VA LOAN GLOSSARY

Leading VA Loan Experts In Colorado Springs

VA loans are much like other types of loans, but specific to VA loans are particular jargon that can be hard to understand without a clear explanation of each of them and how they work in the overall process to getting your VA loan.  Here at The Reichert Mortgage Team, because we understand how these definitions are sometimes confusing,  we’ve provided this handy VA loan glossary to aid you in the process of purchasing or refinancing with the VA home guaranteed loan. We hope it serves you well! If you have any additional questions, you can read our VA FAQ, or contact us today.  

An unbiased professional opinion of the value of your home. Different from home inspections, appraisals provide a general overview of the estimated value of the home and are required for all VA loan purchases.

Cash-out-refinance allows you to dip into your home’s equity. Equity is the difference between your home’s appraised value and your remaining mortgage balance. With the credit you qualify for, you can pay off high-interest debt, pay for school, or do home-improvements.

The Certificate of Eligibility verifies that a veteran, Active Duty Member,  National Guard member or Reservist, is eligible for the VA loan program. Obtaining your COE is a necessary first step that allows your lender to move your VA loan forward. The Reichert Mortgage Team obtains this on applicant’s behalf with a relatively quick turnaround. 

The Certificate of Release or Discharge from Active Duty, frequently referred to as the DD214, is a document of the Department of Defense stating the nature of your discharge, dates of service, and current classification (retired, seperated, National Guard or Reserves). This document may be needed to help your lender confirm your eligibility for the VA home-loan program. 

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.

A holistic picture of your monthly spending including debts, ongoing payments, and leases in contrast to your overall income. Generally, VA lenders require a DTI of no more than 41% to process the VA-home loan, although great credit, steady employment, and other factors may affect your loan limit.

The department is in charge of overseeing the laws that aim to provide affordable housing to Americans without discrimination, alongside helping out with the appraisal and mortgage process.

In the case of the VA Home Loan Guarantee Program, once you receive the Certificate of Eligibility, you are entitled to a flat amount of $36,000 for homes under $144,000. For homes over this price, you are guaranteed up to 25% of the home’s price. As of 2020, there is no loan limit for VA loans, which means you are entitled to 25% of any home, as long as you are able to meet your lender’s credit requirements. 

Created in 1974, it bans lenders from discriminating against borrowers based on race, religion, national origin, sex, martial status or age. 

In connection with the Department of Housing and Urban Development, the FHA works to stabilize the mortgage market, improve housing standards and conditions, and provide adequate financing for struggling families. 

Interest Rate Reduction Refinancing Loan, is also called a “streamlined loan”, which refinances your existing loan under different terms, often with lower interest rates and monthly payments. The Reichert Mortgage Team is an excellent resource to do this.

Evaluated by your VA appraisal specialist, these requirements ensure that your home is safe, sanitary, and structurally sound. 

 

National Guard Report of Separation and Record of service is a document that proves to your lender that you are eligible for a VA-guaranteed loan.  This document may be needed by your lender to confirm your eligibility. 

An acronym standing for Principle, Interest, Taxes, Insurance – which is the sum of your mortgage payment. Often, this term is used by lenders in talking about your front-end ratio in determining your overall DTI

A legal document granting authority to another person to act on their behalf in legal matters.

Prepayment qualifications are given by a lender to help you find your price range in the housing market. By giving your lender necessary financial papers, including W-2’s and tax returns, you can shop for homes you know you qualify for.

If you cannot pay at least 20% of the home in the form of a downpayment, Private Mortgage Insurance is required ; however, for VA loans PMI is not required. PMI does not benefit the borrower, but the lender in the cause your default on your mortgage.

SF-180 authorizes release of military records, and may be required to obtain your DD-214.

For active duty members, the Statement of Service is proof of your employment used by lenders to confirm your eligibility.

Where veterans submit their Certificate of Eligibility or any other required documents. Once these forms have been completed, you can take them to a VA-approved lender and electronically process your COE, or mail them to the VA Eligibility Center at the following address:

VA Loan Eligibility Center

PO Box 20729

Winston-Salem, NC 27120M

The VA funding fee is between 0 and 3.6% of the total loan depending on the type of loan you wish to obtain (refinancing vs first time home buyer). The money must be paid at the closing of the loan, and all of the money is funded solely into the VA. However, you may be exempt from the funding fee if you receive disability as a veteran or are a surviving spouse of a veteran who died while in the line of duty.

For more specific information on the Funding Fee amount, you can visit the VA’s website.

According to the VA’s website, the VA Guaranteed Home Loan can be used to:

  • Buy a home as a primary residence
  • Refinance an existing home

The benefits of the VA Guaranteed Home Loan include:

  • No down payment unless required by lender
  • No Private Mortgage Insurance (PMI) required
  • Minimum property requirements (ensure it is safe, sanitary, and structurally sound)
  • Can take out multiple loans if you have leftover entitlement 
  • VA staff assistance if you become delinquent
  • Competitive interest rates
  • No prepayment penalty
  • Equal opportunity for all veterans

Refer to our VA loan page to learn more about the benefits of VA Guaranteed Home Loans.

Once your home is under contract, your lender is to order a VA appraisal to get an unbiased, professional opinion of the home’s market value and determine if it meets the Minimum Property Requirements.

How Can The Reichert Mortgage Team Help?

The Reichert Mortgage Team are VA loan specialists, who take the needs of our military clients seriously. From credit counseling to refinancing to closing on home with fantastic rates, we are ready to serve you. We hope to hear from you soon and don’t forget to contact us with any additional questions in our form below.

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