Who’s eligible for VA loans?
- Members of the military are eligible for a VA loan after they have actively served for 90 days during wartime or 180 days during peacetime.
- Members of the National Guard and reservists are eligible after 6 years or, if they have been called for active service during wartime, 90 days.
- Surviving spouses of someone who died during active duty or due to a service-related disability are also eligible for a VA loan.
The VA loan limits conform to the limits for conventional financing established by the Federal Housing Finance Agency.
Benefits of VA loans
Government-backed VA loans do not require private mortgage insurance (PMI) or a down payment.
VA borrowers can qualify for 100 percent financing. Veterans do not have to be first-time buyers and may reuse their benefit.
VA loan borrowers can’t be charged commissions, brokerage fees or buyer broker fees.
VA loan limit
The limit is $484,350 in most areas and up to $726,525 in high-cost housing markets.
VA loan funding fees
The VA charges an upfront VA funding fee, which can be rolled into the loan or paid by the seller. Regardless of how the funding fee is paid, it must be paid by closing.
The funding fee varies from 1.25% to 3.3% of the loan amount and depends on your military category, whether this is your first VA loan, and the amount of your down payment. Use the VA mortgage calculator to estimate your monthly payment.
This fee is designed to lessen the impact on taxpayers since there’s no PMI or down payment required.
People who are exempt from the funding fee are:
- Veterans receiving VA compensation for a disability that occurred during service.
- Veterans entitled to compensation for a service-related disability if they didn’t receive retirement or active duty pay.
- Surviving spouses of veterans who died in service or from a service-related 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.
VA loan down payments and closing costs
VA loans don’t require down payments from qualified borrowers buying primary residences. Although VA loans are backed by the U.S. Department of Veterans Affairs (VA), the VA does not lend money but guarantees loans made by private lenders.
The VA allows sellers to pay closing costs or split them with the buyer but doesn’t require them to. Keep in mind that you might need funds to cover all closing costs. Closing costs include items such as VA appraisal, credit report, state and local taxes and recording fees.
Drawbacks of VA loans
There are limits on how much liability the VA can assume, which can affect the amount the lender will lend you.
The funding fee and other costs might mean that you become underwater on your mortgage, meaning you could owe more than your home is worth. This could lead to other problems like having to write a check to sell the house.
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