditional metal. But it’s also much stronger and better at withstanding ballistic impacts. The holes in the metal disperse and distribute both heat and energy from a collision.

Tell Us Your Favorite Military Innovation!

In addition to these 10 developments, there were many, many others that we could have included. Some honorable mentions are the Visual Eye room mapper, a satellite melter, brain implants that help restore memories, and synthetic lifeforms that can alert and track enemies.

With so much amazing research being performed by the military, we know we’ve probably missed some! If you feel like we left something off the list, comment and let us know. At Low VA Rates, we’re so grateful for the military and all they do—including making the world a better place through new technology.

Is It Harder to Buy a Home with a VA Loan?

Beautiful modern home with a American flag out front

If you’re considering buying a home with your VA loan benefits, you might have heard the rumors that using your benefits will complicate the process.

However, these rumors are just that: rumors. As one of the best mortgage programs for buyers, the VA loan program can help save you thousands of dollars over the life of the loan, through a lower interest rate, no down payment requirement, and no need to pay for mortgage insurance. And it won’t be any extra hassle for your seller.

Despite these facts, you still might be hesitant to use your VA loan, thinking you could run into trouble. To help ease your mind, and the mind of a seller, here are three truths about using a VA loan to purchase a home.

1. VA Loans Close Just as Often as Other Loan Types

One of the most common misconceptions about VA loans is that they’re less likely to close compared to other loan types.

However, according to Ellie Mae’s Origination Insight Report from February 2019 (the most recent as of this publishing), the rate of closure for VA loans is almost always within 1 or 2 percentage points of conventional loans, as well as the overall average for all loan types. And some months even show a higher close rate for VA loans.

Another fact to keep in your pocket? While a lot of first-time homebuyers like to go with FHA loans, they actually close the least often. From February 2018 to February 2019, VA loans closed at a significantly higher rate than FHA loans.

If the seller of the home you’re interested in buying expresses this concern, now you have the facts to persuade them that using a VA loan does not add additional risks to closing.

2. VA Loans Don’t Take a Lot of Extra Time to Close

While VA loans do, on average, take a little bit more time to close, it’s usually only two or three days longer than the average for all loan types.

However, in order to make sure your VA loan is the quickest it can be, you’ll want to make sure you choose the right lender.

Basically, pretty much any lender can do a VA loan. However, only some are able to do them without VA oversight. If your lender is less experienced and doesn’t have automatic authority, they have to submit your loan to the VA, which slows down the process.

So, when choosing your lender, you should find one that is LAPP-approved, which means they’ve qualified to participate in the VA’s Lender Appraisal Processing Program. As a LAPP-approved lender, they’ll have authority to request, process, and approve your appraisal without directly involving the VA.

You’ll also want to find one who has been granted “nonsupervised automatic authority” by the VA. In order to achieve this status, the lender must regularly complete a certain number of VA loans and meet a minimum requirement for years of VA loan experience.

At the risk of sounding too self-promoting in a blog post, we wanted to take a second to mention that Low VA Rates just so happens to be both LAPP-approved and a nonsupervised lender. In case you might be wondering.

3. VA Appraisals Fairly Evaluate the Home

One of the conditions of purchasing a home with a VA loan is that it must meet the VA-specific appraisal guidelines. While the guidelines themselves are a little different, the appraiser doesn’t work for the VA. In fact, they do all types of home appraisals for multiple loan types.

This means they won’t treat the appraisal any different just because it’s being purchased with a VA loan. How they value the home will not be influenced in any way.

The fact is, the determination of home value doesn’t have anything to do with the loan type. It is generally based on the objective condition of the home, the value of the homes around it, and other factors unrelated to how you plan to purchase the property.

The only way your VA appraisal will be different from any other type of home appraisal is that the appraiser is specifically tasked with making sure everything meets the VA’s minimum property requirements (MPRs), which is a slightly longer list that helps ensure the home is “safe, structurally sound, and sanitary.”

Use Your VA Loan to Buy a Home with Confidence

If you’re one of the few who qualify for a VA home loan, you deserve to take advantage of it. Out of all the home loan programs, it offers the most benefits to you as a buyer, so don’t let misinformation or rumors keep you from what you’ve earned as one of our nation’s heroes.

Also, don’t hesitate to give us a call if you have any other concerns or questions about using a VA loan. When you talk to one of our expert VA loan officers, there’s never any obligation to choose us as your lender. We just want to help you, whether that’s by simply providing information or actually originating your loan.

You can speak with one of our loan officers at (866) 569-8272.

Changes to VA Cash-Out Refinance Loans

A veteran's home being considered for a VA cash-out refinance loan

Last year, when President Trump signed the Economic Growth, Regulatory, and Consumer Protection Act into law, all types of VA refinance loans experienced some significant changes.

In mid-December, the VA released a circular outlining the new rules specifically for cash-out refinance loans. These rules define how lenders should put the law into practice so they are in compliance. To put it another way, the rules are a practical application of the larger law.

When the New Rules Go into Effect

According to the circular, the new rules for VA cash-out loans go into effect on February 15, 2019. They apply to all VA cash-out refinance loans that are written on that date or after.

3 Main Changes to VA Cash-Out Rules

On February 15th, there are three main changes that will go into effect:

  1. An update to the requirements for the loan-to-value (LTV) percentage
  2. The addition of a net tangible benefits (NTB) test
  3. A requirement for new disclosures to be given to the borrower

In the sections below, we’ll cover each of these changes, including the history of what they used to be and how they will be changing on February 15th.

1. Changes to the LTV Percentage

The total loan amount for a VA cash-out refinance loan can no longer exceed 100% of the home’s value.

How the LTV Percentage Used to Work for Cash-Out Loans

Historically, one of the benefits of a VA cash-out refinance loan was the ability to refinance up to 100% of your home’s value. Many other cash-out refinance types, including conventional and FHA cash-out refinances, limit borrowers to only taking out up to 80%, or sometimes 90%, of their equity.

However, because VA cash-out loans allow you to roll the funding fee into your loan amount, rather than paying it up front at closing, borrowers who refinanced 100% of their home’s value would end up with a loan amount that was greater than the value of their home.

Here’s an example of how it used to work:

Shaundra wants to do a VA cash-out refinance on her home so she can pay for her son’s college tuition at Yale. She still owes $200,000 on her current home loan, and when she has her home appraised, it comes back with a value of $300,000.

She decides to refinance the full value of her home—all $300,000 of it. Because she’s rolling in her closing costs (which we’ll say end up being $12,000, or 4%, for this example), she’ll get $88,000 in cash back. This will almost cover her son’s first year of tuition.

On top of her loan and the other closing costs, Shaundra also decides to finance the VA-required funding fee into the loan amount. Since she has used her VA eligibility before, for her current home loan, she is charged a 3.3% funding fee, which comes out to $9,900.

By financing the funding fee into her loan, it brings the total amount of Shaundra’s new home loan to $309,900.

As you can see, Shaundra’s new loan ($309,900) is for more than her home is worth ($300,000). While this used to be allowed under the VA’s rules for the loan-to-value ratio of cash-out refinances, their new rules prohibit it.

How the LTV Requirement Has Changed

So what is allowed? The new rule states that the borrower’s total loan amount (including any financed closing costs or funding fee) cannot exceed 100% of the home’s value.

Let’s put that in real terms. The rule is basically saying that if the borrower wants to finance their closing costs and funding fee into the loan amount, it reduces the how much they’re able to get in cash back.

Going back to Shaundra’s example, if she wants to finance her 4% closing costs and 3.3% funding fee into the loan, she can no longer get the full $88,000 in cash out. Instead, the most she could get would be just over $79,500. Here’s how the math works:

If Shaundra finances her home at $279,500, her 4% closing costs come to $11,180 and her 3.3% funding fee totals $9,223.50. Because she is rolling everything into the loan amount, her new total is $299,903.50, which is just under the 100% value of her home.

We can then calculate the LTV percentage by dividing her total loan amount ($299,903.50) by the appraised value of her home ($300,000). This gives us 0.999. Multiplied by 100 to get the percentage, Shaundra’s loan is now at 99.9% of the value of her home, making her loan in compliance with the new rules.

2. Passing the Net Tangible Benefits (NTB) Test

What counts as a “net tangible benefit” is limited to eight defined options; all VA cash-out refinance loans must meet at least one of them to pass.

How Net Tangible Benefits Worked Before

Cash-out loans have always had a net tangible benefit requirement. However, they haven’t always had to pass a net tangible benefit test.

Basically, prior to this rule change, what constituted a net tangible benefit was up to the lender. As long as they could persuade the VA that there was some kind of benefit to the borrower, they could write the loan.

