What Is a VA Loan? | Rates & Guidelines 2021

A VA loan is a mortgage loan that’s backed by the U.S. Department of Veterans Affairs. These loans are reserved for military service members, veterans, and their spouses. The VA home loan program is one of the lowest-cost, most valuable mortgage loan options currently available.

See if you’re eligible for a VA home loan. Start here. (Dec 6th, 2021)

Benefits of a VA loan

VA loans come with a number of significant benefits to home buyers, particularly when compared with other types of mortgage programs.

Just a few VA loan advantages include:

  • No down payment required: Most other loan programs require at least 3% down ($9,000 on a $300,000 house).
  • Competitively low interest rates: Rates on VA loans are some of the lowest you’ll find. This saves you both monthly and in the long run.
  • Closing costs are limited: You can’t be charged an origination fee of more than 1%, and sellers can contribute a large portion of your closing costs.
  • No prepayment penalty: This means you can pay off the loan or refinance quickly without an added fee.
  • No private mortgage insurance (PMI) is required: The majority of other loan products require mortgage insurance, which adds upfront and monthly fees.

VA loans are also assumable, which means if you eventually sell the house, the buyer can take over your loan, too — a huge perk, given the low rates and other benefits VA loans come with.

VA mortgage rates 2021

When compared to other loan types — conventional loans and FHA loans, for example — VA home loans offer consistently lower rates than loans for the average consumer.

VA Conventional FHA
August 2021 2.88% 3.19% 3.23%
July 2021 2.94% 3.27% 3.27%
June 2021 2.92% 3.25% 3.23%
May 2021 2.98% 3.30% 3.25%
April 2021 2.95% 3.25% 3.23%
March 2021 2.72% 3.02% 2.99%

Source: Ellie Mae Origination Insight Report, June 2021

*These rates are only averages. Your VA loan rate could be higher or lower than average depending on factors like your credit score and down payment size. Check with a lender to find out what rate you qualify for.

Click here to request a VA home loan quote. (Dec 6th, 2021)

Types of VA loans

There are several types of VA loans to choose from. The right one depends on your goals as a borrower, as well as how you’ll be using the funds.

The four main types of VA loans include:

  • VA purchase loan: These are VA loans designed for purchasing a property. You can buy a single-family home, a multifamily home with up to four units, a manufactured or mobile home, an approved condo unit, or a new construction home.
  • VA Streamline Refinance: The VA’s Streamline Refinance — also known as a VA Interest Rate Reduction Refinance Loan (IRRRL) — is for existing homeowners looking to refinance their mortgage and reduce their interest rate.
  • VA cash-out refinance: With a VA cash-out refinance, you take cash out of your home. It replaces your existing mortgage with a newer, larger one, giving you the difference in cash.
  • VA energy efficient mortgage: Also called EEMs, these are VA loans that can help you finance energy improvements on your home.

The VA also offers NADL loans, which are mortgages reserved strictly for Native American veterans buying on federal land.

VA loan eligibility requirements

VA loans are only for qualified veterans, active-duty service members, and, in many cases, their surviving spouses. To qualify, you’ll need to meet specific service requirements.

These service requirements vary slightly based on when you served, but generally speaking, you will need to have at least one of the following:

  • 90 consecutive days of active service during wartime
  • 181 days of active service during peacetime
  • 6 years of service in the National Guard or Reserves
  • A veteran/service member spouse who died in the line of duty or due to a service-related disability or injury

To prove you have the above service record, you’ll need to submit a Certificate of Eligibility (COE) to your lender. This is a document that details your service record, the nature of your release from the military, and your VA loan entitlement.

You can get your COE through the VA eBenefits portal online. Or, when you apply for a VA loan, the lender can request a COE on your behalf. This usually takes only a few minutes.

Qualifying for a VA loan

Beyond service eligibility requirements, the VA doesn’t set specific financial standards for these mortgages. The individual private lenders that issue VA loans, however, often do. While these vary from one lender to the next, you can typically expect to need a 620 credit score and a 41% debt-to-income ratio or lower.

The good news is, there’s no down payment required for a VA loan. So eligible borrowers can qualify for a VA home loan with very little cash upfront.

VA property requirements

The VA home loan program is designed to help military service members and their families purchase a primary residence, which means you cannot use your VA home loan benefits to purchase a second home, vacation home, or investment property.

Additionally, the home must meet certain standards set by the VA to ensure the home is safe and livable.

How does a VA loan work?

The VA loan process is fairly similar to that of other mortgage programs, just with a few added steps along the way.

Are you considering a VA loan for your home purchase or refinance? Just follow these steps:

#1. Verify eligibility and request your Certificate of Eligibility (COE)

The first step is to make sure you meet the VA’s service requirements (you can see the full list here). If you do, you’ll need to request your Certificate of Eligibility, which proves you’re eligible for the program. You can get your COE in your eBenefits portal, request it by mail, or ask your lender to pull it on your behalf.

#2. Get prequalified

The next step is to get prequalified for your loan. To do this, you’ll give a lender some basic information about your finances. They’ll then determine if you’re a good candidate for a VA loan and how much home you can likely afford.

#3. Get pre-approved

Next, you’ll apply for a full pre-approval. This requires filling out an application and submitting to a credit check, both of which your lender will consider in detail. Once they’ve analyzed it all, you’ll get a pre-approval letter stating how much you can borrow and at what interest rate. You can use this to guide your home search.

#4. Put in an offer

After you’re pre-approved, you can start shopping for a house. When you’ve found that perfect property, submit an offer, and include your pre-approval letter. If the seller accepts, it’s time to move through the rest of the VA loan process.

#5. Go through the VA appraisal and underwriting

You’ll need to fill out your lender’s full loan application next, and your lender will order an appraisal of the property you intend to buy. They’ll also begin underwriting your loan, which essentially means verifying all your information to ensure you can meet the obligations and pay your mortgage.

#6. Close on your new home

When your loan is fully underwritten, you’ll be scheduled for a closing appointment, which is when you’ll pay your closing costs, sign your paperwork, and get your keys.

What is the VA funding fee?

The VA funding fee is a one-time fee you’ll pay at closing. It varies from 0.5% to 3.6% of your loan amount and is used to help sustain the VA mortgage program.

