With over two million active service members alone, veterans make up roughly 15% of the population. VA loans are a growing area in lending comprising 8% of loans in the country. If you want to compete as a top mortgage professional, it’s necessary to have an understanding of this VA benefit. Here are a few basics about VA loans to get you started.
Eligibility for VA Loans
As the name implies, VA loans are for veterans and active service members, but eligibility isn’t limited to those two groups. There are situations where military spouses and reserve members can also qualify. Be aware, there are requirements regarding how long your client needs to have served in either war or peacetime to be eligible for a VA loan. In some situations, clients can even shift from eligible to ineligible in a short window of time due to these requirements, so it helps to stay educated. That’s why our expert VA lending team offers education through Caliber webinars and FAQS on the subject.
Benefits of VA Loans
A VA loan is intended as a benefit for service members, so there are perks for your military clients that can’t be found in any other government-backed loan. A down payment is not required unless the lender requires it, or the purchase price is more than the reasonable value of the property. A VA loan does not require mortgage insurance, unlike Fannie and Freddie loans. They’re also simpler in structure than FHA loans, and less expensive for both the lender and borrower.
Versatility of VA Loans
VA loans are not limited to a standard fixed rate loan. They can be adjustable loans, hybrid loans, graduated payment mortgages, construction loans, or loans for energy-efficient updates to the home. Your client has options for their current needs. A variety of property types are also allowed including single-family residences, two to four-unit properties, VA-approved condominiums, manufactured homes, and properties in Planned Unit Developments (PUDs). There is no limit to the size of loan your borrower can qualify for, either. However, the loan cannot exceed the lesser of the appraised value or purchase price. What is limited is the amount the VA will guarantee if the veteran defaults on the loan. The VA will only guarantee 25% of the total loan amount.
A VA loan is also reusable and can even be used several times at once due to the structure of the entitlement. Most eligible veterans have a primary entitlement of $36,000 and an additional, secondary entitlement of $101,062, for a total of $137,062. If 25% of the loan is less than that amount, the borrower still has entitlement that can be used again for another VA loan. When the loan connected to the entitlement is paid in full, the borrower “clears the entitlement” and can use it again.
Origination Fees With VA Loans
The VA loan allows lenders to charge a 1% origination fee to cover costs but limits anything beyond that amount. This is separate from closing costs, which the borrower can always pay. In the VA Lenders Handbook, the list of allowable and non-allowable fees is detailed. However, most lenders find that the 1% is never exceeded in their costs.
Enlist With Caliber
Caliber’s Military and Veteran Lending Team professionals are specifically trained to handle VA loans and have an ongoing commitment to be leaders in the VA loan market. We can help you succeed in this area and demystify the perceived complications of VA loans with our expertise and educational resources. Get on board with us to begin growing your business and obtain access to all our resources on VA loans.