Some unscrupulous lenders would use this to their advantage by saying there was a benefit, but when put into practice in real life, the “benefit” to the borrower was almost negligible. It might even be harmful, if the long-term cost of the refinance put them into a worse financial situation.

The goal of both the Economic Growth, Regulatory, and Consumer Protection Act and the VA’s rules interpreting it is to prevent this kind of situation from ever being able to happen at all.

How Net Tangible Benefits Work Now

The new rules define eight specific situations that count as a net tangible benefit. Together, these eight conditions are called the net tangible benefit test.

What counts as a net tangible benefit is no longer up to the lender, or their persuasive powers. Either the cash-out refinance meets one of the eight conditions, or it doesn’t.

If it doesn’t, then the lender can’t do the loan. But if it does, then the loan passes the test.

So what are these eight conditions? We’re glad you asked:

  1. Mortgage insurance (PMI, MIP, etc.) is eliminated
  2. The loan has a shorter term
  3. The interest rate decreases
  4. Monthly mortgage payments are lower
  5. The borrower’s monthly residual income increases
  6. The refinance is replacing a construction (or other interim) loan
  7. The total loan amount is below 90% of the home’s appraised value
  8. The loan moves from an adjustable to a fixed rate

Again, in order to pass, the cash-out refinance doesn’t have to pass all eight conditions. It only needs to pass one.

3. New Disclosures for the Borrower

Lenders must now disclose additional information about the refinance to borrowers, including what is changing and how it affects them.

Disclosures Before the Rule Change

VA cash-out refinance loans have always had disclosures. This rule change is simply adding to them by outlining new information that must be included.

How Disclosures Are Changing

The VA’s circular lists two specific sets of information that lenders must now give to their borrowers at two specific times during the loan process:

  1. Within 3 business days of receiving the loan application
  2. At closing

The first new disclosure compares key characteristics of the original loan against the refinanced loan. These characteristics are:

  1. The refinanced loan amount vs. the payoff amount of the original loan
  2. The loan type (adjustable, fixed, etc.) for both loans
  3. The interest rate for both loans
  4. The loan term (15 years, 30 years, etc.) for both loans
  5. The total long-term costs for both loans (principal and interest, plus any mortgage insurance)
  6. The LTV for both loans

The second new disclosure should provide an estimate of how much equity the veteran is losing. It must also explain how the loss of this equity may affect them.

What These Changes Mean for Veteran Borrowers

For starters, because lenders are facing more limitations on when and how they can do VA cash-out refinance loans, you may find it a little more difficult to get one.

You will also be more limited on how much money you can get back from the loan, which could affect what you were planning on using it for.

However, these disadvantages are offset by the fact that cash-out loans, when you do get one, will ultimately be a little safer for you. The goal is to make them less risky, especially when it comes to your financial health.

For example, because you can no longer get 100% cash back on your home’s equity, you will never be underwater on your loan due to a refinance (though it could still happen from other external causes).

Thanks to the NTB test, the benefits of a refinance really should outweigh the costs associated with it, putting you in a better overall situation.

And finally, the new disclosures will help make sure you have all the information you need to decide for yourself if a refinance is truly in your best interest.

Have Any Questions?

If you still don’t feel like you understand these changes, feel free to give us a call at (866) 569-8272. When you call us, there is never any obligation or expectation that you have to get a loan with us. We’re simply here to help you, and the honor of writing your loan is just the icing on the cake.

That’s because at Low VA Rates, we believe our veterans should understand the loan process. By arming you with knowledge, we equip you with the tools you need to make the right decision about your home. We like to think that our full transparency makes us unique in the loan world.

Are VA Loans Affected by the Government Shutdown?

House with a flag and text that says "Government Shutdown? Not a problem for VA loans!"

With the government shutdown in place since December 22nd, there was initially a lot of speculation and worry about how VA loans might be affected.

Now that we’re in the fifth week of the shutdown, with no foreseeable end date, it’s clear that VA loans are still going strong.

The VA Continues Processing Loans During the Shutdown

Prior to the shutdown, Robert Wilkie, the Secretary of Veterans Affairs, issued a statement where he explained that the VA was already fully funded for the 2019 fiscal year, which allows “all VA operations [to] continue unimpeded.”

The VA is able to make this promise for a few reasons. One is the fact that they are partially staffed during government shutdowns, including the employees who process guarantees and endorsements for VA loans. Because these employees are paid through borrowing fees and not the government directly, they are fairly immune to government shutdowns.

In addition, the VA’s ability to process VA home loans is considered an essential service. It is even included in VA’s Veterans Field Guide to Government Shutdown under the list of services that will not be impacted, even if there were to be a lapse in appropriations.

Because the VA is open and processing loans during the shutdown, we, as a lender, are able to access your Certificate of Eligibility, order a VA appraisal, submit your funding fee, and complete other essential portions of the VA loan process that rely on cooperation with the Department of Veterans Affairs.

VA Loans Aren’t Funded by the Government

As alluded to in our prior paragraph, another reason why VA loans have been able to continue without interruption during the government shutdown is the fact that the majority of work is done by private lenders, not government workers.

At Low VA Rates, we employee teams of people at nearly every step of the process. In addition to our loan officers, processors, and funders, we also have in-house underwriters that can continue working on your loan, even it happens to require manual underwriting.

Solutions for Holdups with Other Government Agencies

Though we do as much in-house we can, some parts of the the VA loan process occasionally depend on outside government agencies, beyond even the VA.

Some examples of situations that require information from other, currently shutdown government agencies include income verifications from the IRS if you’re self-employed, verification of your Social Security number (SSN) from the SSA, and employment verification for veterans who work for the government.

While these issues will only affect a small portion of VA loan borrowers, at Low VA Rates, we haven’t had any issues being able to verify employment for government employees, SSNs, or income, so there is no need to be concerned about shutdown-related delays to your application.

Homeowners with VA Loans May Be Affected

While VA loans themselves, and the ability to get a VA loan, aren’t affected by the shutdown, homeowners who already have a VA loan could be.

Members of the Coast Guard

Like the Department of Veterans Affairs, the Department of Defense (DoD) had already been funded prior to the government shutdown. However, the Department of Homeland Security (DHS) was not yet funded for 2019 when the shutdown occurred.

This distinction matters because the Army, Navy, Marines, and Air Force all receive their funding under the DoD umbrella, so servicemembers in these branches are getting paid during the shutdown. However, members of the Coast Guard are funded through DHS.

When the shutdown started, the Coast Guard announced that their servicemembers wouldn’t be receiving their paychecks. Then, on Dec. 28th, it was announced that they would receive their final 2018 paycheck, with no guarantee of future ones during the remainder of the shutdown.

In mid-January, members of the Coast Guard did not receive their first paycheck, and won’t see any for the foreseeable future while the shutdown continues. Without this income, Coast Guardsmen who are homeowners may have difficulty making their monthly mortgage payments.

Veterans Working for Government Agencies

After leaving the service, many veterans find work with the federal government. If they work for an agency affected by the shutdown, they may be required to work without pay or they may be furloughed, which means they are temporarily unable to work at all.

Like with our Coast Guardsmen, this means that they might have a hard time making timely payments on their VA home loans during the shutdown.

What to Do If You’re Unable to Pay Your VA Loan

The VA has recommended that lenders consider being more lenient with borrowers affected by the shutdown. Some specific measures they recommended include waiving late fees, delaying reports of late payments to the credit bureaus, and even forgiving late payments.

At Low VA Rates, we take these recommendations to heart. During this time, it is our internal policy to waive any applicable fees for those affected by the shutdown.

In addition, because we aren’t an actual loan servicer, we don’t ever report to credit rating agencies, whether we’re experiencing a government shutdown or not.

Finally, if you are affected by the government shutdown to the point that you’re worried you won’t be able to make your monthly mortgage payments, you have options. Even if we aren’t your lender, Low VA Rates can help you!

Depending on your situation, there are a couple of different ways we might be able to help you. One option would be to do a streamline refinance and get you in to a more affordable loan with a lower payment.

If we are your lender, you may have a few other options, as well.

If you contact us, we might be able to grant a temporary reprieve where you have two or three months that you don’t have to make your payment. Once the shutdown ends and you receive your back pay, we can then work together to come up with a payment plan to get you caught back up.

A modification of your loan agreement could be another option, where your actual loan agreement is adjusted and changed to accommodate your situation.

No matter what workout option we go with, it is possible to reduce the stress of not receiving your income because of the shutdown. Just remember, it’s better to do it sooner, before you even miss any payments. So, if you think there is even a possibility you’ll need help, reach out now!