The amount of the VA funding fee you’ll pay depends on the nature of your military service, the size of your down payment, the type of loan you want and the number of times you’ve previously used your VA home loan benefit.

First-time use purchase VA funding fee

Down Payment Veteran/Active Duty Reservist/National Guard
Less than 5% 2.3% 2.3%
5% to 9.99% 1.65% 1.65%
10% or more 1.4% 1.4%

How does VA loan assumption work?

With a VA loan assumption, the VA loan transfers with the house. The buyer assumes the seller’s VA loan, including its same rate, terms, and balance, and resumes making payments as initially planned through the original loan. Though the buyer doesn’t need to be a veteran or military member to assume a VA loan, they do need to meet all the financial requirements of the loan program (and the lender) to be eligible.

Ready to get started? Request a VA home loan quote here. (Dec 6th, 2021)

VA Home Loan FAQ

What is a VA loan?

A VA loan is a mortgage backed by the Department of Veterans Affairs. Only active duty military members, veterans, and their spouses are eligible.

What are the benefits of a VA home loan?

There are many benefits to a VA loan. They require no down payment, have low interest rates, and do not require mortgage insurance. They also come with limited closing costs and are assumable.

How does a VA loan work?

VA loans are guaranteed by the Department of Veterans Affairs, meaning it will pay back the lender if a borrower defaults on the loan. This reduces the risk that lenders take on and allows them to offer loans with no down payments, no mortgage insurance, and lower credit score minimums.

What’s the difference between a VA loan and a regular loan?

VA loans are only for military members and veterans, so that’s the biggest difference. They also require no down payment, which is rare when it comes to mortgage loans. Most other loan programs require 3% to 3.5% down payments minimum.

What is the interest rate on a VA home loan?

Your interest rate will vary depending on your credit score, debt-to-income ratio, loan amount, down payment, and other details. Generally speaking, VA loan rates are lower or comparable to rates on other loan programs.

What credit score is needed for a VA home loan?

The VA doesn’t have a set credit score minimum for its loans, though individual lenders often do. This is typically between 620 and 640, depending on your mortgage company.

What is the minimum income for a VA loan?

There is no minimum income to be eligible for a VA loan. Your lender will, however, consider your debt-to-income ratio to be sure you can comfortably make your monthly payments.

What are VA loan limits?

There are no limits on VA loans. You can borrow as much as you can financially qualify for, given your credit history, debt-to-income ratio, and other financial details.

What is the VA funding fee?

The VA funding fee is a one-time fee all VA borrowers pay at closing. It goes toward supporting and sustaining the VA loan program. Funding fees vary between 0.5% and 3.6% of the loan amount depending on your down payment size, type of loan, and the number of times you’ve used your VA loan benefit.

What is needed for a VA home loan?

For a VA loan, you (or your spouse) will need to meet the military service requirements set out by the Department of Veterans Affairs. You will also need to submit a Certificate of Eligibility, as well as various forms of financial documentation, including tax returns, W-2s, and more.

What is needed to get a VA home loan?

To get a VA loan, you’ll need to work with a VA-approved mortgage lender, submit your COE, and meet the remaining eligibility and documentation requirements of your lender.

How does a VA assumable loan work?

VA loans are assumable, meaning when a VA-financed home is sold, the buyer may be able to assume the VA loan attached to it, too. The buyer does not need to be a military member for this to happen, though they will need to meet other financial requirements set out by the VA and the lender.

What are the pros and cons of a VA loan?

The pros of a VA loan are many. There’s no down payment or mortgage insurance, and rates are competitively low. On the downside, they come with strict appraisals and can sometimes take a bit longer to process than loans through other programs.

Is a VA loan really worth it?

If you can qualify, VA loans are most often worth it. With zero down payment and no mortgage insurance requirement, they can make buying a house much more affordable than an FHA or conventional mortgage. They also have no hard-and-fast credit score minimum.

Do you pay back a VA loan?

You repay a VA loan just as you would any other type of mortgage or loan product. VA loans come with either a 15- or 30-year loan term, which means your monthly mortgage payments are spread out over either 15 years or 30.

If I’ve previously used a VA loan, can I use it again?

Your VA loan benefit never expires. After you pay off your existing VA loan, you can continue to use the VA loan again and again. In some cases, you may be able to have two VA loans simultaneously.

Are VA loans a good deal?

When compared to other mortgage loans, VA loans are absolutely a good deal. Thanks to the VA guarantee, your mortgage lender can afford to pass significant benefits along to borrowers. VA home loans have fewer upfront costs, low interest rates, and no mortgage insurance, making them one of the best mortgage loan products on the market.

See if you’re eligible for a VA home loan. Start here. (Dec 6th, 2021)

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The post Blog first appeared on MilitaryVALoan.com.

Source: militaryvaloan.com

Current VA Mortgage Rates | December 2021

According to a weekly survey of 100+ lenders by Freddie Mac, the average mortgage interest rates fluctuated slightly week over week — 30-year fixed increased (3.1% to 3.11%), 15-year fixed decreased slightly (2.42% to 2.39%) and 5/1 ARM increased slightly (2.47% to 2.49%).

VA rates are no different. In fact, when compared to other loan types — conventional and FHA, for example — VA home loans offer consistently lower rates than for the average consumer.

Shop and compare your personalized rates with multiple lenders (Dec 2nd, 2021)

VA Mortgage Rates 2021

VA Conventional FHA
August 2021 2.88% 3.19% 3.23%
July 2021 2.94% 3.27% 3.27%
June 2021 2.92% 3.25% 3.23%
May 2021 2.98% 3.30% 3.25%
April 2021 2.95% 3.25% 3.23%
March 2021 2.72% 3.02% 2.99%

Source: Ellie Mae Origination Insight Report, June 2021

How to get the lowest VA mortgage rate

If you’re getting a VA loan, you already have a head start on getting a great deal. VA loans typically offer the lowest rates of all mortgage options.

Still, there are more ways to ensure you’re getting the lowest rate possible:

  1. Make yourself into the most attractive borrower you can
  2. Shop around for the lender that suits you best

Here’s a step-by-step guide to getting the best mortgage rate.

