The Ins and Outs of VA Loans

If you are an active military member or veteran of the military, you may be eligible for home loan benefits from the Department of Veteran’s Affairs. VA loans have flexible rules and you don’t need a down payment to buy a home. At Achroma, we believe that veterans deserve fair, transparent, and unbiased loan decisions. We help you purchase a home or refinance your mortgage using your VA benefits.

Keep reading to learn why you should consider VA home loans when you are shopping for a mortgage. Check out our current mortgage rates for VA loans, or visit our mortgage finder to customize a loan for your needs.

What is a VA Loan?

While it sounds like the VA underwrites and funds VA loans, they don’t. They insure the loans for individual lenders. You can get a VA loan from any qualifying VA lender, which Achroma can help you find. Military members, veterans of the military, members of the National Guard and members of the Reserves may all be eligible for VA financing.

In order to qualify, you must first meet the service requirements in order to be eligible:

  • If you are active in the military, you must be in it for at least six months before using your home loan benefit
  • If you are in the National Guard or Reserves, you need six years of service before you become eligible 
  • If you are a veteran, you must have served at least 90 days during wartime or 181 days during peacetime before becoming eligible

Understanding VA Entitlement

If you meet the service requirements to be eligible, you will likely receive full entitlement for a VA loan. The entitlement is what VA lenders need in order to give you a loan with no down payment. The entitlement means that the VA will guarantee that portion of the loan.

If you have full entitlement, you are eligible for a loan amount up to $484,350. Once you use any or all of your entitlement, it remains tied to the home you purchased until you sell it or refinance out of the VA loan. 

If you sell the home and pay off the VA loan in full, you can ask the VA to reinstate your entitlement. This means that you can reuse your benefit to buy another home. If you lose your home in foreclosure, though, you cannot reinstate your benefits unless you are able to pay the loan amount back in full. 

Loan Limits for VA Loans

The basic loan limit for VA loans is $484,350 as we discussed above. However, if you need to borrow more and qualify for it, you may be able to. VA lenders can lend you as much as you qualify to receive based on your credit score, current debt load, and the amount of your down payment.

Military members and veterans that borrow more than $484,350 must make a down payment. At Achroma Mortgage, we help you understand how a larger purchase price will affect your down payment requirements, as in the example below.

For example:

You have full entitlement of $484,350 available. You found a home for $515,000. The VA lender can lend you $484,350 with no down payment. The remaining amount of ($515,000 – $484,350) $30,650 needs a 25% down payment. This means you need to make a $7,662 down payment in order to get the full loan amount. 

This leaves you with a loan amount of:

$515,000 - $7,662 = $507,338

Minimum Credit Score Requirements for VA Loans

The average VA lender looks for a credit score of at least 620. Achroma currently has VA loan products with minimum credit scores of 580. Lenders look at more than just your credit score, though. They also look at your credit history. They focus on the last 12 months of your credit history very closely. They look at how well you paid your bills on time as well as how well you manage your debt. Do you overextend your credit card credit limits or do you spend responsibly? Do you have a lot of other loans, such as student debt, car loans, or personal loans? Lenders look at all of this when making a decision. If you have an idea of what your credit score is, you can see how it may impact your mortgage by creating an account and using our dashboard.

Down Payment Requirements for VA Loans

You don’t need a down payment for a VA loan in most cases. You can borrow up to 100% of the home’s value when buying or refinancing a home with a VA loan. Even though you don’t need a down payment, many veterans still put money down on the home because there are benefits in doing so. 

The more money you put down on a home (the lower the loan-to-value ratio, or LTV), the easier it is to get approved for the loan. It may also help you get a lower interest rate. At Achroma, we help you understand how a down payment can benefit your situation, whether with a lower interest rate or fewer fees. 

VA Mortgage Insurance Requirements

VA loans also don’t require mortgage insurance. However, you will pay a funding fee at the closing. The funding fee goes directly to the VA. The amount you pay depends on your type of service, your down payment amount and whether or not this is your first VA loan or a subsequent VA loan:

Type of VeteranDown paymentPercentage for First time UsePercentage for Subsequent Use
Regular MilitaryNone2.15%3.30%
5% or more1.50%1.50%
10% or more1.25%1.25%
Reserves/National GuardNone2.40%3.30%
5% or more1.75%1.75%
10% or more1.50%1.50%

VA Debt-to-Income Requirements

The amount of debt you have now affects your chances of approval on a VA loan. The VA wants you to have as little debt as possible compared to your income. They calculate your debt-to-income ratio (DTI) by using your total monthly payments and your gross monthly income (income before taxes).

Ideally, your monthly debts, which include minimum credit card payments, installment loan payments, student loan payments, alimony, child support, and the new mortgage payment should take up less than 41% of your gross monthly income. 

Eligible Property Types for VA Loans

Veterans can use VA loans on many types of properties. The most common is the single-family home, but you can also use it on condominiums and townhomes. It may be a little harder to get VA financing on a condo or townhome, but the experts at Achroma will walk you through the process.

VA Loans are a Good Option for Veterans

If you served in the military and have VA home loan benefits, using it can help you get a loan with low down payment requirements and no mortgage insurance. At Achroma, we will help you find a lender that offers transparency and unbiased decisions, helping you get the most out of your experience when shopping for a mortgage.