5
Steps to a VA Loan
- Apply
for a Certificate of Eligibility (we will do this for you).
A veteran who doesn't have a certificate can obtain one easily by
completing VA
Form 26-1880, Request for a Certificate of Eligibility for VA Home
Loan Benefits and submitting it to one of the Eligibility
Centers with copies of your most recent discharge or separation
papers covering active military duty since September 16, 1940, which
show active duty dates and type of discharge.
- Decide
on a home the buyer wants to buy and sign a purchase agreement
- Order
an appraisal from VA. (Usually this is done by the lender.)
Most VA regional offices offer a "speed-up" telephone
appraisal system. Call the local VA office for details.
- Apply
to a mortgage lender for the loan.
While the appraisal is being done, the lender (mortgage company,
savings and loan, bank, etc.) can be gathering credit and income
information. If the lender is authorized by VA to do automatic
processing, upon receipt of the VA or LAPP appraised value
determination, the loan can be approved and closed without waiting
for VA's review of the credit application. For loans that must first
be approved by VA, the lender will send the application to the local
VA office, which will notify the lender of its decision.
- Close
the loan and the buyer moves in.
Who
is Eligible for a VA Loan?
Veterans who
served on active duty and were discharged under conditions other than
dishonorable, during World War II and later periods are eligible for VA
loan benefits. World War II (September 16, 1940 to July 25, 1947),
Korean conflict (June 27, 1950 to January 31, 1955), and Vietnam era
(August 5, 1964 to May 7, 1975) veterans must have at least 90 days'
service. Veterans with service only during peacetime periods and active
duty military personnel must have had more than 180 days' active
service. Veterans of enlisted service which began after September 7,
1980, or officers with service beginning after October 16, 1981, must in
most cases have served at least 2 years.
Persian
Gulf Conflict.
Basically, reservists and National Guard members who were activated on
or after August 2, 1990, served at least 90 days and were discharged
honorably are eligible. VA regional office personnel may assist with
eligibility questions.
Members of the Selected Reserve,
including National Guard, who are not otherwise eligible and who have
completed 6 years of service and have been honorably discharged or have
completed 6 years of service and are still serving may be eligible. The
expanded eligibility for Reserves and National Guard individuals will
expire September 30, 2003. Contact the local VA office to find out what
is needed to establish eligibility. Reservists will pay a slightly
higher funding fee than regular veterans.
Financing
Benefits
More than 29 million veterans and service
personnel are eligible for VA financing. Even though many veterans have
already used their loan benefits, it may be possible for them to buy
homes again with VA financing using remaining or restored loan
entitlement.
- Before
arranging for a new mortgage to finance a home purchase, veterans
should consider some of the advantages of VA home loans
- Most
important consideration, no downpayment is required in most cases.
- Loan
maximum may be up to 100 percent of the VA-established reasonable
value of the property. Due to secondary market requirements,
however, loans generally may not exceed $203,000.
- Flexibility
of negotiating interest rates with the lender.
- No
monthly mortgage insurance premium to pay.
- Limitation
on buyer's closing costs.
- An
appraisal which informs the buyer of property value.
- Thirty
year loans with a choice of repayment plans:
- Traditional
fixed payment (constant principal and interest; increases or
decreases may be expected in property taxes and homeowner's
insurance coverage);
- Graduated
Payment Mortgage--GPM (low initial payments which gradually rise
to a level payment starting in the sixth year); and
- In
some areas, Growing Equity Mortgages-GEMs (gradually increasing
payments with all of the increase applied to principal, resulting
in an early payoff of the loan).
- For
most loans for new houses, construction is inspected at appropriate
stages to ensure compliance with the approved plans, and a 1-year
warranty is required from the builder that the house is built in
conformity with the approved plans and specifications. In those
cases where the builder provides an acceptable 10-year warranty
plan, only a final inspection may be required.
- An
assumable mortgage, subject to VA approval of the assumer's credit.
- Right
to prepay loan without penalty.
- VA
performs personal loan servicing and offers financial counseling to
help veterans avoid losing their homes during temporary financial
difficulties.