5 tips for strengthening your VA mortgage application

Work to improve your personal finances before you start shopping for a loan can make a big difference to the interest rate you’re offered. That’s because mortgage lenders offer the best rates to the borrowers deemed least risky.

Here are some of the variables a mortgage lender will consider when evaluating your application and determining your interest rate:

  1. Credit score
  2. Existing debt
  3. Down payment (if any)
  4. Employment history
  5. Discount points

Below, we’ll explore the steps you can take to make your application as attractive as possible — and potentially help you save thousands of dollars with the lowest interest rate.

1. Improve your credit score

Although the VA doesn’t set a minimum credit score, most lenders impose their own credit thresholds. These minimum credit score requirements vary by lender but typically range from 580 to as high as 660.

Still, there’s good reason to get your credit score as high as you can, not just over the credit score minimum. The higher your credit score is, the lower interest rate you’re likely to receive. Raising your credit scores is one of the best ways to bring your interest rate down.

To improve your score, start by requesting free copies of your credit report from the Big 3 credit bureaus. You can get these all at once at AnnualCreditReport.com. You’re entitled to one free report every year so be wary of sites that try to charge you.

Review your report carefully and have any mistakes corrected. Errors are commonplace on these and adverse ones can seriously lower your score.

FICO is the most widely used credit scoring system in the country and it determines your score based on:

  • Payment history: 35%
  • Credit utilization: 30%
  • Length of credit history: 15%
  • Credit mix: 10%
  • New line of credit: 10%

That means you can improve your credit score by:

  • Paying your bills promptly
  • Keeping your credit card balances below 30% of the credit limit
  • Not opening new credit accounts or closing old ones where possible
  • Using a mix of loan types, including credit cards and installment loans (like auto loans or personal loans) rather than relying on just one kind of credit
  • Not opening many new accounts quickly

For a deeper dive into strategies to raise your credit ahead of a VA loan, check out this article: 6 Steps to Restore Your Credit

If you’re planning to apply for a mortgage, do your best to stick by those rules as rigorously as possible right up until closing. It could make a significant difference to the overall cost of your home loan.

2. Lower your existing debt

Lenders look closely at your debt-to-income (DTI) ratio. This figure reflects the percentage of your monthly pre-tax income that goes to:

  1. Existing debt payments (including minimum credit card payments and installment loans)
  2. Other financial obligations, such as child support or alimony
  3. Projected mortgage payments and homeownership costs for your new home

For an in-depth look at how DTI can impact your borrowing, check out this article: How Does DTI Affect Loan Amounts?

DTI affects the amount you can borrow but it’s also key to determining your interest rate. The higher your DTI, the higher interest rate you’re likely to pay.

So what’s the best way to improve your DTI for the best possible interest rate? Start by paying off your debts strategically.

If you can, begin with credit card debt. Are any of your balances higher than 30% of that card’s credit limit? Bring them down to 30% (or lower!) as soon as you can. This offers the best bang for your buck in determining your mortgage rate. This is because you’re boosting your credit score and reducing your DTI at the same time.

Once you’ve done that, if you’re able, look at your installment loans. These days, most can be paid early without incurring a prepayment penalty. Confirm this with your lender before you make any early payments.

Your goal is to reduce the outstanding amounts, rather than paying them off entirely. If you do this, you can ask your lender to lower monthly payments to reflect the new balance. This way, your monthly payments will be smaller and this will be reflected in your DTI.

Paying off your debt takes time and dedication. Still, small changes can make a big difference to your VA mortgage interest rate.

3. Make a down payment

One of the biggest benefits of VA loans is that you don’t have to make any down payment.

Still, making a down payment can give you access to lower interest rates (and may reduce the amount of your VA funding fee).

If you can put together a 5% — or even 10% — down payment, you’ll likely pay a lower interest rate.

This can be very doable for existing homeowners, especially in areas with rapidly rising home prices since you’ve probably accumulated more equity in your home. That equity can be used to make a down payment on your next home.

It can be tough for VA first-time buyers to come up with such amounts. Still, if you can muster the funds, it could save you money on your funding fee and earn you a lower VA interest rate.

4. Don’t change jobs

Your mortgage lender will review your employment history when calculating your mortgage interest rate. When it comes time to apply, there’s not much you can do about your employment history. Lying on your mortgage application qualifies as fraud.

But by avoiding big employment changes in the months leading up to your application, you can demonstrate employment stability to your lender.

The lender wants to know your employment is stable and that you’ll have a reliable income stream to repay the loan.

Though it’s not impossible to change jobs once you’ve started the home buying process, it will help your application if you keep the same job in the months leading up to your application and through to closing. If you do change jobs, it’s best to stay in your field or profession.

5. Consider buying discount points

Discount points allow you to buy yourself a lower interest rate by paying more money upfront, at closing. As with a down payment, this is an option more accessible to borrowers with more money available at closing.

Still, if you can afford it, discount points can help you save money over the life of your loan.

This article will help you determine whether discount points are useful for your particular financial situation.

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Compare lenders to get the best rate

If you want to get the lowest possible interest rate on your VA home loan, shopping around for lenders is essential.

Start by looking for a VA lender who works with borrowers like you.

How do you know which lenders will work with you? Check out the lender’s website to find its minimum requirements, including credit score threshold, to see whether you’re likely to qualify.

Click here to connect with multiple VA lenders (Dec 2nd, 2021)

Request at least 3 to 5 quotes

Find at least three to five lenders and request quotes from each. The more lenders you apply with, the better your chance of finding a low rate.

Make sure that you request quotes for the same loan terms (i.e. 15-year term, 30-year term, fixed-rate, adjustable-rate, etc.) from every lender so that you’ll be doing an apples-to-apples comparison.

Review your loan estimates

Each lender is required by law to provide a quote in a standardized format called a Loan Estimate. Each LE will come in an identical format, which makes it easy for you to compare each one side-by-side. This Loan Estimate will contain all the figures you need — including interest rate and closing costs — to identify your best deal.

Take note especially of the “Comparisons” section near the top of page 3. It will show your annual percentage rate (APR), which represents your total loan costs as an annual amount. APR can help you determine which lender is least expensive in the long term when all costs — including interest and upfront fees — are considered.

Additionally, this section shows how much you’ll have paid — and paid off — at the end of the first five years, which will help you to determine the best offer.