Why You Should Get a VA Loan During the Shutdown

As we’ve already discussed, VA loans haven’t really been impacted by the current government shutdown. If you’ve been worried about starting or continuing a VA loan, you can stop stressing. In fact, now might actually be the best time to get a VA home loan.

According to a recent article published by NerdWallet, mortgage rates recently dropped in December, but should only last for a short while. Because you can still get funding for a VA loan, you might want to consider taking quick action and locking down a low rate before they start rising again through the rest of 2019 and into 2020.

If you’re already in the process of a VA loan, keep moving forward! Again, we haven’t experienced any delays, and you could also take advantage of the current lower rates. Even if the government shutdown continues for awhile, we’ll still be able to process and close your VA loan.

Though they’re unlikely, if we do experience any delays with your application, we’ll keep you informed. At Low VA Rates, we believe in communication and transparency. It’s why thousands of veterans and servicemembers have trusted us for their VA loans, and you can too.

Everything You’ll Need to Get a VA Loan

Checklist of info you'll need to get a VA loan

Sometimes it can seem like there’s a lot you have to provide in order to meet the requirements to get a VA loan. However, we’ve put together this list of everything you’ll need so it’s all in one place.

Not only will reviewing this list prepare you to meet with a loan officer, but it will also help you be sure that you’re even eligible for a VA home loan.

Personal Data

There is a variety of personal information you’ll need to fill in when you apply for a VA home loan. Some of it, like your name, phone, number, address, and birthday, you should already know.

Some information, though, you might not remember off the top of your head, so it’s better to make sure you know it before you start filling out an application.

In addition to the information already mentioned, you’ll also need to provide:

  • Your social security number
  • Any past addresses for the last 2 years
  • Your highest grade level completed in school
  • Your ethnicity and race*
  • Your government-issued ID card
  • How many dependents you have, along with their ages
  • What state you want to buy a house in

*This information will not affect your ability to get a loan. However, all mortgage lenders are required, by law, to ask it. It will simply be reported to the government to make sure your lender is in compliance with the Equal Credit Opportunity Act (ECOA) and the Home Mortgage Disclosure Act (HMDA).

Certificate of Eligibility (COE)

Your COE is one of the most important documents needed to get a VA loan. The easiest way to get this information is to actually have your lender request it. However, you may also send in a request yourself, though doing so usually takes longer.

Credit History

Even though a minimum credit score isn’t one of the VA’s requirements for a VA home loan, your score will be pulled by lenders in order to determine your interest rate. In addition, some lenders do create their own internal credit score requirements, but Low VA Rates is not one of them.

Besides checking your credit score, another reason lenders look at your credit history is to make sure you’re not behind on loan payments or collection fees.

When it comes time to have your credit pulled, you’ll want to have the following information ready:

  • The social security numbers for everyone getting a credit check
  • A list of all your debts, including auto loans, student loans, credit cards, and other lines of credit, to make sure they’re correct on your credit report
  • Proof of any errors on your credit report, if applicable
  • The amount you spend on childcare each month, if applicable
  • Bankruptcy and discharge documents, if applicable
  • A way of explaining any late payments, if applicable

Income, Employment, and Assets

In addition to your debts, you’ll also need to be prepared with evidence of your income, assets, current employment, and recent job history. To this end, you’ll need to provide:

  • Your job history for the last 2 years, including the name, address, and phone number for all your employers, and the dates you worked for each
  • Your pay stubs from the last 30 days or your latest Leave & Earnings Statement (LES)
  • Your W2s for the last 2 years
  • Pension, retirement, and/or social security award letters and related 1099s, if applicable
  • Divorce decree and settlement documents, if applicable
  • Bank statements from the last 60 days as evidence of the money necessary for any down payment and/or closing costs, if applicable
  • Statements from your retirement account from the last 60 days, if applicable
  • A list of any real estate you own
  • 2 years of tax returns, if you’re self-employed
  • Any tax returns showing income from commissions or rentals, if applicable

Military Service Information

To prove one of the most important home loan qualifications, you’ll want to gather the following documentation:

  • A copy of your DD-214, if you’re separated from the service
  • A statement of service signed by your commanding officer & your LES if you’re on active duty
  • Evidence of future stable income if you plan to leave the service less than a year after closing on your home

Real Estate Documents

Finally, you can try to gather the following real estate documents:

  • A contract to purchase the real estate, which should be signed by the seller and you
  • A VA appraisal of the property, which your loan officer can order
  • The contact information of your homeowner’s insurance agent
  • The contact information of your homeowner’s association, if applicable
  • An inspection report on the property, which is wise but not required

However, if you’re not able to gather all of these before meeting with your loan officer, don’t worry—they can help you get them.

Contact Low VA Rates to Get Started

Once you’ve gathered all of the information you can, we hope you reach out to us. All of our loan officers are experienced in VA loans, so please contact Low VA Rates today.

Does the VA Loan Program Offer Options for Bad Credit Home Loans?

VA loan application for those with bad credit

Being late or skipping on payments, having accounts that are in collections, filing for bankruptcy, going through a foreclosure., and not having a long enough credit history can all lead to a low credit score.

Sometimes the military lifestyle makes it easier to make these credit mistakes.

Maybe you joined the military right after high school or college and weren’t able to build any credit history. Or you may have owed on a credit card and weren’t able to pay on time while you were deployed. You even might have simply had too much debt already when you joined.

These situations are very common. Some very small mistakes and understandable circumstances can cause low credit scores for veterans.

However, these issues don’t have to stop you from purchasing a home. That’s because the VA loan program helps lenders create loans for veterans with bad credit.

VA Home Loan Requirements

The VA doesn’t require a minimum credit score in order to qualify for a VA loan. It’s even possible to qualify after a bankruptcy or foreclosure.

In addition, veterans home loans also have a more generous and more flexible requirement when it comes to the debt-to-income (DTI) ratio. The general rule is that it has to be 41% and under, though there are some exceptions where it can exceed this amount.

Private lenders are the ones who actually issue VA loans based on the VA’s guidelines and some of their own requirements. While some lenders to set their own internal minimum credit score requirements or lower DTI ratios, Low VA Rates doesn’t!

We simply follow the VA’s requirements, which include:

  • Honorable military service
  • Stable income
  • An intention to occupy the house

It’s also important that the home itself meets the VA’s minimum quality standards.

All of these standards exist because, ultimately, the goal is for you and your home to be a worthy credit risk with a great chance that you’ll make your payments.

Benefits of VA Loans

The benefits of veterans home loans include:

  • No down payment
  • Lower interest rates than conventional loans
  • No private mortgage insurance payments
  • No funding fee for disabled veterans
  • A maximum loan amount of up to $424,100 in most counties

It’s definitely worth pursuing a VA loan, even if you think you don’t qualify—you might be pleasantly surprised, and it never hurts to give it a try!

How Low VA Rates Works with People Who Have Bad Credit

Low VA Rates works with veterans with any credit score. We have consistently created bad credit home loans for veterans with credit scores below 600.

We’re able to do this because we lend on a case-by-case basis, so you’ll be seen as an individual, not a credit score. Instead of limiting your financial situation to a single number or isolated, unfortunate events, we prefer to look at your current ability and overall willingness to repay debts. In fact, even a high credit score doesn’t guarantee someone will pay!

We believe that rejecting someone based only on a credit score would be as wrong as planning a vacation to the beach based on the average temperature without taking into account current weather forecasts, hurricane warnings, and so on.

Of course, we’ll still see what your credit score is, but we’ll also look for honorable military service, stable income, a quality house, and other factors.

Contact Low VA Rates today to talk with a knowledgeable loan specialist about how you can get a VA loan even with low credit.

What Are the Lesser-Known VA Loan Guidelines?

A military family stands together on a hill holding a flag

Some VA loan guidelines don’t get talked about enough. Let’s make sure you know about them before you start shopping for properties.

Eligible Properties

You can’t buy just any type of real estate with a VA loan. There are restrictions on the types of properties that allow you to use your entitlement.

For example, cooperative properties, or “co-ops,” are not eligible, and you can’t buy a property to rent out or use as a vacation home.

In addition, vacant land doesn’t qualify for a VA loan on its own, but it can be purchased as part of a package deal with a construction loan if you have a plan to build on it right away.

Finally, houseboats also don’t ever qualify, because they don’t have an immovable foundation.

Some other properties can be eligible, but it depends on your lender.

For example, mobile homes and modular homes are eligible, but not all lenders will want to work with you on them. Low VA Rates, however, can and will help you get this type of home.

Also, many townhomes and condominiums can also qualify, as long as the whole complex meets VA approval. You can check if a property is on the VA’s online list of approved properties.

