VA Loan Requirements
VA Loan Down Payment
The VA Home Loan has always had a no-down payment option. There are some exceptions to this rule. For example, if the purchase price of the property is greater than the reasonable value determined by the VA appraisal, you will have to provide a down payment so that the loan equals the amount approved by the VA. You may also want to make a greater down payment than required by the lender in order to lower your monthly mortgage payments and reduce the amount of interest you will pay over the life of the loan.
Also, a higher down payment decreases the amount the VA Charges for guaranteeing the loan. This charge is called the VA Funding Fee. To see a detailed breakdown on how your down payment can decrease the VA Funding Fee on a new VA Home Loan, click here.
VA Loan Appraisal
For a new VA Home Loan, you will be required to pay for a VA approved Appraisal. The typical cost for a VA Appraisal ranges from $350-$700 depending on your area. VA Guidelines do not require an appraisal if you are looking to refinance your existing VA Loan. However, that does not mean the lender has to abide by that guideline. Lenders can still require an appraisal and almost all lenders do nowadays. For example, since most homes in California have little or no equity due to the economic recession, it is extremely rare to find lenders who do not require at least a drive-by appraisal to show there is still some equity in the home. At VA Loan Leader, we have relationships with lenders who will still allow veterans to refinance without appraisals
Credit Requirement for VA Home Loans
Most lenders require a minimum FICO credit score of between 620 - 660 in order to be eligible for a VA Loan or in order to refinance your VA Loan with the VA IRRRL (VA Streamline) program. If your FICO score is less than 620, it is still possible to get a credit exception if you have a clean mortgage payment history and no outstanding judgments, liens or past due amounts on your credit cards.
VA Loan Private Mortgage Insurance (PMI)
VA Loans do not require PMI (Private Mortgage Insurance). Instead the Veterans Administration charges a VA Funding Fee. This fee helps the VA mitigate the cost incurred for guaranteeing the small percentage of loans that default.
VA Funding Fee
As stated above, the VA charges a VA Funding Fee when obtaining your new VA Home Loan and also when you refinance your VA Loan. The VA Funding Fee is rolled into your new loan. For Active Duty and Veterans of the Armed Forces, if the down payment is between 0% - 4.99% and this is your first VA Loan, then the Funding Fee is 2.15% of the loan amount. However, if it is your second time using your VA Loan Eligibility then the Funding Fee is 3.30%. The funding Fee decreases if your down payment is greater than 5% of the loan amount. For a detailed breakdown, please see our VA Funding Fee Table.
If you are looking to refinance your VA Loan using a VA Streamline (VA IRRRL), the VA Funding Fee is 0.50% of the loan amount.
If you are currently receiving VA Disability Benefits with 10% or greater disability, then you are exempt from the VA Funding Fee for both new VA Home Loans and VA Streamline Loans.
Clean Mortgage Payment History
If you are looking to refinance or purchase a new home using your VA Eligibility, then it is imperative that you have a solid history of making your mortgage payments on time. For the VA Streamline Refinance, lenders will not consider you for the program if you have not made at least your last 12 mortgage payments on time.
Foreclosure, Short Sale, Bankruptcy or Loan Modification?
Lenders will allow you to qualify for a new VA Loan or refinance your existing loan even if you have had financial difficulties in the past. Most lenders we work with require 3 years of proven credit worthiness after a Foreclosure or Short Sale. This includes no late mortgage payments on any property. Chapter 13 Bankruptcy is allowed if discharged over 12 months and there is a clean mortgage history with no 30, 60 or 90 day late payments. Chapter 7 Bankruptcy is allowed if discharged over 24 months and there is a clean mortgage history with no 30, 60 or 90 day late payments. Unfortunately, if you have had a loan modification, we don’t know of any lenders today that will allow you to subsequently refinance your mortgage.