At the start of the program, the VA made all of the loans itself, but over time the program has changed to meet the needs of Veterans and has adapted to the market. There are now more than 300 lending institutions providing VA mortgages to qualifying Veterans. With so much information available about VA Home Loans, let’s start by breaking down the basics of the benefit.
Eligibility
The benefit is available to Veterans who meet various service requirements that are based on the time you served, what component you served in, and how you were discharged. For example, for a reservist to qualify for their benefit they must have 6 years in the reserves/National Guard or 90 days of active duty service. Once the Veteran qualifies, the VA will provide a “Certificate of Eligibility” (COE) that confirms the benefit is awarded and the amount available to the Veteran.
An additional component of the VA benefit is that it also covers surviving spouses not receiving Dependency and Indemnity Compensation. The ability for a spouse to qualify is different from the actual Veteran.
Obtaining a COE can be a lengthy process for a Veteran. However, Lenders are allowed a streamlined process so contact your lender to save time. Once the COE is in hand, your lender will also be able to note, simultaneously, if you owe a VA funding fee.
Fees and Rates
The VA funding fee is a fee the Veteran pays to receive the benefit of the VA Mortgage. That benefit includes no down payments for the balance, lower qualifying credit scores and reduced seasoning periods for significant financial events such as bankruptcy and foreclosure.
So, because 25% of a VA Mortgage is backed by the Federal government, holding all borrower characteristics and property information are the same, your VA interest rate will always be lower than a conventional rate. Your lender must follow these guidelines to receive the backing of the VA.
When asked about the VA Loan, a representative from the VA regional loan office in St Paul, Minnesota, said, “The Veteran has earned this benefit. We want them to receive it. We want to find a way to make it work.”