Funding Fees and Other Closing Costs

One of the most important VA home loan guidelines is that a funding fee is needed to obtain the loan. This fee goes into the fund the Department of Veterans Affairs uses to guarantee VA loans so veterans don’t have to make a down payment or pay monthly mortgage insurance.

Other closing costs may include paying for a credit report and a VA appraisal, the origination fee, a recording fee, and taxes.

You may be able to reduce some of these costs in a couple of ways. For example, some sellers might be willing to help pay for some of them. And some closing costs, including the funding fee, can be rolled into the total amount of the loan to be paid off over time.

Reusing a VA Loan Entitlement

Many veterans may naturally assume that a VA loan is a once-in-a-lifetime benefit. However, you can actually reuse it several times throughout your life.

One way to do this is by completely paying off your VA loan, then requesting to have your full entitlement restored before applying for a new VA loan.

Another way is to sell your home to another veteran who agrees to use their entitlement in place of yours. However, this entitlement transfer will be for the full original amount, not just the remaining balance of the loan. If you find a buyer who agrees to this stipulation, you will then be able to apply to have your entitlement restored.

A third option is to have more than one VA loan at the same time. Some military personnel use this during a move to a new assignment.

This process is a little more complicated, but basically your entitlement can be divided over multiple loans, as long as the total amount borrowed doesn’t exceed the conforming loan limit. If you’re interested in learning more, check out this blog post for a more detailed explanation about how splitting your entitlement and getting a second VA loan works.

How a Past Foreclosure or Bankruptcy Affects VA Loans

You might think that a bankruptcy or foreclosure in your past—or your spouse’s past—will make you lose your chance to qualify for a VA loan. Actually, you can still qualify if you can show a responsible credit history leading up to your loan application.

Some time will also need to have passed, though it’s probably not as much as you think. Depending on the type of bankruptcy, it can be as little as 1–2 years. For a foreclosure, it can happen as soon as 2 years.

The reason for this shorter wait time is that a lender’s main goal is just to make sure you can meet your monthly payments in the future.

We Can Help You Understand All of the VA Loan Guidelines

We hope these explanations of some VA loans guidelines help you make an informed decision. VA loans were set up to help veterans, like you, buy a home, and at Low VA Rates, we want to see that happen for as many veterans as possible.

What Is a VA Loan Certificate of Eligibility?

Flying American flag

In order to finish getting a VA home loan, you’ll need a Certificate of Eligibility (COE) from the VA, even if you qualify for a VA loan in every other way.

That’s because the COE is the official document that proves that your military service entitles you to a VA loan, as well as any conditions of your qualification for a VA loan.

In addition, your COE lists the actual dollar amount of your entitlement. Lenders need to know what your entitlement is in order to determine how much the funding fee should be.

How to Apply for Your Certificate of Eligibility for a VA Loan

Though there are a few ways to get your COE, the easiest and fastest is to let your lender apply for it on your behalf. Lenders have a connection to a VA electronic system and can get a response in seconds.

If you’d like, you can instead mail in an application for a VA loan Certificate of Eligibility yourself. Simply print out VA Form 26-1880 and mail it to the address corresponding to your state, which you’ll find on page 3 of the form.

Most veterans, however, ask lenders to apply for the VA home loan Certificate of Eligibility for them. You can even allow several different lenders to do this while you’re shopping around for different rates and terms.

Using the eBenefits Portal

Another way to apply for a VA loan Certificate of Eligibility yourself is through the VA’s online eBenefits portal. If you’ve never used it, click the blue “Register” button at the top of the page and follow the directions to create your own credentials.

Otherwise, click on “Login” and use your login information. Then, click on “Apply.” Under “Housing,” click on Certificate of Eligibility for Home Loan and follow the instructions.

Special Instructions for Surviving Spouses

Unmarried surviving spouses need to fill out a different form in order to get a VA home loan: VA Form 26-1817. When you complete it, mail it to the address listed for your state on page 2 of the form.

If your spouse was a veteran who died after his or her service, the VA may take 2–3 months to verify that the death was caused by a service-related disability. However, if the VA has already decided on the cause of death, the eligibility approval could come much faster.

Let Us Help You Request Your Certificate of Eligibility

Remember, getting your Certificate of Eligibility is one of the first steps toward getting a VA loan. Luckily, the process for getting yours is usually very simple. If you’d like Low VA Rates to request one on your behalf, simply give us a call today.

VA Home Loan Guide

Picture of a home that could be purchased by following our VA home loan guide

VA home loans are an excellent option for military veterans, servicemen, and families to affordably own their own home.

If you’ve ever found yourself wondering, “What is a VA loan?” or how to apply for one, this guide will get you started so you can discover if one is right for you.

What Is a VA Loan?

VA loans were implemented in 1944 when President Franklin D. Roosevelt created the Servicemen’s Readjustment Act.

Basically, VA loans are home loans that help veterans and eligible military servicemen and their families afford to purchase a home.

Unlike conventional home loans, VA home loans don’t require a down payment because the government backs the loan.

This government backing provides security for the private lenders, like banks and mortgage companies, who provide the loans, allowing them to offer lower rates and better financing terms.

Main Types of VA Loans

There are two main types of VA home loans: new purchase loans and refinance loans.

Some of the main aspects for a new VA purchase loan include:

  • Being able to buy a property you don’t already own or have a loan on
  • Qualifying for more competitive interest rates
  • Avoiding having to pay closing costs or a down payment at signing

For VA refinance loans, some of the main features include:

  • Being able to lower your interest rate and/or monthly payment by replacing your current mortgage
  • Changing or improving terms on your mortgage
  • Getting cash out to pay off other debts or to renovate your home

Learning about which loan is right for you will help you understand what to look for when you go to get your VA loan.

VA Loan Eligibility

Now that you’ve learned what a VA loan is, you may be asking yourself what it takes to qualify.

Luckily, VA loan eligibility requirements are pretty straightforward. For starters, you must be either a current servicemember, honorably discharged veteran, or the spouse of a servicemember.

Then, in addition to proof of your military status, you will also need:

  • Evidence that your income is sufficient to cover your mortgage and have a certain amount remaining for other expenses each month
  • A Certificate of Eligibility (COE)
  • Acceptable credit*

If you are unsure of your VA loan eligibility benefits, visit the U.S. Department of Veterans’ Affairs VA home loan eligibility page for more information.

*Please be aware that some companies, like Low VA Rates, do not have a minimum credit requirement to be approved

VA Loan Benefits

VA home loans were created with military servicemembers in mind. The benefits provided by the VA recognize the hard work of our military servicemen and women by helping them afford their own homes. Some of these main VA loan benefits are outlined below.

No Down Payment

Conventional home loans require homeowners to pay up to 20% of the home loan when purchasing their home. Depending on the price of the home, this could mean paying anywhere from $7,500 to $90,000 up front. In comparison, VA home loans do not require any money down when purchasing because the government backs the loan.

In fact, the only fee present at closing is the funding fee, a small, one-time fee of 1.25% to 3.3% of the total loan amount. This fee can be paid up front or it can be rolled into the life of the loan and paid over time, eliminating up-front costs when purchasing.

Fee Regulation

VA home loans are regulated by the government, which sets limits on the fees lenders can charge borrowers. Because lenders cannot raise fees above what the government has established, you have less out of pocket expenses than with a conventional home loan.

Flexible Underwriting

Many borrowers who get a VA home loan wouldn’t have been able to qualify for a conventional home loan. However, they’re able to get a VA home loan because of the flexible underwriting requirements that look at more than just the credit score.

While underwriting requirements can vary depending on where you get your loan, they tend to be less strict across the board because veterans and servicemembers have earned the right, through their service, to become homeowners.

Transferable Benefits

When you sell your home, you can transfer the benefits of your VA home loan to other buyers who may not be eligible for their own VA loan, which could help you sell your home faster.

No Mortgage Insurance Premiums

The government provides the insurance and backing for your loan, which means you won’t have to pay any Private Mortgage Insurance (PMI). This can save you thousands of dollars every year on your mortgage payments.


It is perfectly fine to refinance your VA home loan in order to get a lower interest rate or reduce your monthly payments. Unlike conventional home loans, some types of VA refinance loans might not require income verification or a home appraisal.

Lower Rates

VA loans typically offer lower rates than conventional home loans. As of 2017, VA loans had a 4.05% interest rate compared to conventional loans that were around 4.32%. It may seem like a small difference, but over time it can really add up and increase what you save on your loan.

No Minimum Credit Score

Many conventional lenders look for a minimum credit score around 620, though it could be up to 720 in some cases, when they approve home loans.

