VA Mortgage Details

What is a VA Loan?

 

VA stands for Veterans Affairs. The U.S. Department of Veterans Affairs created a military serviceperson loan guarantee program in 1944 to enable active and returning military service members & their surviving spouses to purchase homes in cases where private financing is not generally available and help our service members realize the dream of home-ownership with no down-payment.

 

The VA Loan Guarantee Program was expanded in 1992 to expand the eligible pool of borrowers to also include National Guard personnel and Reservists. The VA Loan Guarantee program guarantees mortgages made by approved VA lenders to military personnel and their spouses.

 

To clarify a point of confusion, the Agency of Veterans Affairs does not directly make VA Loans. The VA, rather guarantees the loan enabling approved VA lenders the ability to offer eligible borrowers loans at highly competitive mortgage rates, with no down-payment, no mortgage insurance, and easier credit/underwriting guidelines. The loan is meant for the purchase of a service member’s primary residence only – not second homes or investment properties.

 

Foundation Mortgage Corporation is an Approved Correspondent VA Lender!

 

Am I Eligible for A VA Loan?

  

  • If you have served 90 consecutive days of active service during wartime you may be eligible for a VA Home Loan.

  • If you have served 181 days of active service during peacetime you may be eligible for a VA Home Mortgage.

  • If you have more than 6 years service in the National Guard you may be eligible for a VA Loan.

  • If you have more than 6 years service as a Reservist you may be eligible for a VA Loan.

  • If you are the spouse of a service member who died in the line of duty or as a result of service-related disability you may be eligible for a home loan through the VA program.

  • Veterans & Members of the National Guard or Reserves who have been previously called to active duty will need their DD Form 2014.

  • Active Service Members will need a current Statement of Service.

 

Click here to visit our Eligibility Table for specifics on who qualifies for a VA home loan.

 

 

What is a COE?

 

The COE (Certificate of Eligibility) is an official form that you complete and submit to the VA.  The COE verifies to your lender that you are eligible for a VA-backed loan.

 

You can download a COE form here.

 

How Do I Complete & Submit a Certificate of Eligibility (COE) Form to the VA?

 

Foundation Mortgage as an Approved VA Correspondent Lender can help expedite the processing of your COE and assist you in fully explaining your Eligibility Benefits. Our VA Home Loan Specialists can help you gather the proper documentation, complete the COE properly, and navigate any hiccups with the VA in the processing of your COE.

 

  • Step 1:  Gather the information required as shown on our VA Loan Eligibility Requirements Table

  • Step 2:  Complete your Certificate of Eligibility (COE) Form.

  • Step 3:  Submit the COE to the VA

    • Our VA Loan Specialists will assist you with this process.

  • Step 4:  Review your VA Loan Guarantee Benefit to determine the maximum loan amount you are eligible for.

    • Note: sometimes there are inaccuracies in the reinstatement of benefit if you have previously used your VA guarantee to purchase a home in the past.

    • Foundation Mortgage can assist in updating/correcting this is necessary.

  • Step 5:  Review your income/assets/credit qualifying information with a Foundation Mortgage VA Loan specialist to see what the best options are for your scenario.

 

What are the Maximum VA County Loan Limits for 2016?

 

Assuming you have full use and maximum guarantee available & your credit/income/asset/debt profile qualify, what is the maximum loan amount you can borrow under the VA Home loan guarantee program?

 

Click here to Access Our VA Loan Limit Calculator (pop-up)

 

  • There are 3 categories in determining the VA Loan Limit:

    • Conventional VA Loan Limit Counties

      • The standard VA Loan Limit is $417,000

        • This means, you will be able to purchase a house for $417,000 with no down-payment.

        • Refinance Transaction maximum loan amounts will be discussed in a separate section.

    • High Cost VA Loan Limit Counties

      • Some high cost counties have expanded VA Loan Limits.

        • In these counties you can purchase a house up to a maximum of $625,500 with no down-payment.

        • Refinance Transaction maximum loan amounts will be discussed in a separate section.
    • VA Jumbo loans for transactions exceeding the conventional loan limits

      • You can still use your VA Guarantee for loan amounts above the above mentioned county limits!

      • The maximum VA loan limit is $1,000,000.   

      • Loans above the county loan limits listed above will require some down-payment.

      • Click here to access our VA Jumbo loan limit calculator (pop-up) to determine the minimum loan amount required for your VA Jumbo loan scenario.

 

 Click here to Access Our VA Loan Limit Calculator (pop-up)

VA Home Loan Costs – What is the VA Funding Fee?

 

The VA Funding Fee is a unique cost to VA Loans. It is a one-time fee paid as part of your closing costs on both VA Purchase Loans and VA Refinance loans.

 

The Funding Fee is a percentage of the loan amount. The Percentage varies depending on the type of VA Home Loan and your military category, if you are a first time or subsequent user of the program, and whether you make a down-payment.

 

The VA Funding Fee goes directly to the VA to ensure that the VA loan program can maintain funding and will continue to be available for future generations. The VA Funding Fee is used by the VA to offset the loss on loans that go into default, and thus reduce the cost to US Taxpayers to maintain the program.