Need more help understanding your Loan Estimates? The Consumer Financial Protection Bureau has a Loan Estimate Explainer on its website, including sample pages so you know what to expect.

15-Year vs 30-Year Mortgage Terms: Which is cheaper?

Sometimes, borrowing over a shorter period — 15 years rather than 30 years — can get you a lower interest rate.

It’s important to note that with a 15-year mortgage your monthly payments will be substantially higher because you’ll be making fewer monthly payments overall. So while you’ll save money in the long run, you’ll pay more month to month.

The difference between 30-year VA loan rates and 15-year ones fluctuates so review current rates. If you can afford to borrow for a shorter amount of time, you may earn a lower interest rate — and you’ll own your home that much sooner!

Fixed-rate vs ARM: Which is cheaper?

As with loan length, rate type is a loan term that can impact your mortgage rate.

Adjustable rate mortgages are often available at lower interest rates but keep in mind that the rate will go up at the end of the introductory period. Depending on how long you plan to keep the loan before moving or refinancing, this could be a good deal. With a fixed-rate mortgage, you’ll pay the same rate for the life of the loan but you are guaranteed an interest rate that won’t increase.

As with all mortgage terms, the most affordable option will depend on your personal financial situation.

How to get the lowest VA interest rate

To get the lowest interest rate possible on your VA mortgage, you’ll want to make yourself into the most attractive borrower possible, while also finding the lender who offers you the best deal.

If you take the time to do both, you’re likely to end up with a lower interest rate — something that could save you thousands of dollars over the life of your VA loan.

Shop and compare your personalized rates with multiple lenders (Dec 2nd, 2021)

The post Blog first appeared on MilitaryVALoan.com.

Source: militaryvaloan.com

Military Home Loans for Service Members & Veterans | 2021

You’ve served your country, and as a token of appreciation, there is a home loan for active-duty service members and Veterans. Military home loans are also known as VA home loans, VA mortgages, military housing loans, or military mortgages.

All of these terms refer to a special program that allows eligible military members and retirees to buy a home with zero down payment.

These loans are issued by private lenders or mortgage companies and guaranteed by the Department of Veterans Affairs. Compared to other loan types, military home loans are easier to qualify for and have better interest rates — and that’s just the start of the great benefits.

Check your VA home buying eligibility here now.

Military Home Loan Advantages

No Down Payment Required. With just about any other loan type, homebuyers have to come up with between 3.5% and 20% of the purchase price for the down payment. When buying a house for $250,000, that’s at least $8,750 and as much as $50,000 you would have had to save for.

No Monthly Mortgage Insurance. Unlike FHA loans or conventional loans, military home loans don’t require monthly mortgage insurance payments. In some cases, that’s a savings of hundreds of dollars per month. Use that money to qualify for a bigger home, put toward savings, or pay down your loan principal.

Click here to see if you can buy a home with a VA loan.

Lenient Credit Requirements. Military home loans don’t require a perfect credit score to qualify. In many cases, the lender can approve loan applicants who have previous bankruptcies, late payments, or other credit blemishes. The important part is that you’ve shown a good credit history recently and explain any previous credit challenges.

Lower Cash Reserves. With many loan types, lenders require you to have enough cash in the bank to pay for two months of mortgage payments, after paying for loan closing costs. But with a military mortgage, no such requirement exists. You just need enough to cover closing costs, and that’s it.

Limited Home Loan Closing Costs. The VA limits how much you can be charged in closing costs on your military home loan. For instance, you can’t be charged more than a 1% loan origination fee. Also, the escrow fee must be paid for by the seller of the home. See a complete list of estimated VA closing costs.

Easier Refinance Options. If you already have a VA home loan, you can refinance with very little documentation with a VA streamline refinance, also sometimes called an Interest Rate Reduction Refinance Loan (IRRRL). If you don’t have a VA loan currently, you may be eligible for a VA cash out loan of up to 100% of your home’s current value. This is great for those who don’t have any equity in their home, or need cash for other purposes.

Get a military streamline refinance quote here.

Military Home Loan FAQ + How to Start

How do I get started?

You don’t have to know your eligibility status or credit score to start. VA lenders have access to tools that can check those things for you. Veterans or active-duty military who think they may be eligible only need to initiate the process by completing a short online request. The rest of the process is guided by VA lenders who have helped thousands of eligible veterans purchase and refinance property.

Click here to complete a short request now.

How do I know if I’m eligible for a military home loan?

You have to meet certain eligibility requirements. Basically, you have to have served in the military a minimum amount of time. Generally, that’s 90 days if still on active duty, two years if now retired, or 6 years in the National Guard or Reserves. See complete details on VA home loan eligibility.

What documentation will I need?

For your initial call with a VA mortgage specialist, you don’t need anything. He or she will ask you some quick questions to see if you qualify for the VA loan benefit. Start here. As the loan process progresses, you’ll need things like paystubs, bank statements, and possibly your DD-214.

Are military home loan rates low?

Yes. Mortgage interest rates are typically lower for those applying for a VA home loan. That’s because the U.S. government insures the mortgage, and military mortgages have the lowest default rates of any loan type. So lenders are willing to give low VA mortgage rates to eligible members of the military.

What’s a Certificate of Eligibility (COE)? Do I need one for a military home loan?

The COE is a form issued by VA showing whether or not you’re eligible to participate in the program. You do need a valid COE to qualify for a military VA mortgage loan. Your lender will order the COE for you, and review it to check your VA loan eligibility.

Click here to request your COE.

How much can I borrow with a military mortgage?

VA home loan limits are quite generous. In most areas of the country, you can borrow up to $417,000 with no down payment, and up to $1 million+ in some high-cost areas. The VA sets no limit on the size of the VA loan. However, you must pay a 25% down payment on the portion that’s over the VA guarantee, usually $417,000. Read more about VA jumbo loans.

How much cash on hand do I need to buy a home with a military home loan?

The answer varies greatly. You don’t need any money for a down payment unless your home price is above VA loan limits. However, you are responsible for VA loan closing costs. Those average 1% – 3% of the loan amount on bigger loan amounts. But they can be between 3% and 5% of a smaller home’s price. According to VA loan guidelines, the seller is allowed to help the buyer with up to 4% of the home’s price in closing cost assistance. So you could buy a home even if you have no money in the bank if the home seller is willing to cover your costs. Speak to your real estate agent about your chances of receiving seller closing cost assistance.