However, there is no minimum required credit score for VA loans (though lenders can set their own policies that specify a minimum).

But some companies, like Low VA Rates, work with borrowers from all credit backgrounds if they have the appropriate income and job stability.

Lower Delinquency Rates

Because VA lenders look at the overall financial makeup of the borrower, the delinquency rate for VA loans is often lower than the delinquency rates for conventional loans.

Though this may not always be the case at any given moment in time, the general trend is for a lower rate of foreclosures with VA loans. And, even when delinquency rates for VA loans are higher, it is usually only by a small margin.

The Perfect Time to Get a VA Home Loan

VA loan benefits are too good to pass up, and now is a great time to buy. Interest rates on homes are beginning to rise and are predicted to reach 5% by the end of 2018. If you’re thinking about purchasing a home, you’ll want to start sooner rather than later.

Refinance & Loan Options

There are three main types of VA refinance loans. Check out an overview of each of these three loan types below. If one of them sounds like the perfect fit for you, visit Low VA Rates to apply today.

VA Interest Rate Reduction Refinance Loan (IRRRL)

Often called the VA streamline loan, there are many benefits to getting a VA IRRRL. However, there are also some requirements you have to meet first:

  • You must be refinancing a current VA home loan
  • Mortgage payments must be current
  • You cannot have more than one 30-day late payment within last 12 months
  • Your current loan must have seasoned for at least 6 months

If you meet these requirements, then you will be able to enjoy the following benefits:

  • VA streamline refinance loans are easy to qualify for and have great rates
  • VA refinance loans does not require income verification, bank statements, or pay stubs
  • A home appraisal is not required
  • There are no out of pocket expenses for the refinance, including closing costs

VA Cash-Out Refinance

Veterans who’ve established equity in their homes and need some extra cash might consider a cash-out refinance.

This type of loan is very useful because it allows you to get cash you can use to make home improvements, pay off bills, lower monthly expenses, and more. You may even be able to refinance up to 100% LTV (loan-to-value) on your home.

In order to be eligible for a cash-out refinance, you must:

  • Verify income and employment with two years of tax returns, proof of income like rental properties or child support, two most recent pay stubs, and proof of employment history for two years.
  • Provide information on your liabilities and assets including your credit report and two months of official bank statements for all accounts.
  • Get home inspection and appraisal to determine the current value of your home.

Veterans who qualify for a cash-out refinance include:

  • Those with an honorable discharge status
  • Current members of the National Guard or Reserve
  • Current servicemembers on active duty
  • Surviving spouses that are have not remarried
  • National Oceanic and Atmospheric Administration officers and Public Health Officers

You must also prepare and submit your COE and have your DD-214 ready.

VA Energy Efficient Mortgage (EEM) Refinance Loan

VA loan borrowers who are interested in improving the energy efficiency of their home can choose to pursue an energy efficient mortgage (EEM).

This type of mortgage refinance loan allows qualified applicants to improve the energy efficiency of their home. These updates and improvements must be completed within six months of closing on the loan.

Some updates are not allowed as part of an EEM. However, many are, including:

  • Solar-powered cooling and heating
  • Improvements to insulation
  • Upgrades to thermostats and heat pumps
  • Windows and doors that are energy efficient

Once improvements have been completed, your home will be audited for energy use to determine your estimated annual savings and to make sure your upgrades offset your renovation costs. The auditor will also recommend any additional changes that need to be made to make the home more energy efficient.

Securing VA Loans with Bad Credit

If you’ve ever gone through a bankruptcy, then you know how it seriously damages your credit, and you might feel that it means homeownership is out of your reach.

Thankfully, VA home loans can help you make the journey back into homeownership. Even if you’ve filed a Chapter 7 or Chapter 13 bankruptcy, you may still be eligible for a VA home loan.

Chapter 13 bankruptcy will typically require a 2-year waiting period (after bankruptcy discharge) and Chapter 7 will require a 12-month waiting period before most lenders will approve you for a VA home loan.

Additionally, your VA home loan lender will need the following:

  • Proof of a stable job and income
  • Evidence that you have built up your credit, or are actively building your credit
  • No record of late payments since the bankruptcy discharge

Bankruptcy is a difficult choice and it requires hard work to get back on track. However, it is comforting to know that just because you have faced a bankruptcy doesn’t mean you can’t qualify for a home loan.

Paying Off Your Mortgage

Amidst all the excitement of getting a home, you should still take time to consider how to best pay off your mortgage. Thirty years to pay off a mortgage is a very long time when you sit down to think about it.

There are, however, simple things you can do to pay off your mortgage quicker; one of these methods is to pay your mortgage bi-weekly instead of just once a month.

Making Bi-Weekly Payments

An easy way to make extra payments is to pay half of your mortgage payment bi-weekly, especially if that’s how your work’s pay schedule is already set up.

If you pay half of your mortgage every time you get paid, you end up making 26 payments, which turns out to be an extra full payment on your mortgage every year. This payment can go directly to the principal balance on your loan.

While it may not sound like much, it adds up quickly. If you had a $100,000, 30-year mortgage with a 5.5% interest rate, you would end up cutting 5 years off the total life of your loan and saving around $34,000.

Because VA loans don’t have a prepayment penalty, this type of payment schedule is a great strategy to help you pay off your loan ahead of schedule.

VA Loan Approval

Once you’ve established that you meet VA home loan guidelines, the next step on your journey for VA loan approval is to get your Certificate of Eligibility (COE). You can apply for your COE in one of three different ways:

  1. Online through the VA’s eBenefits portal
  2. By mailing in the completed VA form 26-1880
  3. Through a VA-approved lender

The last option is actually the easiest, so we encourage you to contact one of our team members here at Low VA Rates.

After that, it’s a matter of submitting all of the required documents and waiting the processing time to get your VA loan approval.

And if you aren’t approved? Well, just because one lender doesn’t approve your loan doesn’t mean a different one won’t. We encourage all of our borrowers to shop around to find the lender that best meets their needs and provides the best terms for their specific situation.

(We think that will still probably be us . . . but this way you’ll know for sure!)

Your Experienced VA Loan Experts

Low VA Rates strives to provide servicemen and women with VA home loans that work for them. So, if you’re looking for a VA home loan, apply now and see what we can do for you!

5 Tips to Find the Perfect VA Approved Lender

Map with a marker for finding a VA-approved lender

There are so many different VA home loan lenders out there, and they all say they’re going to do a good job—so how do you decide who you can trust and who will get you the loan you need?

At Low VA Rates, we want you to get the right loan for situation. And while we always hope it’s from us, we know that might not be the case. So, before you commit to one lender, follow these five easy steps to make sure you find the right VA-approved lender for your situation.

1. Ask Around

If you want a VA loan, one of the first things you’ll need to do is to make sure any lender you’re even considering is VA-approved.

A great place to start is by asking your co-workers, friends, or family members who also served. If they’ve bought a home recently, they may have also gotten a VA loan, so they’d be able to tell you if they like their lender.

2. Check Each Lender’s Reputation

Do your own background check on recommended lenders and be sure to read online reviews and even talk to past clients if possible.

Bring up any bad reviews with lenders and see if they have answers or an explanation, because sometimes the reviewers were unfair. If you ask the hard questions now, you can avoid problems years down the road.

3. Research Each Lender’s Experience

Ask possible lenders if they have experience with people who have a background similar to yours. For example, you may only want a VA loan, your credit score is low, and you want to buy your first home. Have they worked with others like you?

Any VA home loan lender you choose should have plenty of experience when it comes to creating VA loans. Because VA loans have unique requirements, you will want to choose a lender who does lots of VA loans as opposed to one here and there.

4. Get Loan Estimates from Several Lenders

Once you narrow down your list, ask each prospective lender for a loan estimate form. With several of those, you can compare the monthly payments, fees, interest rates, and other details offered by each lender.

5. Trust Your First Impression

No matter what a lender’s online reviews say, it matters whether you like and trust them in person. To hone in on that gut feeling, here are some things to consider:

  • Did they answer the phone courteously and talk in a friendly way?
  • Were they prompt in getting back to you?
  • Did they answer all your questions and help you learn more?
  • Do they offer other useful information, even when you don’t ask?

BONUS: A House Hunting Tip

Ok, so this one isn’t really about how to find the perfect lender, but it will come in handy as you get ready to start the search for your dream home.

Learn about the local real estate market!

Knowing what to expect will 100% make house shopping easier. In order to start learning, you should ask questions like:

  • What neighborhood(s) do I want to live in?
  • What are the high, medium, and low prices in those neighborhoods?
  • How many houses are vacant there?

