All Americans owe a huge debt of gratitude to those who serve and protect us as members of the U.S. military. The mortgage industry does its part to honor and support veterans through the VA Home Loan Program. This government-backed mortgage program requires no down payment. It was created in 1944 as part of what is now commonly known as the GI Bill of Rights, signed into law by President Franklin Roosevelt. The VA Home Loan was initially started for World War II veterans who served between 1940 and 1945. But what started as a way for members of the “greatest generation” to readjust to civilian life after the war has become a program that’s here to stay. Its history shows that VA loans evolved into a long-range program, opening the door to home ownership and financial stability.
Now in its eighth decade, Union Savings Bank (USB) is proud to offer VA loans to our customers who have served in the armed forces. To receive the full benefit of the program, it’s essential that veterans work with a USB loan officer to determine if you, as a military veteran or surviving spouse, are eligible for a VA Home Loan. To help get you started, we’ve outlined five of the most frequently asked questions about the VA Home Loan program.
What is a VA Home Loan?
VA Home Loans are mortgage loans made by private lenders such as USB. The United States Department of Veterans Affairs guarantees a portion of the loan. That guarantee enables lenders to loosen the requirements typically needed to secure a loan. For example, no down payment or private mortgage insurance is required with a VA loan, and there is no limit on how much money an approved veteran can borrow. VA loans also come with low interest rates, limited closing costs, and relaxed credit-score requirements.
Are there any fees associated with a VA Home Loan?
While costs associated with a VA loan are low, borrowers will have to pay a VA funding fee. It’s a one-time fee of the total amount borrowed on the VA Home Loan. The amount varies depending on circumstance. For example, for a first time VA loan recipient who makes a down payment of 5% or less, the VA funding fee is 2.3%. The funding fee is typically rolled into the loan amount and goes right back into the program, ensuring that it keeps growing for future users. The fee is waived if the applicant has suffered service-connected disabilities.
Who is eligible for a VA Home Loan?
Members of all uniformed service units are eligible to earn VA Home Loan benefits. Your USB loan officer will help guide borrowers through the eligibility process.
In general, the requirements for veterans are:
- Two years: Regular service members
- Six years: Reservists & National Guard members
- 90 days: Active-duty during wartime
- 181 days: Active duty during peacetime
In addition, a surviving spouse may also quality for a VA Home Loan. In general, the spousal requirements are:
- Spouse of a veteran who died in service or of duty-related causes
- Spouse of a veteran who was disabled and eligible for compensation
- Spouse of a POW or MIA veteran
Am I eligible for more than one VA Home Loan?
The VA loan is a benefit for life, and veterans may apply for more than one. But there are qualifications. Borrowers may apply for an additional VA Home Loan if they sell a house financed with a VA loan and pay off the mortgage. If the VA loan-financed house is sold and the new buyer assumes the loan, the original borrower may not secure a new VA loan until the first one is paid off.
Can I refinance my VA Home Loan for a better interest rate like I can with a conventional mortgage?
Absolutely. The process is often referred to as a “streamline refinance” or “interest rate-reduction refinance loan” (IRRRL). An IRRRL is used to get a lower interest rate, which lowers your monthly mortgage payment. An IRRL may also make monthly payments more stable by moving the loan from an adjustable or variable interest rate, which changes over time, to a fixed rate, which does not change. To qualify, borrowers must have an existing VA Home Loan and live in the house covered by the loan.
At Union Savings Bank, our loan officers are knowledgeable about the VA Home Loan process and will help you every step of the way. Homebuying DOESN’T have to be scary, especially when Union Savings Bank has your back. Our home loan experts guide veterans (and all) buyers, through the home loan process. Part of the American dream is building equity and creating a better life for you and your family, and we’re honored to be help you achieve that goal.