VA Mortgage Qualification Process

Veterans are allowed 100 percent financing on a home without having to pay private mortgage insurance (PMI). This offer is extended to American veterans or their surviving spouses, providing that they do not remarry. These loans also include extremely competitive rates.

To receive a VA mortgage, veterans are required to pay a funding fee of 0 to 3.3 percent of the loan, which can be rolled into the mortgage. This fee replaces traditional closing costs, which can typically run from 3 to 5 percent of a loan’s value. Another benefit for veterans is the VA mortgage’s streamlined refinance: Veterans are allowed to refinance their current loans to a lower rate without having to re-qualify. As a result, they can bypass income verification, income documentation, and home appraisals.

VA mortgages do have some restrictions when compared to general mortgages in the marketplace. For instance, they don’t include “no document” or “no income verification” loans, or interest-only loans and home equity lines of credit (HELOCs). What’s more, candidates are not allowed to receive cash back at closing on a new home purchase.

VA mortgages do offer a cash-out refinance option, in which veterans may borrow up to 90 percent of the value of the home. And even though HELOCs aren’t available, home equity loans are. These allow borrowers to tap up to 100 percent of their home’s equity.

During the qualification process, most lenders only consider the last 12 months of a veteran’s credit history. However, applicants should be mindful of the fact that bankruptcies, tax liens, and collections could have a negative impact on the qualifying process.

The highest mortgage that a lender will allow for the 100 percent financing option is $417,000. If you want to purchase a more expensive house, the difference between the purchase price and the $417,000 would need to be brought to the closing table as a down payment.

VA mortgages offer the kind of benefits that would make most lenders wince, which is why the Veterans Administration guarantees the loans in the event the borrower defaults. They have become a viable lending option for active military personnel and veterans. With 100 percent financing and affordable rates, they’re a small token of our nation’s appreciation.