If you’re an eligible Veteran or service member, you may already know that a VA home loan can offer benefits such as no down payment in certain circumstances and no monthly private mortgage insurance (PMI). But those are just two features of the VA home loan program.
From using your benefit more than once to purchasing certain multi-unit properties, your VA home loan benefit may offer more flexibility than you realize.
Here are several benefits and features worth knowing about as you consider your homeownership options.
Using a VA loan to purchase a home doesn’t necessarily mean you’ve used your benefit for good.
Depending on your circumstances, entitlement, and previous VA loans, you may be able to restore your entitlement or have remaining entitlement available for another home purchase.
Because every situation is different, reviewing your Certificate of Eligibility (COE) and available entitlement with a mortgage professional can help you understand your options.
Eligible borrowers with full VA loan entitlement are not subject to a VA-imposed loan limit for loans over $144,000.
However, that doesn’t mean you can borrow an unlimited amount or that every purchase will qualify for zero-down financing. You must still meet applicable credit, income, and underwriting requirements, and the property must meet VA requirements.
Your ability to borrow will ultimately depend on your individual financial circumstances and loan qualification.
Unlike some loan programs, the VA itself does not establish a minimum credit score for VA-guaranteed loans.
That doesn’t mean credit isn’t important. Lenders may establish their own credit requirements, and your overall credit history is still considered as part of the mortgage approval process.
If you’re unsure whether your credit will qualify, don’t assume you’re out of options before speaking with a mortgage professional.
Credit score and debt-to-income ratio aren't the only financial factors that may be considered with a VA loan.
VA underwriting also considers residual income—the amount of money remaining each month after certain major expenses and obligations have been paid.
Residual income requirements can vary based on factors such as family size, loan amount, and region. Looking at the borrower’s overall financial picture is an important part of determining whether the mortgage payment is sustainable.
VA financing isn't necessarily limited to traditional single-family homes.
Eligible borrowers may be able to use a VA loan to purchase a property with two, three or four units, provided applicable requirements are met. The borrower must generally intend to occupy one of the units as a primary residence.
For the right buyer and property, this could provide an opportunity to live in one unit while renting the others.
Another feature of VA loans is that they may be assumable.
Under certain circumstances, another qualified borrower—including someone who is not a Veteran—may be able to assume an existing VA loan. The assumption is subject to applicable VA requirements, qualification, and approval.
Veteran homeowners considering an assumption should also understand how it could affect their VA entitlement, particularly if the person assuming the loan is not substituting their own eligible VA entitlement.
Many VA loans include a one-time funding fee, but certain eligible Veterans, service members, and surviving spouses may be exempt.
For borrowers who are required to pay the funding fee, the amount can depend on factors including the type of loan, whether the VA benefit has been used before, and the amount of the down payment.
In certain purchase-loan situations, making a down payment of at least 5% or 10% may reduce the applicable funding fee.
Your Certificate of Eligibility and other VA documentation can help determine whether a funding-fee exemption applies to you.
VA guidelines allow sellers to pay certain closing costs and provide certain concessions, subject to applicable limitations.
What a seller can contribute—and how those funds may be used—depends on the transaction and VA requirements. If seller assistance is part of your purchase strategy, discuss the details with your mortgage lender and real estate professional before making an offer.
For VA-guaranteed purchase loans, the VA Escape Clause, also known as the VA Amendment to Contract, can provide an important protection related to the property's VA-established reasonable value.
Generally, it allows the buyer to avoid being required to complete the purchase solely because the agreed purchase price exceeds the property's VA-established value.
Buyers may still choose to proceed with the purchase in certain circumstances, but understanding the appraisal, contract, and available options is important before making that decision.
Being deployed doesn't necessarily mean an eligible service member cannot purchase a home using VA financing.
Occupancy requirements still apply, but VA guidelines provide certain considerations for service members whose circumstances prevent them from personally occupying the property within the standard timeframe. Individual circumstances and all applicable loan requirements must still be reviewed.
If deployment or an upcoming change in duty station could affect your home purchase, discussing your situation with an experienced VA mortgage lender early in the process can help you understand what options may be available.
VA home loan benefits were created to help eligible Veterans, active-duty service members, and certain surviving spouses pursue homeownership. But the program includes more than the commonly known benefits of potential zero-down financing and no monthly PMI.
The biggest takeaway: Don't assume you won't qualify because of something you've heard about VA loans.
Your entitlement, funding-fee status, credit history, income, existing VA loans, and overall financial picture can all affect your options.
Thinking about using your VA home loan benefit? Connect with a BankFirst Mortgage lender to review your eligibility, entitlement, and financing options and learn what may be available to you.
This content is for informational and educational purposes only and does not constitute legal, tax, or financial advice. VA loan eligibility and approval are subject to applicable VA guidelines, lender requirements, and credit approval. Terms and conditions may apply.
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