We’ve assembled this VA guide to help buyers and agents alike. These are the common questions we receive on a daily basis about VA financing. If you’d like to discuss VA options, schedule a call with us to chat anytime!
What is a VA Loan?
A VA Loan (Veterans Administration Loan) is a mortgage that is guaranteed by the VA for veterans. VA loans have flexible underwriting and down payment guidelines for veterans and their spouses only.
VA loans also have low-interest rates, no mortgage insurance, and no down payment requirements for most veterans.
Key Components of VA Loans
VA loans are the best bargain in mortgage financing for qualified veterans. Below are some key aspects.
LTV Max is 100%
The maximum Loan-to-Value ratio (LTV) is 100% for most eligible veterans who have not used their VA financing benefits before. With a sufficiently large seller or lender credit for closing costs, a veteran can buy a house with no money out of pocket.
No “As Is” Purchases
All properties subject to VA financing are required to have a clear Section I termite/pest inspection report. In contrast, FHA and conforming financing allow for “as is” purchases with no inspection reports required.
No MI Required
Mortgage Insurance (MI) is not required for VA loans. There is, however, an “upfront funding fee.” These upfront fees vary depending on a veteran’s status and can be wrapped into the total loan amount.
“Unallowable” Fees VA Buyers are Not Allowed to Pay
There are some fees that VA buyers are specifically not allowed to pay. Other parties related to the transaction (lenders, agents and sellers for example) can, however, cover these “unallowable” fees. A small closing cost credit from the seller or lender is usually sufficient to cover the “unallowable” fees.
Timing/Escrow Periods
We need 21 days to close a VA loan. This is longer than our famous “14 day closes” b/c we have to rely on VA appraisers and the VA itself for key info, and we have no control over these parties.
Interest Rates are low
VA interest rates are very low b/c the government guarantees the loans, making them lower risk than other loans.
Below is additional VA info along with some FAQs and answers.
How do Veterans Know If They Are “Eligible” For VA Financing?
Before applying for a VA loan, veterans should check with the Department of Veteran Affairs to make sure they meet all of the eligibility requirements for VA loan benefits. A veteran’s eligibility is dependent on the length of their service, duty status, and character of service.
VA Loans can be obtained through any qualified lender, but VA borrowers must have a Certificate of Eligibility (COE), which is an official document that proves eligibility for VA financing. Veterans can acquire their COE on the Department of Veteran Affairs website in the eBenefits portal.
What are “Unallowable” fees?
The VA does not allow veterans to pay for:
- Attorney Fee – if required
- Escrow Fee/Settlement Fee/Closing Fee
- Closing Protection Letter
- Document Preparation Fee
- Underwriting Fee/Processing Fee
- Lock-in Fees
- Courier Fee/Postage Fees
- Notary Fees
- Application Fee
- Tax Service Fee
- Mortgage Broker Fee
These fees amount to about $3,000 on average, but can vary.
So, How Are “Unallowable” Fees Paid For?
As mentioned above, lenders, sellers and agents can cover “unallowable” fees with credits. The simplest solution usually involves the lender providing a credit of approximately $3,000 to ensure all “unallowables” are covered.
What’s The Minimum Down Payment Required?
No down payment (0% Down) is required in most cases, depending on debt to income ratios and eligibility. Here are a few exceptions:
* The loan is above the County Loan Limit. For example, if a county’s Loan Limit is $726,525 (typical for the Bay Area), and a veteran wants to purchase a $1MM home, he/she has to come in with 25% of the difference between the purchase price and County Loan Limit. In this case, that amount would be $68,369
($1,000,000 – $726,525) x 0.25 = $68,369.
* If a non-spouse will be a co-borrower (e.g. a boyfriend). Then, a minimum 12.5% down payment will be required.
Are VA Appraisals Different Than Other Appraisals, And Why Do They Take Longer?
Only appraisers certified and sanctioned by the VA (and on the VA panel) can perform appraisals for VA transactions. In other words, we are not allowed to use the appraisers from our pool of approved appraisers. We can only official “VA appraisers” and they tend to have much longer turn times.
Is There Mortgage Insurance?
VA financing requires no Mortgage Insurance, irrespective of the down payment percentage. This is a major advantage of VA financing.
What Is The VA Funding Fee?
The VA Funding Fee is the fee charged for all VA loans to fund the VA guarantee program. The typical fee is 2.30% (recently changed), but it can vary depending on eligibility status (type of service), down payment, and other factors. The fee can be financed and included in the loan amount.
How Are Termite/Section 1 Repairs Handled?
These repairs must be paid for by the seller, before close of escrow. Clean Pest Reports are required to close a VA deal. Buyers, however, can pay for the termite repairs if they are not billed through escrow.
Why Are VA Interest Rates So Low?
VA rates are very low b/c the government guarantees the loans, making them lower risk. The dirty little secret though is that many lenders do not share these low rates with veterans but instead charge higher rates in order to make a lot more money themselves. At JVM, we always share our very low rates with our veteran clients.
How Fast Can We Close A VA Loan?
We can close VA loans as fast as 21 days at JVM. This is much faster than almost all other lenders but slower than our typical “14-day close” b/c we have to rely on the Veteran’s Administration itself and on VA appraisers who are not as fast as our normal appraisers, so we need an additional seven days.
Questions About VA Loans?
While this article covers just the basics of VA financing, we can provide additional information to those who request it. We’re available 7 days/week at (855) 855-4491 or jvmteam@jvmlending.com.