Keep in mind that homes in high-demand areas can be more difficult to get, as multiple bidders can drive up the prices.

Low VA Rates Is Your VA-Approved Lender

Well, there you have it: how to find and evaluate different VA-approved lenders. At Low VA Rates, we wish you luck on your search and hope you keep us in consideration.

We’ve helped many veterans get VA loans all over the country. It’s our #1 focus! We also have a reputation for being friendly, professional, and educational. Contact us today to speak with licensed VA loan officers, some of whom are also veterans, just like you.

How VA Loan Interest Rates Are Different from Other Loans

Picture of a home with a stack of coins representing rising interest rates

You may have heard that VA home loans offer some of the most competitive mortgage rates available. But have you ever wondered why?

To understand loan interest rates on VA loans, let’s first think about financial loans in general and why lenders charge interest.

How Loans Work

In order to understand how loan interest rates work, you first have to understand how a home loan itself works.

Basically, a home loan is a type of secured loan, where the home itself serves as collateral in case you default. What this means is that, if you can’t pay, the lender can sell the home to get back their money.

Because home are expensive, and most people don’t have hundreds of thousands of dollars in cash, banks or other lenders let an individual borrow the money with the agreement that the money will be paid back over a certain amount of time, with interest.

But why do they charge interest? Why can’t they just loan you the money and let you pay it back, even-steven? Keep reading to find out!

Why There Are Interest Rates

Basically, banks and other lenders charge interest just like landlords charge rent; in other words, interest is the cost of renting the lender’s money.

The lender usually adds the interest amount to the principal (which is mortgage-speak for the amount you originally borrowed). Over time, this increases the amount you’ll need to pay back.

Ok, so now you understand why there are interest rates. But why do they vary from borrower to borrower?

Basically, it’s a way for the bank to protect themselves from losing too much money. Lenders charge higher interest to borrowers who have riskier credit histories, lower income, and so on.

The rationale for this is that those “high-risk” borrowers are more likely to not pay the entire loan back, so the lender wants to make more on the loan before the borrower defaults.

Because lenders are a business, loans are written so they will get back much more than they lent. Basically, they need to make it worth their while, financially, in order to justify the risk.

Why Average Interest Rates Change Over Time

Banks and other lenders set their loan interest rates based on factors like central bank rates, inflation, and the demand for credit.

Here an explanation of how this works:
The country’s central bank lends out money to other banks, so if the central bank raises its interest rate, the other banks will also have to raise their rates. That makes borrowing more expensive, and consumers want to borrow (and buy) less. Because less people are buying, the economy slows down, which usually encourages the central bank to lower its interest rate again.

Now, with interest rates dropping, borrowers can take out more loans and use that, in combination with their savings, buy more. This increase of spending expands the economy, eventually leading causing the demand for goods to rise higher than supply, which results in price inflation. In order to combat this inflation, the central bank raises interest rates, and the cycle starts over.

So, because the economy is cyclical, you can see why the average interest rates keep changing and are higher or lower depending on various factors.

How a VA-Backed Loan Gives You a Lower Interest Rate

A VA loan interest rate will almost always be lower than the average home loan interest rate. That’s because the VA gives lenders an added piece of security by guaranteeing they’ll be repaid a portion of each loan, even if you don’t pay them back a cent.

So, lenders feel safer, and it’s less risk to them if you default, so they’re confident and comfortable giving out lower interest rates. It also means they can provide other benefits, such as not requiring a down payment.

Why Lower Rates Should Matter to You

Let’s put it simply: with lower interest rates, you’ll be able to keep more of your money each month to spend it on other important things besides housing.

Sound enticing? To find out if you qualify for a VA loan, apply now with Low VA Rates. We’ll guide you through the steps to saving money on your mortgage so you can achieve your home-owning dreams.

Can I Get a VA Loan after Declaring Bankruptcy?

Man looking stressed after declaring bankruptcy

If you declare bankruptcy, this has the potential to affect when and if you can get a VA loan. Part of that has to do with how your credit score is impacted by filing—it can drop your score up to 240 points.

However, despite these challenges, you can still qualify, though the details will differ depending on which type of bankruptcy you filed for.

Getting a VA Loan After Chapter 7 Bankruptcy

With Chapter 7 bankruptcy, you have to wait a full two years from the discharge date before you can qualify for a VA loan. Other requirements after the two year wait time include:

  • Reestablishing a good credit history
  • Compiling a full explanation of the Chapter 7 bankruptcy
  • Providing proof of a stable job

Even though a Chapter 7 bankruptcy does not eliminate the possibility of a VA home loan, it does create more requirements and wait time.

Getting a VA Loan After Chapter 13 Bankruptcy

Because Chapter 13 bankruptcy deals with the repayment of debt rather than the liquidation of assets, it differs slightly from a Chapter 7 bankruptcy.

Like Chapter 7 bankruptcy, Chapter 13 also has a required wait time before you can receive approval for a VA home loan. However, instead of two years, you can apply for a VA home loan after only a year, as long as you’ve made every single payment on time.

To verify your payment history over the past year, the court trustee must give their written approval for the loan to be approved. In addition, you must still provide a full explanation of the Chapter 13 bankruptcy, just like you would for Chapter 7.

Improving Your Credit after Bankruptcy

While the VA and some lenders, including Low VA Rates, don’t have minimum credit score requirements, some VA lenders do. And even without a minimum requirement, having a good credit score can simplify and streamline the process of getting a VA loan.

That’s why you should spend the waiting period after declaring bankruptcy working to improve your credit score as much as possible. If you’re not sure how to do that, feel free to contact one of our team members at Low VA Rates. We’ve helped veterans improve their score in the past, and would love to help you improve yours as well.

Your Guide for Using a VA Loan to Build a House

Home being constructed for purchase with a VA home loan

It’s possible for a lender to create a VA loan to build a house, if that’s what you want to do. As a veteran, one of the benefits of doing this is that you don’t have to make a down payment.

Not All VA Lenders Issue VA Construction Loans

However, not all lenders are comfortable creating a VA home loan for building a house. Instead they’d rather stick with standard mortgages.

Construction loans, in general, are riskier because the lender might lose their money if the home is never finished and you default on your payments. Since the VA doesn’t issue loans—it just guarantees a portion of the loan for the lender—private lenders often don’t want this risk.

So, if it’s your dream to own a custom-built home, you might need to shop around a bit for a VA lender who is willing to work with you. Not every lender is aware of or experienced with how to help you use your VA home loan benefits for a truly custom-built home. (Good news, though: Low VA Rates happens to be one of them!)

How to Build a Custom Home Using Your VA Benefits

Once you decide on the lender you want to use to help you finance your custom dream home, it’s time to dive in to the process, which usually has a couple of extra steps compared to financing a pre-built home.

First, you will likely need to find the local builder you want to work with and finalize the plans and discuss costs. You also need to make sure that this builder has a VA Builder ID number.

If the builder you really want to work with doesn’t have this ID yet, make sure they get it. It’s simply a matter of submitting a few forms to register with the VA, and then waiting just a day or two for the ID number to be assigned.

Once you’re sure your builder has their ID number and you have the plan and costs nailed down, your VA lender (hopefully it’s us!) can get you pre-approved for the proper amount using a VA loan.

But you won’t be using that VA just yet. With the pre-approval letter in hand, you will actually now need to get a short-term construction loan to cover the actual build. Your builder most likely has banks they’ve worked with before. If you bring that list to your VA lender, they should be able to help you decide which bank to go with.

Once you’ve decided on which bank or lender you want to use for the short-term construction loan, you and your builder can use your VA lender’s pre-approval letter to help get your construction loan approved and building can start.

After the home is finished, that’s when your VA loan comes into play. It will be used to pay off the construction loan and now you’ll be using your VA-benefits to pay off your new home for the next 15 to 30 years, depending on your loan term.

Contact Low VA Rates with Any Questions

Still uncertain about the process of how to build a custom home with your VA loan benefits? Even if you’re not ready to dive right in yet, one of our experienced loan officers would still be happy to talk with you and answer your questions, no obligation.

So give us a call or contact us today. We look forward to hearing from you.

How to Get a VA Home Loan in 6 Easy Steps

Home with an American flag on the porch

If you’re getting ready to start a VA loan application, here are six steps to help you prepare for and finish the VA loan process quickly and smoothly.