VA
Loan Uses
- To
buy a home, including townhouse or condominium unit in a VA-approved
project.
- To
build a home.
- To
simultaneously purchase and improve a home.
- To
improve a home by installing energy-related features such as solar
or heating/cooling systems, water heaters, insulation,
weather-stripping/ caulking, storm windows/doors or other energy
efficient improvements approved by the lender and VA. These features
may be added with the purchase of an existing dwelling or by
refinancing a home owned and occupied by the veteran. A loan can be
increased up to $3,000 based on documented costs or up to $6,000 if
the increase in the mortgage payment is offset by the expected
reduction in utility costs. A refinancing loan may not exceed 90
percent of the appraised value plus the costs of the improvements.
Check with a lender or VA for details.
- To
refinance an existing home loan up to 90 percent of the
VA-established reasonable value or to refinance an existing VA loan
to reduce the interest rate.
- To
buy a manufactured home and/or lot.
Obtaining
a VA Loan VA Appraisal -
Certificate of Reasonable Value
The CRV (certificate of reasonable value)
is based on an appraiser's estimate of the value of the property to be
purchased. Because the loan amount may not exceed the CRV, the first
step in getting a VA loan is usually to request an appraisal. Anyone
(buyer, seller, real estate personnel or lender) can request a VA
appraisal by completing VA Form 26-1805, Request for Determination of
Reasonable Value. After completing the form, it can either be mailed to
the Loan Guaranty Division at the nearest VA office for processing or an
appraisal can be requested by telephoning the Loan Guaranty Division for
assignment of an appraiser. The local VA office may be contacted for
information concerning its assignment procedures. The appraiser will
send a bill for his or her services to the requester according to a fee
schedule approved by VA. To simplify things, VA and HUD/FHA (Department
of Housing and Urban Development/Federal Housing Administration) use the
same appraisal forms. Also, if the property was recently appraised under
the HUD procedure, under certain limited circumstances, the HUD
conditional commitment can be converted to a VA CRV. The local VA office
can explain how this is done.
It is important to recognize that while
the VA appraisal estimates the value of the property, it is not an
inspection and does not guarantee that the house is free of defects.
Homebuyers should be encouraged to carefully inspect the property
themselves, or to hire a reputable inspection firm to help in this area.
VA guarantees the loan, not the condition of the property.
Application
The application
process for VA financing is no different from any other type of loan. In
fact, the VA application form is the same as that used for HUD/FHA and
conventional loans. The mortgage lender verifies the applicant's income
and assets, and obtains a credit report to see that other obligations
are being paid on time. If all is well and the appraised value of the
property is enough to cover the loan needed, the lender, in most
instances, can then close the loan under VA's automatic procedure. Only
about 10 percent of VA loan applications have to be submitted to a VA
office for approval before closing.
VA
Loan Costs
A basic funding fee of 2.0 percent must
be paid to VA by all but certain exempt veterans. A down payment of 5
percent or more will reduce the fee to 1.5 percent and a 10 percent down
payment will reduce it to 1.25 percent.
A funding fee of 2.75 percent must be
paid by all eligible Reserve/National Guard individuals. A down payment
of 5 percent or more will reduce the fee to 2.25 percent and a 10
percent down payment will reduce it to 2.0 percent.
The funding fee for loans to refinance an
existing VA home loan with a new VA home loan to lower the existing
interest rate is 0.5 percent.
Veterans who are using entitlement for a
second or subsequent time who do not make a down payment of at least 5
percent are charged a funding fee of 3 percent.
NOTE: For all VA home loans, the
funding fee may be paid in cash or it may be included in the loan.
In addition, reasonable closing costs may
be charged by the mortgage company. These costs may not be included in
the loan. The following items may be paid by the veteran purchaser, the
seller, or shared. Closing costs may vary among companies and also
throughout the nation because of differing local laws and customs.
VA loan costs may include VA appraisal,
credit report, loan origination fee (usually 1 percent of the loan),
discount points, title search and title insurance, recording fees, state
and/or local transfer taxes, if applicable, survey
No commissions, brokerage fees or
"buyer broker" fees may be charged to the veteran buyer. |