Can I use a VA loan to buy an investment property?

The VA loan program is intended to help those with military service to purchase primary residences and become homeowners, not to purchase second homes or rental properties. There are occupancy requirements for VA borrowers.

There are some rare circumstances under which you may be able to get a second VA loan. Learn more here.

What’s the VA funding fee?

The VA funding fee is 0.5-3.3% of the home loan amount. The percentage depends on whether you’re using your entitlement for the first time and type of loan. This fee allows the VA home loan program to be self-sustaining and offer loans with zero down payment and no private mortgage insurance (PMI). It’s added to the total loan amount so you won’t be required to pay it out of pocket at closing.

You can learn more about the VA funding fee here.

Military Home Loan Rate Quotes Available Here

If you have military experience and would like to know whether you’re a qualifying VA borrower, complete a short online form.

We’ll let you know if you qualify, or what you still need to become eligible. If you qualify now, we’ll give you a rate quote, the home purchase price you qualify for, and your estimated monthly payment. From there, we’ll issue a pre-approval so you can start house shopping and make your homeownership dreams a reality.

Ready to get started?  Click here to request a VA home loan rate quote.

(function() { var options = {“display_percent”:””,”instance_v2″:”5cafcc0012ba819cd329b805″,”instance”:””,”experimental”:””}; options.element = document.getElementById(‘click_table_61a06b28e9fb2’); options.experimental = options.experimental === ‘true’; // Convert to boolean when PHP attribute is a string “true” // We might need these options to be accessible by the Dynamic Click Table POC code. // So we share a global reference to it if (typeof window.clickTableOptions === ‘undefined’) { window.clickTableOptions = {} } window.clickTableOptions[‘click_table_61a06b28e9fb2’] = options; if (window.ClickTable) { window.ClickTable.mount(options); } window.addEventListener(‘click-table-loaded’, function(){ window.ClickTable.mount(options); }) // This is for dynamic click tables window.addEventListener(‘click-table-reloaded’, function(e){ options.instance = e.id window.ClickTable.mount(options); }); })();

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How To Choose Your Mortgage Points and Rate

What are VA loan points, and should I buy them?

These are important questions for homebuyers because they affect upfront and long-term borrowing costs.

Whether you should buy points depends on your long-term plans for your new home.

Get a free VA home loan rate quote (Nov 23rd, 2021)

What are VA loan points?

Buying a VA loan point — also known as a discount point or just a “point” — means you’re paying cash up front to lower the interest rate on your new home loan.

A VA loan point typically costs 1% of your loan amount. As a result, the cost of a point varies by the size of your home loan. One point on a $200,000 VA loan is $2,000 and two points equals $4,000. On a $250,000 loan, a single point would cost $2,500 while two points would cost $5,000.

Lenders use the term “discount point” because buying points discounts the interest rate on a veteran’s home loan.

Get a free VA home loan rate quote (Nov 23rd, 2021)

How to calculate VA loan points

Typically, buying one point lowers your interest rate by 0.25% for the life of the loan. The more points paid, the lower your interest rate.

With most lenders you can also buy fractions of discount points. You could find one-half, five-eighths and three-quarter point offerings, for example.

The more VA loan points you buy, the more money you’ll pay up front in closing costs. But more points also means less money spent throughout the loan term. It’s a trade-off.

Are VA loan points worth it?

This is the key question when you’re thinking about buying VA loan points: Are the discount points worth the upfront money?

To answer that question, you’d need to know the future. You’d need to know how long you’ll stay in the home loan: Will you refinance or sell the home in a few years? Or will you keep the loan and pay it off on schedule?

There’s no way to know for sure; most Americans refinance or sell their homes before the loan term ends. The best you can do is base your decision on your current plans.

How soon do VA loan points pay off?

You’ll have to do your own math to find out when your discount points would pay off. But your situation may resemble the following example. It’s for a $200,000 home loan with a 30-year fixed rate.

In this example, we will assume you’re paying cash for the discount points since the VA doesn’t allow financing the price of discount points into home purchase loans:

Discount points Mortgage rate* Upfront cost of discount points Monthly payment** Interest paid over life of the loan Time needed to break even
0 3.5% $0 $898 $123,337 N/A
1 3.25% $2,000 $870 $113,451 6 years
2 3% $4,000 $843 $103,601 6 years
3 2.75% $6,000 $816 $94,030 6 years, 1 mos
4 2.5% $8,000 $790 $84,530 6 years, 2 mos

*the mortgage rate is for a hypothetical buyer; yours will likely be different
**payment does not include property taxes, home insurance, or other add-ons

As you can see, in this scenario, you’d need to make payments for six years for two discount points to pay off. If you refinanced this loan before its break-even point, your $4,000 in extra costs upfront wouldn’t have time to pay off.

To see the biggest impact of discount points, check out the “total interest paid” column. For example, with four discount points, you’d save $38,807 in interest if you stayed in the loan for its entire 30-year term.

Saving more than $38,000 is a pretty good return on your $8,000 investment. But you can cash in only by staying in the loan for its entire term. On average, most homeowners stay in their original loan for only about seven years.

Can you finance discount points into the loan?

The Department of Veterans Affairs requires homebuyers to pay for discount points in cash at closing. You cannot finance them into your loan amount.

However, it’s possible for the home seller to help pay for your discount points. The VA allows sellers to pay up to 4% of your home’s purchase price as VA loan closing costs. You’d need to negotiate this with the seller before going under contract.

If you’re refinancing, the VA lets you add up to 2 points into your loan amount as long as you can break even within three years.

How to calculate your own VA loan point savings

Examples like the ones above can help you understand how VA loan points create savings on a hypothetical loan. But what about your specific loan? How can you find your own break-even point?

