Many veterans and active-duty personnel enjoy the VA Entitlement they receive as part of their service to our country. Often times, there is a misconception between Entitlements and eligibility for VA-Backed Loans. Lenders, providing the loan, will review the home loan request based on merit, financial stability and credit worthiness as well.
Charity Anderson, Senior Loan Officer with Caliber Home Loans in Traverse City, MI, simply describes the Entitlement and Eligibility in the following way:
- Entitlements is earned by the Veteran or active duty personnel for their service to our country and meets the VA requirements to receive a VA Guaranteed
- Eligibility means the Veteran or active-duty has applied for financing through a VA Loan provider and qualifies for the VA Guaranteed Loan.
Many Veterans do not realize they may be eligible for multiple VA-backed loans, in some cases after a foreclosure from a previous VA-backed loan. The VA Guaranteed Loan purchase amount will be different in various parts of the country. In the greater Traverse City, MI area, the loan limit is $424,100.00 whereas loan limit in Montgomery County, MD is $636,150.00. An example for determining a VA Guaranteed Loan after foreclosure would be the loan limit minus the foreclosed home value would equal the VA Guaranteed Loan Limit entitlement. The lender would then determine your eligibility to purchase a home with the VA Guaranteed Loan Limit. The lender will have their criteria for qualifying a veteran or active-duty personnel for the loan. Always consult your lender and verify any all requirements.
One of the greatest advantages of using the VA Guaranteed Loan is the no-money down option and no Private Mortgage Insurance (PMI). Although the VA Guaranteed Loan is a no money down, some cash maybe needed to cover closing cost. “No Money Down” references a down payment for the loan – FHA may require 3% down and Conventional loans could need 20% down. The closing cost needed would be Hazard Insurance, upfront interest payments, and taxes needed for escrow. PMI on other loans is needed for loan with less than 20% equity in the home.
Most lenders will charge a loan origination fee. The maximum amount a lender could charge for a VA Guaranteed Loan is 1% of the purchase price for first time users of a VA loan and 3.1% for multiple VA Guaranteed Loan users. The VA will require a Funding Fee to help offset the cost of the Loan Guaranty Program. The fee charged varies depending on the amount of the loan. If you receive VA compensation or have been rated eligible to receive VA compensation you may be exempt from paying this fee.
Ian Ashton, Branch Manager for Caliber Home Loans in Traverse City, MI also highlights, “a Veteran with a 100% VA Disability Rating are exempt from paying property taxes on their primary residence in the state of Michigan (they must file for this exemption) and some lenders, including Caliber, will allow the Veteran to qualify without counting the property taxes into their Debt to Income ratio.”
Always be prepared when applying for a VA Guaranteed Loan through a Lender. To get started, have a copy of your DD Form 214 or a Certificate of Eligibility (COE). To obtain the COE go to eBenefits.Gov and register. Previously registered members using the eBenefits website would simply click on Certificate of Eligibility and follow the steps. Contact your lender for any additional lender requirements for the loan.