One of the benefits available to veterans and active duty members of the military is the VA loan, providing a way to buy a home without the traditional requirements. If you are considering using a VA loan to purchase your home, there are a few things you need to know about which type of home you can purchase with it.

What is a VA loan?

A VA loan is a $0 down mortgage option that is guaranteed by the Department of Veterans Affairs (VA). Active duty or retired members of the military can use a VA loan to buy a home without waiting to save up a down payment. Because the loan is insured by the VA (meaning the VA will repay the loan if the borrower defaults on it), lenders are able to offer the loan in spite of the higher risk represented by taking no down payment.

There are other benefits included in the VA loan as well, including a lower credit score requirement, no private mortgage insurance (PMI), and generally offer a lower mortgage interest rate than other loans.

Who is eligible for a VA loan?

To be eligible for a VA loan, you or your spouse must meet at least one of the following criteria:

You have served at least 181 days of active service during peacetime.
You have served at least 90 consecutive days of active service during wartime.
You have served more than 6 years of service with the National Guard or Reserves or 90 days under Title 32 with at least 30 of those days being consecutive.

Beyond these criteria, lenders can set their own requirements for credit scores, but they do tend to be more lenient than with other mortgage products.

What kind of home can I buy with my VA loan?

After determining that you are eligible for a VA loan, the next step is of course to look for a home. It is important to note that there are some limitations to how the VA loan can be used. The property you purchase with your VA loan needs to meet certain criteria, a system that ensures the VA is taking on a reasonable risk when guaranteeing the loan.

Condos

The VA loan can be used for the purchase of a condo, but only when the entire condominium complex has received VA approval. Check with the current list of approved VA condo complexes, and if the condo you are considering is not on the list you can have your lender request approval of the complex. It may take some time for the complex to be approved, as the VA will review the organizational documents, title, parking availability, and homeowner’s association policies before determining approval status.

Manufactured Homes

In some cases, you will be able to use your VA loan to purchase a manufactured home. If so, the home will need to meet the following criteria:

Be properly affixed to a permanent foundation
Single wide homes must be at least 400 square feet, and double wide must be at least 700 square feet
Must have permanent eating, cooking, sleeping and sanitary facilities

More: 10 Things to Know About a VA Loan

Modular Homes

Modular homes are defined as homes that are built in sections at a factory and reassembled on-site by a contractor. These tend to appreciate more quickly than manufactured homes, putting them in a different category of real estate. As long as the modular home is attached to a permanent foundation and has been built according to HUD qualifications, it will be eligible for the VA loan.

Custom New Construction

Building a custom new construction home with a VA loan is extremely challenging, as the builder must provide a complete one year warranty on the home and in many cases the builder will have to agree to begin based on pre-approval status on the contingency that the home passes three different inspections. In most cases, building a new construction home is not a good fit for a VA loan.

Vacant Land

Vacant land is not eligible for a VA loan. The loan is designed to support military members and their families buying a home, so the land must have a livable dwelling on it to qualify.

Detached Single Family Homes

As you may have gathered, the easiest way to use your VA loan is on a detached single family home. So long as the home passes basic inspection and appraisals, you shouldn’t have any issues.

To find out more about qualifying for a VA mortgage, talk to me today!

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One of the benefits offered to military members and Veterans is the VA loan, and you may be eligible for it. A VA loan is designed to help those who have served the country purchase a home with favorable loan terms. 10 Things You Need to Know About a VA Loan

If you have served in the US Military and are preparing to buy a home, we have 10 things you need to know about the VA loan.

1. Who is eligible for a VA loan

A VA loan is offered to military members and Veterans who meet certain guidelines, including credit score and income, which allow them to obtain a Certificate of Eligibility (COE).

2. No down payment is required for a VA loan

A VA loan is available for up to 100% of the purchase price. This means you can opt to make no down payment at all, allowing you to keep more cash on hand for renovations, furnishing, emergency funds, or other expenses. This is one of the most unique criteria of a VA loan.

3. The VA loan is government-insured

The VA loan is available with looser restrictions because the Department of Veteran’s Affairs (VA) insures a portion of the loan will be paid back to the lender if the buyer were to default. The government does not contribute any money toward the purchase, but provides assurance that the loan will be paid even if the buyer does not continue making payments. Government backing gives lenders the confidence to extend financing with excellent rates and terms.

4. VA loans have no Private Mortgage Insurance (PMI)

In most cases, a lender will require you to may a monthly private mortgage insurance (PMI) premium if you make less than a 20% down payment. With a VA loan, however, you do not have to pay any PMI.

5. The VA Funding Fee

One unique cost associated with a VA loan is the Funding Fee. It is a mandatory fee applied to all VA loans to cover any losses from a potential default. The Funding Fee can be paid upfront or financed, and is calculated as a percentage, which is determined based on whether you have used a VA loan before, the size of your down payment, and whether you are purchasing or refinancing.

6. A VA appraisal is required

In order to purchase a home with a VA loan, a VA appraisal will be required. An independent VA-certified appraiser will inspect the home, evaluate comparable properties in the area, and then make a value assessment. The appraisal is separate from a home inspection, and generally costs between $300 and $500. In order to ensure that you are paying a fair price for the home you plan to purchase, an appraisal is necessary.

7. Closing costs can be covered by the seller

Some loan options won’t allow closing cost assistance, meaning the buyer would be responsible for all closing costs upfront. Other loans allow the seller to pay a portion of the closing costs. The VA loan allows sellers to pay up to 100% of the closing costs, including up to two discount points to buy down your interest rate. This is, of course, dependent on negotiations with the seller, but the loan is designed to allow maximum flexibility in this area.

8. VA loans must be used for a primary residence

The VA loan is designed to help those who have served in the US military own their home. It is not meant to be used for income properties or vacation homes, so the terms stipulate that the VA loan must only be used for your primary residence.

9. There is no prepayment penalty

In some cases, mortgage terms specify a prepayment penalty. If you choose to pay more than your monthly payment on your VA loan, however, there will be no prepayment penalty.

10. You can reuse your VA loan

After you have completely paid off your first VA loan, you will regain your full eligibility and are allowed to use it again on another property. This benefit is designed to be an asset for your future to use multiple times, if you desire.

For more information about applying for a VA loan, contact us anytime. We have a team of loan officers who are ready to help.

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