WATCH: Everything You Need to Know about a VA Loan

The intensity of the housing market means that now more than ever, veterans and active duty service members are looking for the least expensive way to buy a home. Luckily for us, Paul Corbett, host of the online show "The SITREP," produced by the VA New England Healthcare System, breaks it all down in the latest segment.

This video covers everything from how to apply, PCSing tips, credit scores and more. It’s a long and comprehensive video that lasts for almost two hours. If you’re interested in learning more about a VA loan, we’re covering the highlights here until you have time to watch the full video.

This year, the VA is expected to guarantee or close on 1.7 million loans, marking the second record-setting year for the VA. That means the VA expects 1.7 million veterans and active duty service members are expected to purchase or refinance their homes.

VA home loans were created in 1944 as a way to help World War II veterans coming back from the Pacific and European theaters buy homes with reasonable interest rates. Since 1944, nearly 30 million VA loans have been guaranteed through the system.  

It’s important to remember this benefit isn’t just for veterans – it’s for any active duty, reserve, national guard personnel who met the service requirements. Surprisingly, only 14% of veterans nationally choose to use a VA loan.

Contrary to what many assume, the VA does not issue money for a VA loan. Conventional lending institutions like banks and credit unions issue the funds. The VA guarantees 25% of the amount borrowed by the veteran. Imagine a veteran chooses to finance $400,000 for a home after certifying eligibility through the VA. Then the VA issues the lender a Certificate of Guarantee. The COG means that 25% of whatever the lender issues is covered. If the service member is not able to make payment or defaults on the loan, the VA will send a check to the lender for 25% of what’s borrowed. In other words, the VA is taking 25% of the risk for the lender. That's one of the reasons why the VA has the best rates and the most favorable credit guidelines. VA loans don’t require Private Mortgage Insurance (PMI), unlike conventional loans.  

As a result of the Blue Water Navy Act, there is no limit on the amount of money a veteran or service member can borrow to purchase a home. That means eligible veterans, service members, and survivors who are fully eligible for a VA home loan no longer have limits on loans over $144,000. However, in order for this to be true, one of these two criteria must be met:

You are eligible to use your VA loan as many times as you like. However, non-disabled veterans and active duty service members might be required to pay a funding fee and/or a subsequence use fee if you choose to use your VA loan more than once. Veterans with a 10% or more service-connected disability have no funding fees.

It’s entirely possible to retain ownership of a home, PCS, and use a VA loan to buy a new home at a new installation. There will be a subsequent use fee associated with this purchase because active duty Service members are not exempt from subsequent use fees. The one exception to this rule is if an active duty Service member has been awarded a Purple Heart. In that case, they are exempt from all funding fees in perpetuity.  

 If you’re considering purchasing a home, it’s highly recommended that you explore the VA Home Loan page, where you can look up quarterly, and annual lender volume reports. This will help you understand which lenders might be more amenable to VA loans. How to shop for a mortgage is equally as important as selecting the perfect house for you and your family. The more research you put into this part of the process, the better the result. You should look for a VA home loan lender who is familiar with military culture and understands your unique experiences as a Service member.

Funding fees are not out of pocket costs when you purchase a home. This amount is financed into the cost of the loan. For veterans with first-time use, the funding fee is 2.3% of the loan amount. On a $100,000 loan, the funding fee is $2,300, so the loan amount would be 102,300. Funding fees change based on how much money is being financed. If you choose to put a 5 or 10% down payment on the house, the funding fees will change.

 Rick Bettencourt suggests asking around among the military community to find a lender. After you’ve selected a VA-approved lender, you’ll need to obtain a Certificate of Eligibility (COE). The COE proves you meet initial eligibility requirements for VA loan benefits. It also ensures the lender knows how much entitlement you can receive.

Next, pre-qualifying your loan amount can help you save time and avoid potential surprises. You’ll need to provide information about your income, credit history, and other information. A pre-qualification letter helps establish the price range for a home you can afford. It doesn’t guarantee that you’ll be approved for your loan.

You’ll need to gather a copy of your LES if you’re on active duty, your DD-214 if you’re a veteran, along with any relevant financial paperwork that establishes your income and marital status.

The VA doesn’t require a certain credit score but having a higher score might mean better interest rates and loan terms. Private lenders that issue VA loans usually want to see scores between 580-660 to be eligible for a loan.

Rick says the best way to make the home buying process fun and enjoyable is to follow these three tips.

Watch the video for the complete conversation, which includes info about buying multi-family homes, waiting periods and more.