what you need to know about va loans

How VA Loans Work

If you don’t know what a VA loan is, it’s basically a loan program for Service members, Veterans, and eligible surviving spouses. It helps them become homeowners without having to put a down payment. Typically other loans require 3.5% for FHA and 10-20% down for conventional.

The big misconception is that someone using a VA loan doesn’t have to pay for anything. That’s not true.

VA Funding Fee

Generally, all Veterans using the VA loan must pay a funding fee which is a percentage of the loan amount which varies based on the type of loan and your military category, if you’re a first time or subsequent loan user, and whether you make a down payment. You have the option to finance the VA funding fee or pay it in cash, but the funding fee MUST be paid at closing.

Do Not Have to Pay a Funding Fee

You do not have to if you are:

A veteran receiving VA compensation for a service-connected disability, OR
A veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay, OR
Surviving spouse of a Veteran who died in service or from a service-connected disability

The funding fee for second-time users who do not make a down payment is slightly higher. Also, National Guard and Reserve Veterans pay a slightly higher funding fee percentage. To determine your exact percentage, please review the latest funding fee chart.

Other Loan Cost

Be aware that the lender charges interest, in addition to closing fees and charges. Here are some general rules:

The lender, not VA, sets the interest rate; discount points, and closing costs. These rates may vary from lender to lender
Closing costs such as the VA appraisal, credit report, state and local taxes, and recording fees may be paid by the purchaser, the seller, or shared
The seller can pay for some closing costs. (Under our rules, a seller’s “concessions” can’t exceed 4% of the loan. But only some types of costs fall under this 4% rule. Examples are payment of pre-paid closing costs, VA funding fee, payoff of credit balances or judgments for the Veteran, and funds for temporary “buydowns.” Payment of discount points is not subject to the 4% limit.)
You are not allowed to pay for the termite report unless the loan is a refinance. That fee is usually paid by the seller.
No commissions, brokerage fees, or “buyer broker” fees may be charged to the Veteran buyer

Adding the VA Funding Fee and other loans costs to your loan may result in you paying thousands of dollars at the end of closing.

So a rule of thumb to remember what you need to pay, remember the acronym ACTORS. That stands for:

A Appraisals
C Credit Report
T Title Insurance
O Origination Fee
R Recording Fee
S Survey

IMPORTANT!!!!!

You have to be fully divorced to purchase a house if you don’t want your spouse to have any interest in it.
Appraisals for VA loans are a little more strict and would not lend on a home that has major issues like foundation problems etc. Also won’t lend you more than the appraised value.
You also need a termite inspection clearance to purchase the home.
The lender wants to see 2 years of employment at the same job or same line of work. That shows consistency and allows them to determine how much you can afford.
Can’t use a VA loan to flip a property

For Veterans, this is what you’ll need initially to apply for a VA Loan

Certificate of Eligibility (COE)
DD Form 214
2-year tax returns
2-month bank statements
30 day pay stub
Copy of drivers license and social security card

If you have any questions, I have a few lenders I can refer you too or you could just ask me.

As always thank you for reading, I appreciate you and your time

Disclaimer– I am not a lender or loan agent, you should consult with a licensed professional. You should do your own research and verify information.