VA Home Loans In Williamsport: A Primer

Owning a home is everyone's dream, and A VA loan can make your dream come to fruition. Read on to demystify VA loans and understand the application process.  
 

What is a VA loan? How does it work? 

A VA loan is a government-guaranteed home loan open to only military personnel and their eligible spouses. The US Department of Veteran Affairs partners with private lenders, and these loans' risk reduction allows for downpayment-free loans with competitive interest rates. Once you get approval, the VA will only ask you to pay a funding fee between 1.4 to 3.6 percent of the loan amount. However, not everyone is required to pay the funding fee. If you are disabled due to a job-related incident or a spouse to a deceased veteran, or one who was disabled in the line of duty, you are exempt from this fee.  
 

How does a VA loan differ from other mortgage loan types? 
 
Shane Whitteker is the owner and chief broker at Williamsport mortgage broker Principle Home Mortgage. He’s been helping his clients through the VA loan process for over 20 years. 
 
“There are some specific advantages to VA loans,” Whitteker says. “VA loans do not require a payment of monthly mortgage insurance. The VA does charge an up-front funding fee.  This fee is paid at closing and can be financed to not increase the out-of-pocket burden to the home buyer.  If the veteran has any percentage of VA disability that veteran is exempt from having to pay the funding fee.”  
 
Whitteker notes another difference with VA loans is the amount of the purchase price which the loan can cover.  
 
“The VA mortgage also allows for 100% of the purchase price or appraised value to be financed.  When purchasing a home this allows the VA borrower to avoid having to make a down payment.” 
 
VA loans stand out from other mortgage types in a few key ways. Firstly, they're exclusively available to eligible Veterans, Service Members, and certain military spouses. If you are eligible, you do not pay for a down payment or insurance, unlike other mortgage fees. The VA's loan guarantees lower rates and costs, keeping lending charges in check.  
 

Who is eligible for a VA loan? 

If you are from the military fraternity as an active-service member, have ever served in the forces or are a spouse to a diseased or disabled, you are eligible but under specific terms and conditions. A Certificate of Eligibility (COE) provided by Veteran Affairs is mandatory. Additionally, your income and credit score are factors your lender assesses to determine whether you qualify.  
 
Whitteker says its best to consult with your local mortgage broker to get into the exact details of a VA home loan. 
 
“The VA Loan is only available to veterans or surviving spouses of veterans under certain circumstances.  A surviving spouse only qualifies if their spouse was killed in the line of duty or from complications from injuries in the line of duty,” Whitteker says.  
 

Is the approval process for a VA loan more difficult than a conventional mortgage? 

Applying for a VA loan may seem daunting, but adhering to the requirements makes the application process manageable.  
 
“In general a VA loan is easier than qualifying for a conventional mortgage in many ways,” Whitteker says. “The VA allows for lower credit score and higher debt to income ratios. It also allows for no downpayment and for the seller to cover all closing costs.”  
 
The aspect of the government backup is a big plus to getting approved. To increase the approval rate, fast-track what you need to do at your end, like getting an eligibility certificate, signing a sales agreement, and proactively working with a local mortgage broker to determine whether you qualify for a home loan. 
 
 
Is there a limit on how much a VA home loan can be? 

If you have not used your VA loan benefit before, the only limit will be based on your income, credit score, and debt. Another limitation would be the amount guaranteed by the VA. The amount is normally up to a cap of 25 percent of the loan but not more than a county-specific threshold. A down payment can cover the difference if the VA loan limit is not up to the amount you want to borrow and you have the means. 

The VA follows the conforming loan limits which can be found here: https://www.fhfa.gov/DataTools/Downloads/Pages/Conforming-Loan-Limit.aspx  
 

Can I refinance with a VA home loan? 

You can refinance an existing loan in two ways. Interest Rate Reduction Refinance Loan (IRRRL) allows your lender to restructure your loan with lower rates and reduced monthly payments. If you refinance your loan via VA Cash-Out Refinance, you can draw cash from your home equity and determine how you use it. VA Cash-Out Refinance can apply to a non-VA loan.  

“Yes, you can refinance with a VA loan,” Whitteker says. “If you currently have a VA loan, you can do a VA streamline refinance which is less invasive and requires much less documentation. You can also refinance from other loan types into a VA loan but that requires a full underwriting and qualification process.” 

 
 
Can I sell my VA mortgage to someone who isn't a veteran? 

A non-veteran can buy your loan. VA loans are also assumable to qualifying veterans or surviving spouses. Once the VA and your lender approve you and the buyer meets the lender's criteria, the assumption process can occur smoothly. But this is after the buyer pays the unpaid loan balance's 0.5% VA funding fee.  
 
What are some reasons a VA home loan may not be approved? 

Whitteker lists a few reasons why your VA loan application may be rejected. 
 
“Past credit issues, unstable job history, excessive debt to income ratio, etc., can all lead to your loan not being approved,” Whitteker says. 

A mortgage application can be rigorous, and it can be frustrating if your application is declined. Some reasons for a decline are low credit score, application errors and inaccurate information in your details, unfavorable debt-income ratio, and property issues where appraisal and property valuation doesn't match the mortgage pricing. 
 

Are there any drawbacks to getting a VA mortgage? 

VA mortgages have significant benefits, but it's also important to be aware of potential drawbacks. You must pay the VA funding fee from 1.4% to 3.6%. Additionally, some sellers might be hesitant due to perceived complexities and certain closing costs they can't cover. Other downsides are property restrictions the VA sets, slower equity growth due to no down payment, and the occupancy requirement. 
 

What are some common mistakes people make when applying for a VA home mortgage? 
 
“One mistake is thinking the VA lends money and letting a sales person fool you into thinking the lender is actually the VA,” Whitteker says. “Sales people do this frequently, especially with lenders that have “VA” or “veteran” in the name of the business. Another mistake is job history. The VA really is strict on having a stable two year job history in the same line of work.”  

To learn more about VA loans in Williamsport, visit the VA home loan experts at Principle Home Mortgage. You can call them at (814) 308-0959.