VA LOAN FAQ

A VA loan is a $0 down mortgage offered through a VA approved private broker. The United States Department of Veteran Affairs partially backs these financial institutes in the form of loan guarantees. VA loans are made available to serving military, retired service members and some military spouses. Their purpose is to allow these individuals a higher debt-to-income ratio and afford more leniency with their credit score. A score 620 or higher is generally needed to be eligible for VA loans, however.

The V.A. home loan was created in 1942 to aid military returning from war to finance their homes without a down payment or excellent credit scores. For over 75 years the VA has helped guarantee affordable housing for hundreds of thousands of military personnel in the U.S..

VA loans are available to the following individuals who have served in the military under the following conditions:

• Current active duty military, or veterans, honorably discharged.
• Military with at least 90 consecutive days of active service during wartime or at least 181 consecutive days of active service during peacetime.
• Military with more than six years of service in the National Guard or Selective Reserve.
• Spouses of  military personnel who died serving.

For more info consult the VA’s website to check your eligibility for VA loans today.

All VA loan borrowers will need the VA Certificate of Eligibility which will be used to apply for a VA loan. You can request the certificate of eligibility, form 26-1880 directly from the VA office, apply online through the e-benefits program, or submit a request via an approved VA lender. 

For active duty members, be prepared to provide the following information:

• Your full name
• Your Social Security number
• Your date of birth
• The date you entered duty
• The duration of any lost time
• The name of the command providing the information

For honorably discharged veterans, current or former National Guard military, and surviving spouses of former active duty members, you will need proof of your discharge or separation papers (DD-214).

The DD-214 is your proof of discharge or separation, a document issued by the Department of Defense showing important dates of military involvement,  military status of requested individual, in addition to honors awarded.

If you do not have your discharge or separation papers necessary for applying for a VA loan, contact your local Veteran’s Affair office for more information on how to obtain it.

The Certificate of Eligibility is a document proving all the requirements have been met to apply for a VA loan. This document will be crucial to private banks or lenders who will move your VA loan process forward.

VA entitlements are loan guarantees backed by the VA. VA entitlements back designated lenders in case borrowers default on their loans. Thus, lenders can provide bigger loans to those who qualify with less financial risk.

Currently, the VA typically pledges to guarantee up to 25% of the total cost of the loan with no down payment. This means that the VA will guarantee $75,000 on the average Colorado Springs home of $300,000, depending if you meet the requirements of the lender according to your VA entitlements.

For those who have defaulted on previous loans or who have multiple VA loans, they only have partial entitlement, thus are only backed by the VA to a certain degree.

Each district has its own loan limits, which is the amount someone can borrow from a bank or lender. Colorado Springs, for example, has a loan limit of $510,000. However, as of January 1st, 2020, VA loans no longer have a limit. Thus, those with veteran entitlement can borrow beyond the loan limit as long as they meet the credit requirements of the lender. 

For those with partial entitlement, loan limits will still apply.

VA closing costs average anywhere between 1-3% for less expensive homes to 3-5% for higher priced homes.

Origination fees are 1% of the total cost of the loan to be paid in full to your lender.

The VA fee ensures that the VA loan program can continue for future generations. Generally, the cost for first time VA loan borrowers is 2.3% of the total loan agreement. For second time borrowers it is 3.6%.

Veterans injured while in service and receive disability compensation will be exempt from paying any VA funding fee. As of January 1st, 2020, Purple Heart recipients will receive immunity from paying the VA funding fee as well. 

If you have any doubt on whether or not you are eligible to be exempt from the VA funding fee, consult the VA office directly as they handle VA funding fee exemptions on a case-by-case basis.

No: because VA loans are government backed, banks and lenders do not require you to purchase private mortgage insurance. However if you are unsure if you will be able to pay off the loan in the future, getting PMI may be advisable. 

The remaining balance and monthly payments will be transferred to your spouse. If, however, in the case no one is able to pay the loan, the home will foreclose, the VA will back your lender, and the home will become absorbed into the market for resale.

The VA loan offers flexibility in its use. You can buy an existing home on the market, purchase and improve a new home, or improve your current home by increasing energy efficiency, performing home repairs, etc.

Getting pre-approved for a loan will speed up the process of getting a VA loan. Important information will be gathered by your bank and lender using the information on your pre-approved loan, so we definitely recommend this!

The VA loan program provides a “leniency policy”  which allows qualified borrowers with temporary financial difficulty more affordable repayment options. If you are struggling to pay your VA loans, talk to your lender immediately and explain your hardship situation.

Refinancing options are available to those in the same way that conventional loans allow for refinancing for home improvements based on home equity. Refinancing is available with specific requirements based on your specific loan lender, so be sure to consult your lender for more information.

Loan eligibility can be used more than once in the case you have paid off the previous loan and sell the property. In this case you would need to resubmit 26-1880 to become eligible for a second VA loan. 

In the case you sell your home to another buyer and the buyer assumes the VA loan, you will not be able to use your eligibility again.

Finally, having multiple VA loans is possible if you are a military service member who has recently relocated with additional VA entitlement leftover. In all other cases, you are not able to use your VA loan eligibility more than once. VA loans were made to make purchase of a primary home easier.