We just celebrated Memorial Day, which is a time to pay our respects to all those who serve or have served our country and community. San Diego has such a rich military heritage, and I am thankful every day for the brave men and women who put their lives on the line for this great nation.
With this holiday fresh on my mind, it seems like the perfect opportunity to talk about VA loans. What are they and who is eligible to receive one? Let’s take a look at the most important things you need to know about these special mortgage loans exclusively for veterans and active military personnel.
What is a VA Loan?
The first thing to understand is that VA loans are not funded by the U.S. Department of Veteran’s Affairs (VA). Rather, that organization insures the VA-eligible loans that mortgage lenders make. The VA sets the loan guidelines for loan approval and then the lenders actually secure funding for the loans.
Up to 100% Funding
VA loans can be approved with up to 100% financing, depending on your qualification standards. This means no down payment may be required. However, it’s still important to stay within your means and put down as much as you can to minimize your total interest payments over the life of the loan. There is no max VA loan amount, but going above $679,750 here in San Diego will require some form of a down payment.
Explaining the VA Funding Fee
You will also be responsible for paying the VA funding fee, which is calculated based on a percentage of the total loan amount. That amount varies depending on how much money you put down. For example, the VA funding fee is 2.15 percent when you put nothing down (2.4 percent for Reserve/National Guard members), but it goes down to 1.25 percent if you put 10 percent down (1.5 for Reserve/National Guard). This fee can sometimes be rolled into the loan, but it is typically due at closing.
Who Qualifies for a VA Loan?
In order to apply for a VA loan, you must first obtain a Certificate of Eligibility (COE) from the VA by meeting certain basic requirements. This does not guarantee you will qualify for the actual loan, but it is the first step you need to take if applying for a VA loan. VA loans can be secured to buy a primary residence (not a second/vacation home). They can sometimes be used for building a new home or making renovations/repairs to an existing home. Talk to your mortgage lender about your VA loan options.
Those eligible for VA loans include:
- Veteran (honorably discharged)
- Active-duty service member
- Current or former National Guard or Reserve
- Surviving spouses
Minimum service time requirements:
- Active Duty – Served 181 days during peacetime
- Active Duty – Served 90 days during war time
- Reserves/National Guard – Served 6 years
- Spouses of service member who died in the line of duty or as a result of service-related disability.
Your San Diego VA-Approved Lender
If you fall into these categories and are interested in buying a home with a VA loan, contact me and the Transparent Mortgage team today for more information and to get started on your VA loan qualification. We’ll help you review all your mortgage loan options and make the right decisions for your future as a homeowner. Call us today at (619) 929-0199.