1. Make Sure You Qualify for the VA Loan Program

First, make sure you qualify for a VA home loan based on these criteria:

  • You’re a military veteran who meets the VA’s eligibility requirements
  • You plan to live in the house soon after the loan closes
  • After paying your other monthly expenses, you will have enough income left over for mortgage payments
  • You meet the lender’s credit requirements*

*To check your credit, you can get your credit report from one of the big three credit bureaus. In addition, though the VA doesn’t require a minimum credit score for a VA loan, some lenders set their own. However, at Low VA Rates, we do not have a set minimum score, and will do our best to work with you even if your credit score needs some work.

2. Find a VA Lender

Next, contact some VA-approved lenders in your area (like Low VA Rates!).

Make sure you don’t just go with the first VA lender you come across, including us. We want veterans to get the best deal, and we’ve found that the more you look around at different lenders, the more likely that is to happen.

Once you have multiple loan offers from different lenders, compare and contrast their closing costs, settlement costs, and other fees. Give them your credit score and get an estimate of how much they could lend you.

Also look at their customer service and expertise. It’s usually better to go with a lender that specializes in VA loans rather than one that only creates them occasionally. They’ll know how to help you with things unique to the VA loan process, like requesting your Certificate of Eligibility (COE).

3. Pre-Qualify for a Loan

To accomplish this step, you’ll need to run through your income and assets with your lender. This will help you figure out how large of a mortgage payment you could afford and what price of house you should look at, saving you from looking at houses outside of your price range.

4. Select the House and Get a Purchase Contract

Through classified ads, listings, a real estate agent, or online real estate sites, search for a house in your price range.

If you choose to go with a real estate agent, consider working with one who has experience working with VA listings; he or she can help you get the best deals and negotiate for benefits like having the seller pay for certain fees.

Finally, once you choose a house and make an offer that gets accepted, you’ll need a signed purchase agreement in order to finish your VA loan application.

5. Get a VA Appraisal

Now the lender will start to process everything in your application and you will need to order an appraisal.

The appraisal can be ordered in a couple of different ways. First, you could to have your lender send in the order. Or, second, you can seek one out yourself.

However, in either situation, the appraiser MUST be a VA-certified appraiser, which mean they will be assigned by the VA and serve as a neutral third-party not financially invested in the outcome of the appraisal.

The purpose of the appraisal is to estimate the value of the house, which will dictate how much the loan can be written for, and make sure it meets the VA’s minimum property requirements (MPRs).

When it comes to the appraisal, it’s important to remember that it is not an inspection, which you might want to also consider ordering.

6. Close and Sign the Loan

Once the VA appraisal is complete and the home is deemed satisfactory in terms of price and the MPRs, then the lender can approve the loan.

You’ll need to show up and sign the documents, and the lender or closing attorney will go over the terms and monthly payment requirements. At this time you’ll be required to show proof of homeowner’s insurance that meets your lender’s requirements.

The End of the Process

Congratulations, you’re now a homeowner!

Once closing is completed and all of the documents are signed and finalized, ownership of the house will transfer to you. In addition, your COE will also be updated to state that you are currently using your entitlement.

Contact Low VA Rates if you want to get started on this process. We’re here to help you fulfill the American dream of owning your home, and our experienced loan officers will help you complete each of these steps.

Everything You Need to Know about Applying for a Second VA Loan

Person researching things to know about a second VA loan

Have you used a VA loan in the past to purchase a home? If so, you probably know just how helpful these loans can be, both at the time of purchase and during the years of repayment.

Like the majority of Americans, however, you’ll likely purchase more than one home in your lifetime. As you did in the past, you may be interested in applying for a second VA loan.

However, because VA loans are backed by the government, there are some unique aspects of taking out a second VA loan. The following quick tips will cover exactly what you need to know before getting started.

Entitlements: What You Need to Know

As one of the more complex aspects of a VA loan, your entitlement can be difficult to understand even if you’ve already gone through the VA loan process.

Put in simple terms, your entitlement is the amount of money the Department of Veteran Affairs (VA) agrees to pay the lender in the event you happen to default on payments. It’s essentially a safety net for both lenders and borrowers in case of default.

The VA limits the entitlement based on two criteria:

  1. 25% of the home loan amount
  2. The conforming loan limit for conventional financing

With the second criteria, the conforming loan limit is determined by county, but for most loans in most counties, it is currently $453,100 in 2018.

So, for most VA homebuyers, it is safe to say that their total entitlement would be 25% of $453,100, which ends up being about $113,275. This entitlement amount, however, can be split into two, called the primary and secondary entitlement, if you do not use it all on your first home.

In general, the primary entitlement is for $36,000. If your first home costs over $144,000, you can dip into your secondary entitlement in order to still receive 100% funding of the loan; it just can’t exceed your county’s conforming loan limit.

Here’s an example: Say your first home cost $220,000. Because your VA entitlement guarantees 25% of the loan, you’ve used $55,000 of your entitlement ($36,000 + $19,000 of your secondary entitlement). That means your secondary entitlement still has $58,275 that can be used on a second home.

You can also sometimes have your primary entitlement restored (by filling out and submitting VA Form 26-1880) in a few specific conditions:

  1. You still own the home but have paid off the loan
  2. You sold the home and used the money to pay off the loan
  3. You transfer the loan to another veteran buyer who substitutes their entitlement for the original amount of entitlement you used

How Having Two VA Loans Works

It’s not uncommon for veterans to have more than one VA home loan at a time. Oftentimes members of the military purchase a home with the primary VA loan and then have to PCS to a new location in which they want to purchase another home.

If you’re in a similar situation, you may want to rent out your first home instead of selling it, which means you’ll be required to make mortgage payments on both houses. In this case, taking out a second VA loan allows you to be financially qualified to own two homes at the same time without worrying about defaulting on mortgage payments.

However, you will still have to qualify for the second loan, which includes:

  • Making sure you’ll meet the occupancy requirements
  • Reviewing the last 12 months of your existing loan payments to make sure they were paid on time and you’re up-to-date
  • Calculating your residual income to make sure you meet those requirements, as well

The lender will also scrutinize your debt-to-income ratio to confirm that you’ll be able to make both mortgage payments. You should not use your secondary entitlement unless you are absolutely certain you can both loan amounts each and every month.

A Second VA Loan Can Help in the Event of Foreclosure

While the second entitlement is available to help you with the purchase of your second home, a second VA loan can also be used if you’ve happened to lose your primary VA loan due to foreclosure.

As long as your entire entitlement is not tangled up in the foreclosure, you should still be able to get a second VA loan. To find out for sure how much entitlement you have left after foreclosure, you can obtain a Certificate of Eligibility.

It is important to note that you cannot get a VA loan immediately after foreclosure. You must wait a minimum of two years after foreclosure before applying for and receiving a new VA loan.

However, once this time period has passed, choosing a VA loan again will likely still save you money over using other loan types. This is because your second VA loan still won’t carry any mandatory form of mortgage insurance, even after foreclosure. And, if enough of your entitlement remains, you also won’t need to make a down payment.

Because getting a second VA loan after a foreclosure has a waiting period, you should use that time to build your credit back up. During those two years, make sure you show a history of paying all of your debts on time so you don’t get turned down for a second VA loan because of concerns with your credit history.

Fees for Your Second VA Home Loan

VA funding fees help the government operate and manage the loan program, and they will be different for your second VA house loan.

That’s because the fees for a VA loan vary depending on a few factors including:

  • How many times you’ve used the program
  • Your individual military service
  • The type of VA loan you’re applying for

In general, if you’re using the VA loan program for the second time and are purchasing a home with $0 down, you can expect to have a funding fee of 3.3% added to your loan amount. As with any other VA loan, the more you put towards a down payment, the lower your funding fees will be.

Now that you understand these key facts about taking out a second VA home loan, you’re ready to get started. Contact one of our loan experts today to learn about how to qualify for our competitive rates.

What Is a VA Home Loan Appraisal?

An VA appraiser completes a checklist for a VA home loan appraisal

VA loan appraisals evaluate the property you wish to purchase and determine its fair market value. This is done by appraising the current state and condition of the home against other comparable homes that have recently sold—or are currently for sale—in the area.

VA appraisals differ from regular appraisals in that the property is required to meet the VA’s Minimum Property Requirements (MPRs). These are simply guidelines that help ensure buyers purchase a safe home in good condition.

During the VA appraisal, the appraiser uses the MPRs to make sure homeowners don’t buy a home with lead paint, hazardous materials in or around the home, or moisture present in the basement, for example. They also ensure that the home’s roof and structure are in good condition.

Who Needs a VA Home Loan Appraisal?

VA home loan appraisals are mandatory for those seeking to apply for most types of VA loans or refinances. However, some loans, like the VA IRRRL, may not require an appraisal.

As for when the appraisal happens, you will have the option to have your VA lender send an order for an appraisal as soon as you have signed a contract on a home, or you may seek out your own neutral third-party appraiser.