A VA loan calculator can help you find your potential savings. Here’s how to do it:

  1. First, enter the rate and you’ve been quoted and your mortgage loan amount. Click “see results” and write down the monthly payment the calculator shows.
  2. Then, go back to the calculator and enter the lower rate you’d get with discount points. Click “see results” to calculate the new monthly payment size with the lower rate.
  3. Subtract the lower monthly payment from the original monthly payment to show your monthly savings generated by discount points.
  4. Divide the cost of your discount points by the monthly savings you found in Step 3. This answer will show the number of monthly mortgage payments you’d need to break even.

If you expect to stay in your home loan beyond the break-even point, your discount points should pay off. The longer you stay in the loan after your break-even point, the more you can save.

Get a free VA home loan rate quote (Nov 23rd, 2021)

How to buy VA mortgage points

You buy discount points directly from your lender. Just tell your loan officer you’d like to buy VA loan points to lower your rate.

Experienced VA lenders will know the VA home loan program allows you to buy points even though the VA caps lending fees at 1%. VA loan points don’t count toward this 1% cap because they’re part of your annual percentage rate and not your lender’s administrative fees.

And, the lender can still charge its 1% origination fee even though you’re paying more for discount points.

Origination fee vs. discount points

The loan origination fee is a fee VA borrowers pay to the VA lender. It is usually expressed as a percentage of the loan amount, just like discount points.

But the loan origination fee does not directly lower your rate. The VA loan origination fee covers the lender’s expenses: Things like overhead, pay for employees, and otherwise keep the office running and continue to offer VA loans.

The most common amount of an origination fee is 1 percent. On a $200,000 VA loan that would be $2,000.

Lender fees can exceed 1 percent for other types of loans such as FHA and conventional loans. But the VA won’t allow lenders to charge veterans and military service members more than 1 percent.

The VA’s 1 percent cap includes other typical lending fees such as processing and underwriting fees. But, once again, this cap won’t affect your ability to buy discount points.

Get a free VA home loan rate quote (Nov 23rd, 2021)

VA Funding Fee vs VA loan points

VA loan points are an optional way to lower your long-term borrowing costs. But the VA requires borrowers to pay a VA Funding Fee upfront.

Most first-time homeowners pay a funding fee of 2.3 percent which would add $4,600 to a $200,000 loan. Repeat buyers may pay 3.6 percent. This fee can be rolled into your loan amount.

This funding fee takes the place of the mortgage insurance that other types of loans require. It helps the private lenders who issue VA loans to charge lower interest rates even when a veteran makes no down payment.

Down payment vs VA loan points

VA loans do not require down payments. But making a down payment can create advantages for new homeowners.

When you pay money down, you borrow less money for the same house. Borrowing less money in relation to the value of your home could lower your interest rate some.

So should you buy VA loan points or put that money down on your new home loan?

There’s no one-size-fits-all answer to this complex question. But, if you might sell or refinance the home within the first couple years, a down payment could be a better investment than putting that money into discount points.

Why? Because you could get the down payment money back when you sell or refinance. Once you’ve spent money on discount points, you can’t get that money back. Points pay off only when you’ve had enough time to benefit from the lower mortgage payments.

Discount points on a VA Streamline Refinance (IRRRL)

If you’re refinancing a current VA mortgage, then you’ll encounter the Interest Rate Reduction Refinance Loan, or IRRRL, commonly known as the VA streamline.

The VA streamline is a reduced documentation refinance program that requires no paycheck stubs, tax returns or employment verification.

Should points be used to lower an IRRRL rate? The same logic should be used as with the VA home purchase scenario. Divide the monthly savings into the additional upfront cost. If it takes longer than two to three years to recover the extra expense, it’s probably better to take the slightly higher rate.

The exception would be if you absolutely know you will not sell or refinance the house until it’s paid off. But it’s hard to be that certain. Most people sell or refinance within seven years.

Get a free VA home loan rate quote (Nov 23rd, 2021)

Rolling discount points into a refinancing loan

Unlike with purchase loans, the VA lets refinancing homeowners roll up to 2 discount points into the new loan amount. Doing this increases your loan size.

In the following example, a homeowner with a $200,000 loan balance is refinancing into a new 30-year fixed-rate loan. The homeowner is adding the cost of discount points to the loan amount:

Discount points Mortgage rate* Extra principal from cost of points Monthly payment** Interest paid over life of the loan Time needed to break even
0 3.5% $0 $898 $123,337 N/A
0.5 3.375% $1,000 $888 $119,061 8 years, 4 mos
1 3.25% $2,000 $879 $114,510 8 years, 9 months
1.5 3.125% $3,000 $869 $110,066 8 years, 8 mos
2 3% $4,000 $860 $105,642 8 years, 8 mos

*the mortgage rate is for a hypothetical buyer; yours will likely be different
**payment does not include property taxes, home insurance, or other add-ons

In the example above, the VA would not allow you to finance the cost of discount points because the break-even point extends beyond three years. But you could still buy down your rate by bringing cash to closing.

These rules apply to the VA cash-out refinance as well as the VA IRRRL. With the cash-out refi, you can finance up to 2 points into your new loan as long as the points don’t push your loan amount past the appraised value of your home.

Other ways to lower mortgage rates

With discount points, you’re buying down your interest rate, but you may not need to buy points if you already have a great interest rate. To get the best rate offers, be sure to:

  • Shop around: Individual VA lenders have a lot of influence over the interest rate you pay. Getting Loan Estimates from at least three VA lenders can help you score a lower rate.
  • Work on your credit score: Improving your credit report can take months or years, so it may be too late if you’re buying a home soon. But if you have time to pay down your credit card balances and establish a history of on-time debt payments before applying for a loan, you could access lower VA loan rates.
  • Lower your DTI: Your debt-to-income ratio compares your existing debt burden to your monthly income. A lower DTI can help you get a lower interest rate. And, with no VA loan limits anymore, a lower DTI can qualify you for more expensive real estate purchases. You could lower your DTI by paying off a loan or two, or by asking for a raise.

Of course, you can still buy discount points even if you already have a rock-bottom rate offer.

Should you take a higher rate and receive a lender credit?

Just as lenders can lower an interest rate by charging the borrower a point, the lender may also do the opposite: raise the interest rate in exchange for giving the buyer money for closing costs.

To decide whether you should accept a higher mortgage rate in exchange for help with closing costs, you’ll need to do some more math.

