7 Frequently Asked Questions About VA Loans

For many Service Members, both past and present, using their VA Eligibility to purchase a home sounds like a great option- and it can be! We sat down with Bart Rice of The Rice Financial Group, a local Mortgage Broker, to get answers to 7 of the most common questions about VA Loans. 

What is a VA Loan? A VA loan is a loan that is backed by the Department of Veteran's Affairs.  It helps U.S. veterans, active duty service members, and widowed military spouses buy a home with no down payment.

How much cash should I have on hand if I want to use a VA Loan? Most VA borrowers are eligible for 100% financing but may need money for closing costs and prepaid items. However, the seller is allowed to offer up to 4% of the purchase price towards the buyer's closing costs and prepaids so essentially a VA buyer can buy a home with no cash at all!

Who benefits the most from using a VA Loan? As mentioned above, It helps U.S. veterans, active duty service members, and widowed military spouses buy a home. However, it can benefit all parties involved as it can make home buying easy by not requiring any cash from the borrower.

Is there a credit score requirement? While there is no minimum credit requirement, most lenders require a 620 FICO but we can go as low as 580 FICO score.

I want to build a home. Can I use a VA Loan? Yes, a construction loan is an acceptable use of a VA loan. Qualified military borrowers can use VA entitlement toward a new construction mortgage. VA rules require that the builder be VA Approved so it is important for you to confirm the builder's eligibility before signing any contracts.

Are there downsides to using a VA Loan? Some people are concerned with VA loans regarding their more stringent appraisal inspections, but if a home is in decent livable and functional condition, one will not have any issues getting approved. Another consideration is the VA Funding Fee which runs anywhere from 1.25%-3.5% of the purchase cost. This fee is added to the total loan which increases your monthly payments.

Can I refinance a VA Loan? Yes! In fact, VA offers the "interest rate reduction loan" which does not require an appraisal and less supporting documents typically required for a home purchase or traditional refinance.

If you have been thinking about buying a home using a VA Loan, it's important to use a lender that is experienced in the VA Loan process. Your Real Estate Agent should also have a working knowledge of VA requirements to ensure you don't waste time looking at homes that don't qualify.