Will a VA Appraisal Cause Delays with My Loan?

If you’re a VA loan applicant, you might be worrying that ordering an appraisal for your new home could delay and slow down how soon you’re able to get into your dream home.

However, we have great news!

Unless the home is in poor condition and requires extensive renovations or rebuilding, there should be no reason for you to expect any delays.

If repairs do end up being necessary, the appraiser may perform a follow-up appraisal, often called a compliance inspection, to ensure that the necessary changes have been made and the home now conforms to the VA’s MPRs.

Why Are VA Appraisals Important?

VA appraisals determine the value of the property you wish to purchase with a VA loan and will provide the fair market value of the property. Knowing the fair market value helps ensure that you don’t receive a loan that is higher than the actual worth of the property.

For example, if your dream home is 2,000 square feet and it costs $200,000, then the price per square foot is $100. If nearby comparable properties are selling for $90 – $93 per square foot, then buying your home for so much more could set you up for financial failure.

If this happens and your dream home is priced higher than comparable homes, you can still get a loan. But you may have to renegotiate a lower price or pay the difference between the VA-appraised value and selling price.

To find out how to get your VA loan appraisal, contact Low VA Rates today. We’ll help you move one step closer to getting into your new home!

5 Things to Know about a VA House Loan

American flag in front of home purchased with a VA house loan

If you’re a veteran or active member of the military, you may have heard about VA home loans. Whether you’re looking to purchase a home now, or in the future, preparing to get a VA home loan will help you achieve your homeownership dreams.

If you’ve ever wondered what a VA house loan was all about, we’ve put together a list of the five most important things you need to know about a VA home loan before you start house hunting.

We’ll cover everything from VA loan guidelines and requirements (including credit scores) to and VA home loan benefits and even some interest rate information so you can begin preparing for your home purchase today.

1. What Is a VA House Loan?

The VA home loan program was originally implemented as part of the Servicemen’s Readjustment Act of 1944 (G.I. Bill) in order to help veterans establish establish their credit and purchase a home.

Because veterans had been away serving their country, they didn’t have as much time to establish the creditworthiness needed to purchase a home when they returned. The VA home loan program helped them catch up with greater homeownership opportunities.

Today, VA home loans still meet this need and can be used for several purposes, including purchasing, building, repairing, or refinancing a home you intend to use as your primary residence.

These loans are backed by the government but are provided by private lenders, like banks and mortgage companies, who get approved by the VA. Because of the government backing, if you happen to default on the loan, the government will pay the lender a portion of what you owe. This added protection allows VA-approved lenders to offer lower interest rates on their VA loans.

2. VA Loan Guidelines for Eligibility

In order to qualify for a VA home loan, you must meet the VA loan guidelines for eligibility. Once you are considered eligible, you can begin the process of applying for your VA home loan.

A full list of those who qualify can be found on the Department of Veterans Affairs website, but Individuals who may qualify include:

  • Veterans
  • Current servicemen and women
  • Spouses of servicemembers who died in the service
  • Spouses of POWs or those MIA
  • Some Public Health Service officers
  • Cadets of the United States Military, Air Force, or Coast Guard Academy
  • Midshipmen at the U.S. Naval Academy

Other eligibility requirements include things like having satisfactory credit, a sufficient income, a valid Certificate of Eligibility (COE), and an eligible property.

Understanding if you qualify is the first step towards getting your VA home loan and making your dream of becoming a homeowner a reality.

3. VA Home Loan Benefits

Many service members choose to use a VA house loan because of the numerous benefits they offer. While there are lots of conventional loans and other types of government home loans, they have different benefits than a VA loan and often cost the buyer more in up-front fees. Here are the most common home loans and how VA loans compare.

Conventional Loans

These are the traditional mortgage loans most people get for their homes. They are not government backed and approvals are heavily based on credit. In fact, according to Ellie Mae, the average credit score for a conventional home loan is around 753.

They also require a minimum down payment of 3.5%, but it can be as high as 20% of the total loan amount. For down payments below 20%, you will be required to pay PMI (private mortgage insurance) until your loan-to-value (LTV) ratio is 80% or less.

FHA Loans

FHA loans are backed by the government and although there is no minimum required credit score, scores of 620 and up are usually preferred. They are less expensive to purchase initially and only require a 3.5% down payment at closing. However, you will need to pay MIP (mortgage insurance premiums) for the duration of the loan.

USDA Loans

These are also government-backed home loans, but they are only available in rural areas. Again, there is no minimum credit score, but a 660 and up is preferred.

VA Home Loans

VA home loans have many benefits, including no down payment, no mortgage insurance, and no prepayment penalties. There are also limits on how much you have to pay for closing costs, so you might need negotiate with the seller to have them covered.

The myriad of benefits makes it easy to understand why many eligible servicemen and women choose to pursue a VA house loan when looking to finance their home.

4. Credit Score for a VA Loan

Most loans and lines of credit rely on a credit score to determine eligibility. Credit scores range from 300 to 850, and a credit score above 740 is typically considered excellent credit. While many conventional lenders look for excellent credit scores, VA loan guidelines are not so strict.

VA approved lenders often prefer a score of at least 620; however, there is no minimum credit requirement for VA house loans. Some VA-approved lenders, like Low VA Rates, take into account other factors that might be affecting your credit score.

Because credit score is not the end-all-be-all with VA loans, most lenders will also look at your debt-to-income (DTI) ratio. A DTI of 41% or lower is usually preferred, but again, VA loans are much more flexible than conventional loans and often allow a higher DTI ratio.

If for some reason you are not approved for a VA home loan, don’t despair. Credit scores and DTI ratios are not set in stone. You can always take some time to improve your credit, pay down some debt, and apply for your VA home loan again.

5. VA Loan Interest Rates

If you are worried about your VA loan interest rate, don’t be. VA loan rates are usually much lower than rates for conventional home loans because they are government-backed. The rate you are approved for will vary, depending on your loan terms, type, and other factors.

In general, 15-year VA home loans have lower interest rates that 30-year VA loans. Additionally, adjustable rate mortgages also tend to offer lower initial rates than fixed rate mortgages, but they can fluctuate over the life of the loan and go up, so keep that in mind as you search for the VA loan that’s right for you.

VA loan interest rates are still currently quite low, so now might be a good time to purchase or refinance your home with a VA home loan.

Choose VA-Approved Lenders

As you begin your search for a new home, there are many things you’ll need to prepare for. However, if you follow these guidelines, you’ll be starting down the right path. Just make sure your guide is someone you can trust, like a VA-approved lender with experience doing VA loans.

2017’s Top VA Loan Officers Released: Low VA Rates Snags 23 Spots

23 loan officers from Low VA Rates made the Scotsman Guide's list of top VA loan officers

At the end of March, the Scotsman Guide released their annual list of the top loan officers in a variety of categories, including VA loans.

Out of the thousands of loan officers that submitted, only a few hundred made these lists. For the ranking of VA loan officers, only 75 spots were available, and nearly a third of those spots were claimed by those employed by us here at Low VA Rates. (Check out our press release for more info!)

We’re proud of these 23 loan officers. Their hard work and dedication to helping veterans access their home loan benefits deserves to be recognized.

We’re also proud to be the employer of such fantastic people. At Low VA Rates, we cultivate a work environment that emphasizes getting results and going the extra mile. This kind of culture is what helps so many of our loan officers to succeed.

But, more importantly, behind each loan that helped them rank are the individuals they have helped. The veterans and their families who have been able to afford the home of their dreams. The servicemembers who now have more money each month because we helped them refinance their mortgage.

To each of these veterans who chose to work with one of these 23 loan offers, we want to say thank you. Thank you for your service. Thank you for business. And thank you for your confidence in us and our team.

And thank you to each of the 23 loan officers who made the Scotsman Guide rankings. You have represented us well, and we’re honored to have you as part of our Low VA Rates family. We hope you continue to diligently serve those who first served us.

The 23 Loan Officers in the Scotsman Guide

Ryan Sawyer – 1 David Walke – 26 Lance Yates – 50
Rob Peterson – 4 Adam Lindquist – 34 Colby Jones – 52
Jaren Ahlmann – 8 Porter Perkins – 35 Blake Law – 53
Brian Heaton – 14 Curtis Price – 37 Jed Hardman – 54
Kevin Spradlin – 19 Corey Higgins – 44 Andrew Cromwell – 57
Eric Liljenquist – 22 Dan Gardner – 45 Zac Griffith – 58
Mark Francis – 23 Nathan Wathen – 46 Eric Jorgensen – 61
Mike Powell – 25 Ashley Kelly – 47

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