For instance, a borrower could select a rate that’s 0.25% higher than market rates at the time. In exchange, the lender can offer a credit of, say, one point, to help pay for closing costs like the home appraisal, title insurance, and processing fees.

On a $200,000 mortgage, a borrower might receive $2,000 toward closing costs but pay $20 more per month on the new mortgage. This option could work well for homebuyers without enough money for closing costs.

Would you consider paying $20 more each month if you saved $2,000? Would you consider paying $2,000 to save $20 a month?

That’s how to evaluate claiming lender credits or paying points with a VA home loan. Determine how much you will save and how long it will take to save it.

Contact us today here or at (866) 240-3742 to find out about your VA purchase or refinance rate and point options.

Get a free VA home loan rate quote (Nov 23rd, 2021)

VA loan points FAQs

Can you buy down points on a VA loan?

Yes, the VA lets you buy down your mortgage rate through VA loan points, also known as discount points. You can’t finance the cost of discount points into your home purchase loan, but you could finance the cost of up to 2 points into a refinance loan.

Who pays VA discount points?

The buyer pays for discount points. You could ask for a seller to help, but the seller is not obligated. If you’d like the seller to help, ask your real estate agent to negotiate seller concessions into the home purchase contract.

Is the VA Funding Fee the same as points?

No. The VA Funding Fee resembles the private mortgage insurance (PMI) conventional loan borrowers pay or the FHA mortgage insurance premium (MIP) FHA borrowers pay. But unlike conventional or FHA loans, VA loans don’t require ongoing mortgage insurance — just the upfront VA Funding Fee.

How much do VA loan points cost?

The cost of VA loan points can vary a little by lender. In most cases, paying 1% of your loan amount will buy a 0.25% rate reduction. On a $200,000 loan, 1% equals $2,000.

How much does a discount point lower your rate?

Each discount point lowers your mortgage interest rate by 0.25%. At the same time, buying discount points raises your annual percentage rate (APR) because APR reflects the prepaid cost of discount points.

How many discount points can you charge on a VA loan?

The VA does not limit discount points. You can buy as many as your lender will sell you. However, the more points you buy, the bigger your upfront loan costs. If you sold or refinanced sooner than expected, you’d lose this upfront investment.

Do I qualify for a VA loan?

The VA loan program helps only military veterans, active-duty military service members, and some surviving spouses of deceased veterans. National Guard and Reservists can also qualify for this program if they meet the program’s length of service requirements. Qualifying borrowers must have a Certificate of Eligibility from the VA to apply for a VA loan. The VA insures these loans, but you’d apply for yours through a private lender that’s authorized by the VA.

*All scenarios assume a single-family residence, a final loan amount of $200,000 after the funding fee of 2.3% for purchase and .50% for IRRRL, and a 100% LTV. Final APR based on closing costs of $3,000, plus funding fee, plus stated origination fee or discount.

Get a free VA home loan rate quote (Nov 23rd, 2021)

The post Blog first appeared on MilitaryVALoan.com.

Source: militaryvaloan.com

Wallowa County, Oregon VA Loan Information

Table of Contents

  • What is the VA Loan Limit?
  • How to Apply for a VA Home Loan?
  • What is the Median Home Price?
  • What are the VA Appraisal Fees?
  • Do I need Flood Insurance?
  • How do I learn about Property Taxes?
  • What is the Population?
  • What are the major cities?
  • About Wallowa County
  • Veteran Information
  • Apply for a VA Home Loan
  • VA Approved Condos

FAQ

What is the VA Loan Limit?

2021 VA Home Loan Limit for Wallowa County is $0 down payment up to $5,000,000* (subject to lender limits) /2 open VA loans at one time $548,250 (Call 877-432-5626 for details).

How to Apply for a VA Home Loan?

This is a quick look at how to apply for a VA home loan in Wallowa County. For a more detailed overview of the VA home loan process, check out our complete guide on how to apply for a VA home loan. Here, we’ll go over the general steps to getting a VA home loan and point out some things to pay attention to in Wallowa County. If you have any questions, you can call us at VA HLC and we’ll help you get started.

  1. Get your Certificate of Eligibility (COE)
    • Give us a call at (877) 432-5626 and we’ll get your COE for you.
  2. Are you applying for a refinance loan? Check out our complete guide to VA Refinancing.
  3. Get pre-approved, to get pre-approved for a loan, you’ll need:
    • Previous two years of W2s
    • Most recent 30 days paystubs or LES (active duty)
    • Most recent 60 days bank statements
    • Landlord and HR/Payroll Department contact info
  4. Find a home
    • We can help you check whether the home is in one of the Wallowa County flood zones
  5. Get the necessary inspections
    • Termite inspection: required
    • Well or septic inspections needed, if applicable
  6. Get the home appraised
    • We can help you find a VA-Certified appraiser in Wallowa County and schedule the process
    • Construction loan note: Construction permit/appraisal info
      1. Building permit
      2. Elevation certificate
  7. Lock-in your interest rates
    • Wait until the appraisal to lock-in your loan rates. If it turns out you need to make repairs, it can push your closing back. Then you can get stuck paying rate extension fees.
  8. Close the deal and get packing!
    • You’re ready to go.

What is the Median Home Price?

As of March 31st, 2020, the median home value for Wallowa County is $283,615. In addition, the median household income for residents of the county is $44,953.

How much are the VA Appraisal Fees?

  • Single-Family: $775.
  • Individual Condo: $825.
  • Manufactured Homes: $825.
  • 2-4 Unit Multi-Family: $950.
  • Appraisal Turnaround Times: 10 days.

Do I need Flood Insurance?

The VA requires properties are required to have flood insurance if they are in a Special Flood Hazard Area.

How do I learn about Property Taxes?

  • Randy Wortman is the Wallowa county tax assessor. His office can be reached at 101 South River Street Rm 104 Enterprise, Oregon 97828. In addition, his office can also be reached by calling (541) 426-4543 Ext: 1147.
  • The state of Oregon offers businesses that invest and hire in enterprise zones the option to be exempt from property taxes for at least three years. In addition, the Oregon Investment Advantage program encourages new businesses that are starting as well as the ones who are relocating to the state with various incentives. For example, the program offers income tax subtraction and elimination of state income liability for new businesses for many years.

What is the Population?

