Questions and Answers About VA Loans
Presented by, Roger Griffeth,
When is a VA Loan the right choice?
Answer: When you need to purchase a qualified property and you need 100% financing.
However, If you have at least 20% of the purchase price to put toward your loan you need to consider a conventional loan as an option. If a USDA loan is an option (Cherokee County, Alabama qualifies for the USDA program) then all options should be calculated. While zero down might be attractive, in some cases, a VA Loan may be the more expensive option.
What are the qualifications for a VA Loan? Click Here for Answer
Q. - Do all homes qualify for a VA loan? No, Homes must pass a VA inspection (appraisal). Among other items, GFCI’s by all water sources, no peeling paint, roof has to have 8-10 years worth of life left on it, hand rails installed if two or more stairs are present, heating source in all rooms. Manufactured homes and other types of properties can qualify if they meet certain requirements. Your Realtor can help you determine which properties will pass a VA inspection.
Click Here to view other types of dwellings that qualify for VA loans. then Click Here to view the minimum property requirements for a VA loan.
Q. - How much home can I afford? As much as your lender will allow you to borrow. Click Here to calculate the amount of monthly payments you think you can afford to pay each month for housing. Don't forget that monthly payments for home owner's insurance and property taxes must be added. Check with your Realtor for tax and insurance estimates for your area.
Q. - What is a "COE" Certificate of Eligibility? A document issued by the VA to a lender to show that a Veteran is eligible to secure a VA Loan. Click Here for a more detailed answer.
Q. - Can I apply on-line for a "COE"? Yes, Click Here for Instructions. You will need a scanned copy of your DD-214 to upload during the application process. OR you can apply by U.S. Mail (See Instructions). In some cases your lender can help you apply for the certificate.
Q. - Can I start the loan process without the "COE"? Yes, and you should. If it turns out that you don't qualify, you will more than likely qualify for a USDA loan.
Q. - Can I use my VA Loan to finance a second home? No, the VA will only allow financing for the Veteran's primary residence that is occupied by the Veteran.
Q. - Am I required to use a specific lender to obtain a VA Loan? No, most lenders will service a VA Loan. Veterans may want to contact a lender before they even start looking for a home. VA recommends that buyers compare lending terms among several lenders in order to find the best combination of interest rates, discount points, and other negotiable costs for a VA guaranteed loan. Remember, the VA is not lending the money only guaranteeing the loan will be repaid. Accordingly, the lender, not the VA, sets the interest rate, discount points, and closing costs. Since the VA guarantees that the lender will be repaid, VA interest rates should be slightly lower than conventional fixed rate mortgages. When checking rates always ask for the "APR" or "Annual Percentage Rate" in addition to the advertised rate.
In order to determine the interest rate, lenders will need to pull your credit score. Credit Bureaus treat multiple credit pulls from lenders within a couple of months as one event and don't count the inquires against your score. Your specific interest rate will depend mostly on your credit score.
Q. - What fees are required by the Veteran to obtain a VA Loan? In addition to the 1% loan origination fee and the 1% administrative fees that the lender can charge, the Veteran is required to pay a VA funding fee. Click Here to view the VA Funding Fee Chart. Veterans have he option to either pay the funding fee in cash or finance the fee a make it part of the loan. Veterans receiving VA compensation for a service-connected disability are not required to pay the funding fee.
Example of the funding fee being applied to a Regular Military Veteran purchasing a $200.000 home: Loan amount $200,000 x 2.15% = $4,300. During the negotiating process ask the seller to pay some or all of your closing costs. The VA allows sellers to pay up to 4% of the closing costs, including the funding fee.
Q. - What are the closing costs associated with a VA Loan? The VA regulates the closing costs that a Veteran can be charged when obtaining a VA loan. The closing costs regulation is designed to keep lenders from charging Veterans those costs that VA has determined as being beneficial to the lender and not necessarily beneficial to the Veteran.
The following fees are always un-allowed if the 1% origination fee is charged:
• Lender’s appraisal – the veteran can only be charged for 1 appraisal unless VA deemed a second appraisal mandatory
• Lender’s inspection – if it is not required on the appraisal, it can not be charged to the veteran
• Settlement fee, escrow fee, closing fee
• Document preparation fee
• Underwriting fee
• Processing fee
• Application fee – a veteran can be charged up front the cost of the appraisal and credit report to ensure the loan officer is not stuck with those fees if the veteran walks away from the deal.
• Pest inspection fee
• Attorney fees if for something other than title work
• Assignment fee
• Copying fee
• E-mail fee
There are some fees that can never be paid by the veteran regardless of whether the 1% origination fee was paid or not. Those are:
• Termite/Pest Inspection
• Attorney Fee Charged as a Benefit to the Lender
• Mortgage Broker Fee • Realtor Commission
• Prepayment penalties
• HUD/FHA Inspection Fees for Builders
Q. - What should I expect to pay out of pocket before closing? While a VA loan is zero down, you will still need to have money for earnest money (usually $500), appraisal fee ($400-$500), optional home inspection ($400-$500) and any other specific inspection you might require.
The earnest money will held by the listing Realtor in an escrow account and will be refunded to you at closing.
Q. - Can a lender re-bate money to a Veteran after closing? Some lenders have a program to re-bate money back to veterans after closing, however these types of programs do not apply to the State of Alabama where rebating is illegal.
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