The home buying process can be confusing, but…
We offer two types of VA home mortgages: the traditional fixed rate mortgage, in which the interest rate never changes; and a hybrid (also known as an adjustable) rate mortgage, or ARM, in which the interest rate and the monthly payment amount change with fluctuations in the financial markets. In either case, Veterans can get their fixed rate loan with no closing costs or down payment with their VA Home Loan Program benefits.
Fixed Rate Mortgage
A fixed rate mortgage is the loan that most people think of when considering a mortgage. Because the interest rate never changes, home owners benefit from stability and predictability in their mortgage payments. If stability is important to you, or if you are not fully confident about the economy or your job security, then a fixed rate mortgage is the right instrument for you.
15-year VA Mortgage Loans
A 15-year VA home loan means you will make monthly payments that will repay your entire mortgage amount in 15 years instead of the usual 30 years. While the monthly payment is a little higher, typically the interest rate is slightly lower than it is for a 30-year mortgage. This option could save you thousands of dollars over the life of your loan, depending on the loan amount.
30-year VA Mortgage Loans
Thirty years is the most common length, or term, for a VA home loan. By lengthening the duration of the mortgage, the monthly payment amount for the loan is lower than the payment on a 15-year mortgage, but you will pay more in interest than with the shorter loan term.
Hybrid (Adjustable) Rate Mortgage (ARM)
A hybrid rate mortgage, also known as an ARM or adjustable rate mortgage, offers home buyers lower interest rates – at least initially. Because it’s easier to borrow more, this can help first-time buyers afford more house for their budget. As a general rule of thumb, if you expect to stay in your home for less than five years you will probably do better with an ARM. But it’s critical to honestly evaluate your ability to pay a higher rate over time.
VA Home Loan Eligibility
To determine your eligibility for the VA home loan benefit, you will need to obtain a Certificate of Eligibility (COE) which is the only reliable Proof of Eligibility on which the Lender may rely, except in the case of an Interest Rate Reduction Refinancing Loan (IRRRL). We can quickly and easily obtain this document for you or, if you prefer, you may apply for a COE online at www.homeloans.va.gov/eligibility.htm. Your COE determines that you meet the basic criteria of appropriate length and character of service to take advantage of the VA home loan benefit. An eligible veteran must still meet credit and income standards in order to qualify for a VA-guaranteed home loan and to obtain loan approval.
VA Home Loan Entitlement
Entitlement is the amount available for a veteran to use on a VA mortgage. The amount of available basic VA home loan entitlement is $36,000. This may be reduced if a veteran has used entitlement before which has not been restored. The amount of basic entitlement will be displayed near the center of the COE. For example, it may say: “This veteran’s basic entitlement is $_____. Total entitlement charged to previous VA loans is $_____.” For certain VA home loans in excess of $144,000, additional entitlement may be available. For VA loans greater than $144,000, but less than $417,000, the maximum entitlement is 25 percent of $417,000, which equals $104,250. For loans greater than $417,000, the maximum entitlement is 25 percent of the appropriate “loan limit” which can vary by county. For a description of VA home loan limits, as well as the limits for counties, visit the VA Loan Limits Web page. Please note county limits can change yearly.
First-Time Home Buyers
It’s important for first-time buyers to prepare themselves and set their expectations in order for their home-buying experience to be successful. Here are some tips to get new home buyers through the process:
- First, understand what you can afford. Start with a realistic household budget, and don’t forget to leave something in reserve for unexpected expenses. Make sure your budget includes money for property taxes, insurance and unexpected repairs down the road.
- Get pre-qualified on your loan before you make an offer. It’s a great way to double-check your estimates, and it avoids wasting a lot of time.
- Make sure that your expectations are in line with your budget. If you think about it, your first car probably wasn’t a Mercedes, but it got you where you wanted to go.
- At the same time, don’t compromise on features you really need. If you need three bedrooms, don’t settle for two. It’s smart to make compromises in favor of affordability, but don’t sacrifice something that’s essential.
- Be sure that you have the house thoroughly inspected by a professional before you commit.
- Most important, be patient and keep looking until you get as close to what you want as possible for what you can comfortably afford.
Qualifying for a Mortgage
There are two ratios that lenders use to determine whether you qualify for a VA mortgage or home loan. First is the Housing Expense Ratio, using the total of the principal amount and the interest rate on your VA mortgage, plus real estate taxes, home owner’s insurance and mortgage insurance (if necessary). This is your Total Housing Debt, and it should not be higher than 30% of your total gross monthly income. So if your gross income is $5,000 per month, your total housing debt should be no higher than $1,500. The second ratio is your Debt-to-Income. First, add up all recurring monthly debt – including credit card payments, loans, alimony and so on. Then add your monthly recurring debt to your total housing debt. The total should not exceed 40% of your gross monthly income. Using our previous example, if your gross monthly income is $5,000, the total of your housing debt and your recurring monthly debt should not be higher than $2,000.
Pre-Qualifying for a VA Loan
It’s never a bad idea to get pre-qualified for your VA home loan amount. Once you know how much money you qualify for, you can save time shopping for a home that’s comfortably within your price range. Another benefit to getting VA pre-qualified is to give prospective sellers confidence that you’re serious when you are ready to make an offer, because they’ll know you’re qualified to buy their home. All you need to do to pre-qualify at VAMortgage.com is make a phone call. After a brief conversation with one of our VA home loan specialists, we can issue a prequalification letter showing that you qualify for a specified loan amount – at no cost to you, just like our free appraisal service. It’s one more way the VA home loan specialists at VAMortgage.com work to make your home-buying experience as easy as possible. After your home purchase offer has been accepted by the seller, just call back your VA loan specialist at VAMortgage.com and tell us the final purchase price. We’ll start processing your VA home loan the same day. (Note: Pre-qualification does not constitute a loan approved by VAMortgage.com.) Be sure to ask our VA loan specialist what NOT to do once you pre-qualify – such as buy a car, open a new credit card account, quit your job or change jobs!
Free Appraisal with Your Approved VA Loan
As part of our commitment to the needs of military service members and veterans, we are proud to offer you a free appraisal when your approved loan closes with VAMortgage.com. As part of the VA home loan process, you must request an appraisal by the Veterans Administration to ensure that the loan amount does not exceed VA’s estimate of the value of the property. At your request, VAMortgage.com will request your appraisal for you, using The Appraisal System, or TAS, online. There would normally be a cost related to the appraisal, but VAMortgage.com will deduct the cost of the appraisal from your closing costs at settlement. It’s just another way we say “Thank You for your service, and for giving VAMortgage.com the opportunity to serve you.” It’s 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. Call one of our VA home loan specialists today at 888-256-5387 for full information on how to get your free appraisal when you take advantage of the experience, knowledge and expertise available to you at VAMortgage.com.
Need a Realtor?
If you don’t already have a realtor, we can help. Just give us a call at 888-256-5387, and we’ll refer you to a realtor familiar with your area or the area in which you’re looking to buy a home.
