It might not be right now, but we want to help you become a homeowner in the future and guide you on the steps you need to take in terms of saving for down payments or paying off other debts so you can become a homeowner. It’s about finding someone willing to answer your questions, take the time to help you understand, and educate you within the process. That’s invaluable.
Hello everyone, welcome back to the channel and our new episode. I’m Robert Hoffman, your host with Veterans Guide, and today we have Jodi Ulrich back from Novus Home Mortgage. Jodi, thank you for coming.
Yeah, Robert, thanks for having me. I’m excited to be here to share my experience with you guys. I’ve been doing home loans for over 22 years, so it’s always great to come back, answer questions, and figure out how we can help more veterans get into homes and make that dream a reality. So, thanks for having me.
Alright, Jodi, let’s start with the basics. How do VA home loans work?
Yeah, the VA home loan process isn’t much different from a regular home loan process. The big difference is the VA guarantee. What that does is act as an insurance policy for the lender in case of default. This guarantee is generally 25% of the home loan, and it’s what allows veterans to get 100% financing on their home loan. It’s a great way to get into a property with very little money down. It’s one of my favorite home loans to do.
So, the 25%, do we consider that similar to PMI (private mortgage insurance) in a regular mortgage, where you eventually remove it?
Yes, it acts in that exact same way. On a conventional loan, you have private mortgage insurance, which is an insurance policy covering the financial institution’s losses in case of default. In this case, the VA offers that benefit. But the best part is, the VA doesn’t charge you on a monthly basis, so it’s cheaper.
Absolutely. It’s much cheaper for veterans. It’s one of my favorite veteran benefits. VA loans are some of the best loans out there in most cases.
So, pretty much no PMI if you’re using a VA home loan because of the 25% guarantee.
That’s correct, which is hugely beneficial because it could save a couple of hundred dollars on your mortgage payment every month. That’s huge for veteran homeowners, especially during tough times or unpredictable market conditions.
So, how do I qualify for a VA home loan?
You’ll need to reach out to a VA-approved home loan lender. You can find them on the benefits.va.gov website, or you can reach out to a reputable lender who will walk you through the home loan process. They’ll assess your income, credit, and debts to see what you qualify for. One of the things we focus on when talking to people is not just what you qualify for but what’s a comfortable monthly payment. It’s important to make sure you’re looking at homes within your budget, not just based on what you qualify for.
So, what are some of the major benefits of a VA home loan?
There are a lot of benefits. As we mentioned, 100% financing, no down payment required, though you can put money down if you choose to. Getting into a property with little to no money down is a huge benefit, especially when saving for a down payment can be cumbersome. Another benefit is no private mortgage insurance, which saves veterans a significant amount monthly, and it allows them to qualify for a larger loan amount with a lower monthly payment. Interest rates on veteran loans are generally lower too, which is another great benefit.
Can you give a rough idea of how much lower VA loan interest rates are compared to other loans?
Based on my experience, rates on VA loans tend to be a quarter to a half a percent lower than on other types of loans. But it depends on credit scores and other factors. We try to compare all loan options, like VA, FHA, USDA, and conventional loans, to determine which one makes the most sense for the borrower.
What about credit scores? Is there a required minimum to qualify for a VA loan?
The VA itself doesn’t have a credit score minimum. However, many lenders will have a minimum, typically around 620, though some may go as low as 580. It’s important to note that lower credit scores may result in higher interest rates, but it doesn’t necessarily mean you won’t qualify. Many people who don’t qualify for traditional loans can still qualify for a VA loan.
Can you have more than one VA loan at the same time?
Absolutely. You can have more than one VA home loan, depending on how much entitlement you have. If you’re active duty and get relocated, for example, you might rent out your current property and want to purchase a new one at your new assignment. As long as you have enough entitlement, you can qualify for another VA loan.
Can you explain entitlement?
Entitlement is the amount of money the VA guarantees for your loan. For your first home, there’s no limit to how much you can borrow. After the initial use, if you’ve used your entitlement before, the VA calculates how much you have left. If there’s not enough remaining entitlement for 100% financing, you may need to make a down payment, but you might still qualify for 100% financing depending on the situation.
What happens if you go over your entitlement limit?
If you go over your entitlement limit, you’ll need to make a down payment. The down payment would be 25% of the difference between the home price and the loan amount for which you still have entitlement. For example, if you’re qualifying for a $500,000 loan, but you want a $600,000 home, you would need a $25,000 down payment.
What are some key eligibility criteria for a VA home loan?
To qualify, you need a certificate of eligibility, which can be obtained after six years in the reserves, 90 days of active military service, or completing four years of service with an honorable discharge. If you don’t have your certificate, we can help you obtain it by submitting your DD214 to the VA.
Can I apply for the certificate of eligibility myself?
Yes, you can request the certificate of eligibility yourself, or if you don’t have it, we can request it for you. Either way, we can assist in the process.
How does DTI (debt-to-income ratio) and residual income factor into the process?
For DTI, we typically look for a 41% back-end ratio, which includes housing payment and all other debts. You can exceed this threshold depending on your credit and overall financial situation. For residual income, which ensures you can cover living expenses after bills, the VA looks at your income and utility costs, but it doesn’t include food or utility bills when calculating DTI.
How do VA loans compare to traditional loans like FHA and USDA?
VA loans don’t require private mortgage insurance, unlike FHA and USDA loans, which both charge monthly mortgage insurance premiums. Conventional loans may require mortgage insurance based on your credit score. VA loans tend to have lower interest rates, making them more attractive in many cases. Additionally, the VA doesn’t charge monthly PMI, making it a better choice for many veterans.
How do refinancing options work with VA loans?
The VA offers the Interest Rate Reduction Loan (IRRRL), commonly referred to as the VA streamline refinance. This allows veterans to refinance their current loan to a lower interest rate without needing to provide income documentation or undergo a new appraisal. You can also do a cash-out refinance with a VA loan, though rates may be slightly higher for that.
What’s the process for refinancing with a VA loan?
The process for refinancing is similar to that of a regular home loan. For an IRRRL, there’s no need for income verification or a new appraisal, saving both time and money. However, there is a half-percent funding fee unless you’re a disabled veteran, in which case the funding fee is waived.
So, what’s the first step if I’m ready to apply for a VA loan?
You should reach out to an approved VA home loan lender, which you can find on the benefits.va.gov website. Make sure to check reviews and confirm they’re licensed through the NMLS system to ensure you’re working with someone reputable and knowledgeable.
Is Novus Home Mortgage one of these approved lenders?
Yes, absolutely. Novus Home Mortgage is an approved VA home loan lender, and we work with veterans nationwide. We lend in all 50 states and can assist with relocations, first-time homebuyers, and referring you to trusted real estate agents in almost every market. We’re here to help veterans navigate the process and make informed decisions.
That about wraps it up. I’m Robert Hoffman with Veterans Guide. Make sure to like, subscribe, and if you have any questions, leave them below and we’ll get back to you. Have a great day.