 

Borrowers have the option to pay the Upfront Funding Fee at closing as part of their closing costs, or to roll it into the loan amount to keep the borrower’s cash-out-of-pocket lower.

 

I Am Disabled; Do I Need to Pay the VA Funding Fee?

 

VA Home Loan Borrowers with service-related disability can receive an exemption from the VA and may not have to pay the VA Funding Fee.

 

  • Disabled Veterans receiving VA compensation for a service-related disability do not have to pay the VA Funding Fee.

  • Disabled Veterans who would be entitled to receive compensation for a service related disability if they did not receive retirement or active duty pay.

  • Surviving Spouses whose partner died either in service or from a service related disability.

 

How Much is the VA Funding Fee  VA Funding Fee Calculator

 

As mentioned above, the VA Funding Fee is a one-time fee paid directly to the VA.

 

How much will your VA Funding Fee cost?

    • The answer depends on several factors.

    • Foundation Mortgage’s VA Funding Fee Calculator will help you determine how much you should expect to pay for your VA Funding Fee.

    • Remember that this fee can be rolled into your loan amount so you do not have to pay it out of pocket at closing.

    • You can also contact one of our VA Home Loan Specialists for help at 855-313-6066

 

What Are The Benefits of A VA Loan vs. Private Conventional Mortgages?

  • Reduced or NO Down Payment

    • Reduced or No down payment required for loan amounts up to $417,000!

    • Reduced Down Payments on Jumbo Loans over $417,000

 

Down Payment Savings

Loan Amount

0% Down

5% Down

10% Down

20% Down

$100,000

$0

$5,000

$10,000

$20,000

$200,000

$0

$10,000

$20,000

$40,000

$300,000

$0

$15,000

$30,000

$60,000

$400,000

$0

$20,000

$40,000

$80,000

 

  • No Mortgage Insurance

    • VA Mortgage Loans do not monthly mortgage insurance.  Other loans with a loan amount greater than 80% of the value of the property require mortgage insurance.

Mortgage Insurance – PMI - Savings

Loan Amount

Monthly PMI Savings

$100,000

$46.67

$200,000

$103.33

$300,000

$140.00

$400,000

$186.67

 

Assumptions:  95% LTV, 750 Credit Score, SFH, 30% Coverage, 30 Year Fixed, Approve/Eligible, Primary Residence, Florida

  • Low Interest Rates

    • Interest Rates on VA Mortgages are often lower than those for conventional loans.

    • Especially for borrowers with low credit scores

  • Easier to Qualify

    • Lower Credit Scores – As low as 550 qualifying credit score.*

    • Limited Credit History- Non-traditional trade lines, such as utility bills, rent history, and other accounts that are not included on traditional credit reports may be considered in supporting a determination of a borrower’s ability to repay the loan.

    • Adverse Credit- Shorter waiting periods after significant derogatory credit events before eligibility for financing is restored.

      • Bankruptcy – 2 years (7), 13 – 1 year in as long as 12 months payments on time

      • Short-/Deed-in-Lieu – 2 years

      • Foreclosure – 2 years

    • Higher Debt-to-Income Ratios

    • Up to 55% (or higher) debt ratios permitted.  Significantly exceeding what is permitted under conventional loan guidelines.

  • High LTV Limits on Refinance Transactions

    • Refinance up to 100% or greater of your Property’s Value

    • Cash-out Refinances up to 85% Loan-To-Value

  • VA Mortgage Loans are assumable

  • No Prepayment Penalty

  • Seller Contributions to your closing costs of up to 6% of the purchase price

 

What Types of VA Loans are There?

  • Loan Programs:

    • 30 Year Fixed

    • 15 Year Fixed

    • 5 Year ARM

    • 3 Year ARM

  • Types of VA Loans

    • Traditional VA Purchase Loan

    • VA Streamline Refinance -  IRRRL – Interest Rate Reduction Loan

    • VA Cash-out Refinance

For details on the Pros and Cons for different VA Loan Programs click here.

 

Types of VA Home Refinances

  • There are 2 types of VA Refinance Loans.

    • A VA IRRRL or VA Streamline Refinance:  A simple, streamlined refinance of an existing VA loan into a lower interest rate & monthly payment.  

    • A VA Cash-out Refinance:  A refinance of a non-VA mortgage or a refinance of an existing VA Loan which allows the borrower to receive cash back from the equity of the property.

 

What is a VA Streamline IRRRL?

 

VA Streamline Refinance (Non-Credit Qualifying) - VA IRRRL

  • IRRRL stands for:  Interest Rate Reduction Refinance Loan

  • An IRRRL is a VA-guaranteed home loan designed to refinance a borrower out of an existing VA home loan.

  • Generally the new VA loan will have a lower interest rate & lower principal and interest payments than the existing VA loan.

  • You can also refinance your VA Home Loan from a higher risk loan product – ie. an ARM (Adjustable Rate Mortgage) to a lower risk product (Fixed Rate Mortgage).

  • This type of VA Loan is often referred to as a Streamline because it features so little paperwork.

  • VA Streamlines generally also feature little or no closing costs.

