What Is a VA loan?
A VA loan is a home loan that is insured by the U.S. Department of Veterans Affairs (VA) that is available to those who have served in the U.S. armed services and their spouses. The VA is not a direct lender. Rather, they provide insurance to lenders, adding extra incentive to lend to borrowers they might otherwise pass up. The insurance from the VA also allows for more lenient loan standards.
The VA loan is currently the only mortgage product on the market that offers 100% financing. With this loan, the qualifying borrower is not required to put any money down. There are three types of VA loans: purchase loans, interest rate reduction refinance loans (IRRRL, or the “VA Streamline Refinance Loan”, and cash-out refinance loans.
Qualification for a VA loan starts with regular qualification standards, like a good credit score and an acceptable debt-to-income ratio. These qualifications vary from lender to lender, but are usually relaxed because the loans are insured by the VA. In order to gain access to this loan, however, you must fit a description of at least one of the following:
- Veterans who served for at least 90 days in Wartime
- Veterans who served 24 months during Peacetime
- Active Duty service members
- National Guard and Reserve Members who served for six years during Peacetime
- Spouses of Veterans who died in service from a service connected disability
- Spouse of Service member missing in action or a prisoner of war
- Surviving spouse who remarries on or after attaining age 57 on or after December 16, 2003
- Certain U.S. citizens who served in the armed forces of a government allied with the U.S. in World War II
For details on qualification, go to http://www.benefits.va.gov/homeloans/purchaseco_eligibility.asp.
How Do I Apply?
To begin your journey to home ownership, you have to obtain a Certificate of Eligibility (COE) from the VA. All you have to do to get one is to fill out the VA Form 26-1880 online. Spouses, however, must apply by mail using the VS Form 26-1817.
Once it has been determined that you are eligible, you can get started with the home finance process at a lender of your choice.