VA Loan

Last Updated: 03/24/2024

Loan Highlights

  • Eligible veterans, active-duty service members, and their families.
  • Typically no down payment required with competitive interest rates.
  • Government-backed loan program exclusively for military personnel and their families.
  • Offers favorable terms and benefits, including no down payment and no private mortgage insurance (PMI) requirement.
  • Ranges from $100,000 to VA loan limits in the borrower's area.

Interest Rate Estimate

Federal Fund Rate + 0.75% Margin
*The mortgage interest rate calculation above is estimated. The subject borrower for that interest rate is as follow:
  • 740 FICO score
  • 30 years fixed interest rate
  • primary residence
  • single family house

Terms and Breakdown:

  • Interest rates: Typically fixed or can be ARM.
  • Loan terms: Typically 15 or 30 years amortized.
  • No down payment required for most borrowers.
  • Funding fee may be required (1.25% – 3.3%) but can be financed into the loan.
  • No mortgage insurance required (even at 0% down).

Requirements:

  • FICO: 620+
  • DTI: 80/80 if good credit and 60+/60+ if on the low end
  • Employment History: 2 years for W2 employees and self-employed (the amount of year can sometimes very if you’re in school or self-employed).
  • Eligible veterans, active-duty service members, and certain spouses.
  • Minimum service requirements (typically 90 consecutive days during wartime or 181 days during peacetime).
  • Certificate of Eligibility (COE) from the VA.
  • Debt-to-income ratio typically capped at 85%.
  • Documentation:
    • Typical Documents: Typically full documentation (full docs) including pay stubs, tax returns, W-2 forms, bank statements, and proof of assets. Alternative documentation (alt-docs) may be accepted in certain cases.

Derivative or Related Products:

  • VA Interest Rate Reduction Refinance Loan (IRRRL): Allows borrowers with existing VA loans to refinance to a lower interest rate with minimal paperwork and no appraisal.
  • VA Cash-Out Refinance Loan: Allows eligible borrowers to refinance their existing mortgage and take cash out of their home equity.
  • Native American Direct Loan (NADL): VA loan program specifically for eligible Native American veterans to purchase, construct, or improve homes on Federal Trust Land.

Funder and Sponsors:

  • U.S. Department of Veterans Affairs (VA) guarantees VA loans, which are originated and funded by approved lenders such as banks, credit unions, and mortgage companies.

Notes:

  • Common misunderstandings with VA loans include:
    • Overlooking funding fees: While VA loans typically do not require a down payment, borrowers may need to pay a funding fee, which can vary based on factors such as military service, down payment amount, and whether it’s a first or subsequent use of the VA loan benefit.
    • Assuming strict eligibility requirements: While VA loans are designed for veterans and active-duty service members, certain surviving spouses may also be eligible.
    • Documentation requirements: Borrowers should be prepared to provide documentation of military service, income, assets, and other financial information to meet VA loan requirements.