 

What are the Key Features of a VA Streamline Refinance – IRRRL Home Loan?

 

  • No appraisal required.

  • No underwriting of income.

  • No underwriting of assets.

  • No debt ratio calculation.

  • No money out of pocket.

    • Closing costs can be rolled into the new loan amount; Or

    • Lender Paid Closing costs – by electing a higher interest rate.

  • You need only to show the prior occupancy of your property.  If it is no longer your current primary residence you can still refinance with a VA Streamline Refinance of an Investment Property.

  • When moving from an ARM to a Fixed Rate Loan the interest rate may increase.

    • The VA allows this in order to allow you to move from a riskier home loan product to a less risky one.

  • You can not receive cash-back.

  • To qualify for a VA Streamline Refi you must be refinancing from an existing VA loan.  If, not, then you will use the VA Cash-Out Refinance program for your refinance.

  • Typically the existing VA loan needs to be current or show no more that 1 30 day late in the past 12 months.

  • The VA Streamline Refinance can close quickly because of the relative ease of the process and reduced paperwork.

 

What is the Net Tangible Benefit Requirement for a VA IRRRL Home Loan?

 

The new P&I payment must be lower on the new VA loan; unless

    • The new VA IRRRL loan is a fixed rate loan and the original VA loan was an ARM.

    • The term of the new loan is shorter than the term of the loan being refinanced.

      • I.e. from a 30 year fixed VA loan to a 15 year fixed VA Loan.

    • Energy efficiency improvements are included in the IRRRL.

 

Can my Monthly Payment Increase on a VA Streamline IRRRL Home Loan?

 

An increase in the Veteran’s monthly payment may happen if:

  • You finance closing costs causing the loan amount to increase causing the monthly payment to increase.

  • You finance up to 2 discount points causing the loan amount to increase causing the monthly payment to increase.

  • You finance the funding fee causing the loan amount to increase causing the monthly payment to increase.

  • You elect a higher interest rate to move out of an VA ARM Loan and into a VA Fixed Loan product

  • Your Taxes or Insurance Escrow Amounts have changed and are not yet updated on the existing VA Home loan being refinanced.

 

Can I Receive Cash-Out on a VA Streamline IRRRL Home Loan?

 

No.  You can’t use a VA Streamline IRRRL to take cash out. To receive cash-out, you would have to qualify under a traditional VA Cash-Out Refinance program which requires traditional credit and underwriting.

 

The one exception is reimbursement for the cost of energy efficiency improvements up to $6,000 that were completed within 90 days preceding the date of closing on the new IRRRL home loan.

 

What is the VA Funding Fee on a VA Streamline IRRRL Home Loan?

 

  • Traditionally the Funding Fee for a VA IRRRL = .5%

  • Disabled borrowers may be exempt from the VA Funding Fee.

 

What Closing Costs Can be Included in the Loan Amount for a VA Streamline IRRRL Home Loan?

 

  • The VA Funding Fee

  • All allowable closing costs, including:

    • State Fees

    • County Recording Fees

    • Title Insurance Fees

    • Escrow Amounts for Taxes and Insurance

    • Up to 2 discount points (to buy the interest rate down).

    • Lender’s Flat fee charge

  • VA IRRRL Loans currently past due:

    • Must be submitted by your lender to the VA for prior-approval.

    • Late payments and late charges from the old VA Loan can be rolled into the new loan amount.

    • “Reasonable” legal costs initiated to terminate the old loan that had already commenced.

 

What is the Difference Between an IRRRL and a VA Cash-Out Refinance?

 

  • Use the VA Cash Out Refinance Program to refinance out of any loan.

    • VA Streamline Refinance - can only be used to refinance an existing VA Loan.

    • VA Cash Out Refinance - can be used to refinance any conventional, FHA, USDA or Jumbo Loan.

  • Use the VA Cash Out Refi Program to take Equity Out of your property.

  • VA Streamline Refinance Vs. VA Cash Out Refi Underwriting Requirements

    • VA Streamline Refinance requires limited paperwork

    • VA Cash Out Refinances require an Appraisal & traditional credit, income, asset underwriting review.

 

What are the Key Features of a VA Cash Out Refinance?

 

  • Eligible for the refinance of a current primary residence only.

  • The VA Cash Out Refinance Program includes two types of refinances:

    • Refinance of a non-VA loan into a VA loan (regardless of whether you are receiving cash-out or not).

    • Refinance of any loan with the purpose of taking Cash Out.

  • The VA Cash Out Refinance Program allows you to refinance up to 100% of your existing mortgage debt (with no cash-out)

  • The VA Cash Out Refinance Program allows you to take actual cash-out up to 85% of the equity of your home.

  • This loan requires an Appraisal and full credit and underwriting documentation (similar to when you purchased your home).

 

What can I use the Cash Out Proceeds For From a VA Cash Out Refinance Home Loan?

 

  • Use the cash out from a VA Cash Out Refinance Loan to Pay off Debt

  • Use the proceeds from a VA Cash Out Refinance Loan for Home Improvements

  • Use the cash out proceeds to pay-off a non-VA home loan.

  • Home Improvements, school tuition, emergency nest-egg, and much more!