​What is a VA Loan?

A VA loan is a mortgage option that is guaranteed by the U.S. Department of Veterans Affairs. These loans are available to eligible veterans, active-duty service members, National Guard members, reservists, and some surviving spouses. VA loans are provided by private lenders like banks and mortgage companies, with the VA guaranteeing a portion of the loan, allowing lenders to offer more favorable terms.

The biggest advantage of a VA loan is that no down payment is required for qualifying borrowers, and private mortgage insurance (PMI) is not needed.

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VA Loan Requirements

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To qualify for a VA loan, you must meet certain eligibility requirements, which are based on your service history and duty status. The key requirements include:

• Service Eligibility: Veterans, active-duty military personnel, National Guard members, reservists, and eligible surviving spouses may qualify. Service members must generally meet minimum service requirements (e.g., 90 days of wartime service or 181 days of peacetime service).

• Certificate of Eligibility (COE): To apply for a VA loan, you need a Certificate of Eligibility, which proves to lenders that you qualify for the program. This document can be obtained through the VA or your lender.

• Credit Score: While the VA does not set a minimum credit score, most lenders prefer a score of at least 620 to qualify for favorable terms.

• Income and Employment: Lenders will typically review your debt-to-income (DTI) ratio and verify a steady income stream. The preferred DTI ratio for VA loans is 41% or lower, but exceptions can be made depending on other factors.

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VA Loan Benefits

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VA loans offer several significant benefits to qualified borrowers:

• No Down Payment: For most VA loan applicants, no down payment is required, making it easier to buy a home without large upfront costs.

• No PMI: Unlike FHA or conventional loans with low down payments, VA loans do not require Private Mortgage Insurance (PMI). This can save borrowers thousands of dollars over the life of the loan.

• Competitive Interest Rates: VA loans typically come with lower interest rates than conventional loans due to the backing from the Department of Veterans Affairs.

• Limited Closing Costs: The VA limits the amount that borrowers can be charged in closing costs, and in some cases, the seller may cover those costs.

• Flexible Underwriting Standards: VA loans offer more flexible credit and income qualification standards, making them accessible to a wider range of borrowers.

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VA Loan Limits

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While there is no cap on how much you can borrow with a VA loan, there are loan limits that apply if you are purchasing a home with no down payment. These limits vary by county and are set according to median home prices in the area. For 2024, the standard VA loan limit is $726,200 in most counties, though high-cost areas have higher limits.

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Funding Fee

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Although VA loans do not require PMI, borrowers are required to pay a VA funding fee to support the program. The funding fee varies based on the type of service, down payment amount, and whether it's the borrower’s first VA loan. For first-time homebuyers with no down payment, the fee is typically 2.15% of the loan amount, though this fee can be reduced or waived for some disabled veterans and surviving spouses.

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The Bottom Line on VA Loans

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VA loans are an excellent option for eligible service members, offering:

• No down payment and no PMI requirements.

• Competitive interest rates and limited closing costs.

• Flexible qualification standards, making homeownership more accessible for veterans and their families.

If you believe you’re eligible for a VA loan, contact us today to explore your options and start the journey to owning your home with the benefits you deserve.