  • The county’s population of 7,208 is 92% White, 3% Hispanic, and 2% mixed race.
  • Most county residents are between 18 and 65 years old, with 19% under 18 years old and 29% older than 65.
  • In total, the county has about 3,165 households, at an average of two people per household.

What are the major cities?

There are four cities within the county including the city of Enterprise which is also the county seat. The three other cities in the county are Joseph, Lostine, and Wallowa.

About Wallowa County

Named after the word used by natives to describe the area, Wallowa County, Oregon was home to the Nez Perce people who had lived in the area for about 11,500 years. Eventually, the first white settlers in the county arrived in 1871 and in 1877 the native people got removed from the area and were sent to the Nez Perce Reservation in Idaho. However, they did not go quietly and under the leadership of Chief Joseph had several battles until they were ultimately defeated and forced to relocate. Eventually, in 1880 the town of Joseph was named in honor of the chief.

Today, the county is a member of the Northeast Oregon Economic Development District which provides businesses in the region with assistance. Assistance is provided through training, and technical assistance for businesses, non-profits, and local governments.

Educationally speaking, the county is served by four school districts which include a total of six schools that range from kindergarten to high school. In addition, students in the county get to take part in classes with a student to teacher ratio of 11 to 1, allowing for education to be more adaptive and personal.

Finally, in addition to its workforce and education, the county is also home to beautiful natural scenery which has been said to work as a magnet for tourists. Several recreational areas exist within the county like Hells Canyon National Recreation Area and the Eagle Cap Wilderness. 

Veteran Information

The county is currently home to 655 veterans, and they all have access to:

  • Wallowa County is home to two VFW post:
    • Post 4307 Eagle Cap Post – 800 N River St. Enterprise, OR 97828.
    • Post 4060 high Valley Post – 518 N. Main St. Union, OR 97883.
  • VA Medical Centers in the county:
    • Wallowa County VA Telehealth Clinic – 401 Northeast 1st St. Suite A, Enterprise, OR 97828.
  • County Veteran Assistance Information
    • Wallowa County Veteran Service Office – 401 NE 1st Enterprise, OR 97828. 

Apply for a VA Home Loan

  • For more information about VA Home Loans and how to apply, click here.
  • If you meet the VA’s eligibility requirements, you will be able to enjoy some of the best government guaranteed home loans available.  
  • VA loans can finance the construction of a property. However, the property must be owned and prepared for construction as the VA cannot ensure vacant land loans.

VA Approved Condos

There are currently no VA-approved condos in Wallowa County, Oregon. However, it is still possible to get a condo through the condo approved and we can help you through the condo approval process, just call us at (877) 432-5626.  

Oregon VA Loan Information: https://www.vahomeloancenters.org/oregon-va-home-loan-limits/

VA Loan Information by State: https://www.vahomeloancenters.org/va-loan-limit-maximum-va-loan-amount/

The post Wallowa County, Oregon VA Loan Information appeared first on VA Home Loan Centers.

Source: vahomeloancenters.org

Current VA Refinance Rates

Mortgage interest rates remain at historic lows this week. As reported from a weekly survey of 100+ lenders by Freddie Mac, the average mortgage interest rate increased for one of three main loan types and stayed flat for the other two — 30-year fixed (3.17% to 3.18%), 15-year fixed (2.45%), and 5/1 ARM (2.84%).

VA refinance rates are no different. In fact, when compared to other loan types — conventional and FHA, for example — VA home loans offer consistently lower rates than for the average consumer.

Shop and compare your personalized rates with multiple lenders.

VA Refinance Rates 2021

  VA Conventional FHA
January 2021 2.60% 2.91% 2.86%
December 2020 2.66% 2.96% 2.94%
November 2020 2.72% 2.99% 2.99%
October 2020 2.75% 3.01% 3.01%
September 2020 2.78% 3.02% 3.01%
August 2020 2.86% 3.12% 3.10%

Source: Ellie Mae Origination Insight Report, January 2021

When should you refinance?

In general, if you can save money over the life of your loan, then you should consider refinancing. Everyone’s financial situation is different, however, and refinancing can help you achieve a couple of different financial goals. Below are some of the most common reasons homeowners refinance:

  1. Lower your interest rate and monthly payment. Refinancing into a lower interest rate not only reduces the total interest costs you owe over the life of the loan, but it can reduce your monthly mortgage payment as well. This is the most common reason to refinance.
  2. Pay off your current non-VA home loan. VA home loans don’t require private mortgage insurance (PMI) like other loan types (FHA loans, for example, require PMI for the life of the loan if you put less than 10% down). You can also adjust your loan terms and interest rate type.
  3. Fund home projects or consolidate your debt. If you’ve earned enough equity in your home, then a cash-out refinance allows you to tap into that equity for cash. There are no restrictions on how you can use the money, so many homeowners use it to pay for home repairs or remodel projects as well consolidate debt.

What type of refinance should I choose?

There are two types of VA refinance loans: VA streamline refinance and VA cash-out refinance. Both have different benefits and loan processing requirements, so it’s important for homeowners to know what they want to accomplish with a refinance.

VA Streamline Refinance

Also known as an Interest Rate Reduction Refinance Loan (IRRRL), the VA streamline refinance is best if you want to lower your interest rate and monthly payment. In fact, your new monthly payment must be lower than your current one to be eligible for this loan. It has one of the easiest refinancing process — you don’t have to verify your income or credit score, and you don’t need a home appraisal.

VA Cash-out Refinance

The VA cash-out refinance loan is the only refinance option for taking out some or all of the earned equity in your home as cash. Qualifying for this loan is a longer process. You’ll need to meet similar requirements to when you purchased your existing home, including credit score and debt-to-income ratio requirements, plus a new home appraisal.

How do I get the best VA refinance rate?

According to research from the Consumer Financial Protection Bureau (CFPB), almost half of consumers don’t compare quotes when shopping for a home loan. This means many consumers are losing out on substantial savings. Comparing quotes from three to four lenders ensures that you’re getting the lowest refinance rate for you. Some lenders may even waive certain fees and closing costs.

Interest rates determine what you’ll pay monthly as well as the total interest amount over the life of the loan. Even a half a percentage point decrease can mean a savings of thousands of dollars you’ll owe overall.

 

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