- No down payment required
- No monthly mortgage insurance payment
- Typically lower interest rates than conventional loans
- Flexibility to finance the funding fees
VA Home Purchase Program
If you’re looking to purchase a home with no down payment while avoiding mortgage insurance payments, a VA home mortgage may be exactly what you’re looking for. VA loans are designed to make homeownership more attainable for veterans by offering more relaxed requirements with great affordability.
The U.S. Department of Veterans Affairs has guaranteed more than 20 million home loans since the VA Loan program was launched in 1944 as part of a program for returning World War II veterans. The program now offers benefits to not only veterans and their spouses but also Reservists and members of the National Guard who served for more than six years.
PennyMac’s Home Value Estimator allows you to shop with confidence by getting an estimate of the value of a property based on multiple factors.
How Do VA Purchase Loans Differ from Other Loan Programs?
VA Purchase Loans are guaranteed by the U.S. Department of Veteran Affairs and offered by independent lenders, like PennyMac. With the VA program, lenders like PennyMac are able to offer veterans more favorable terms that help eliminate barriers on their journey to homeownership.
Two of the biggest differences between VA Purchase Loans and other kinds of mortgages are that veterans can purchase homes with a VA loan often without making a down payment, and they do not require borrowers to pay ongoing mortgage insurance. Additionally, VA loans often have lower rates and can accommodate a wider range of financial histories than conventional loans.
Loan limits are another point of differentiation for VA Purchase Loans. It will require an increase in down payment but VA borrowers can be approved for higher loan balances than standard conforming loan limits allow.
Another unique aspect of VA Purchase Loans is the funding fee. The funding fee is a percentage of the loan amount, usually between between 1.25% and 3.3%, that is paid at closing or rolled into the total loan amount. This fee goes directly to U.S. Department of Veterans Affairs and helps cover losses on loans that go into default along with some other costs of running the program.
Why Purchase a Home with a VA Loan?
The U.S Department of Veterans Affairs designed the VA Loan program to address the specific needs of veterans and their families. VA Loans allow veterans to borrow at a great rate without a large down payment or monthly mortgage insurance. The VA program gives many veterans an opportunity to buy a home and build equity where the opportunity would otherwise not exist.
Aside from the preferable rates, VA loans are also more tolerant of a range of credit histories, making them a viable option for veterans who might not be a great match for other loan options. Even qualified borrowers who can meet the requirements for other loan products often choose VA loans because they provide great value with their low down-payments and low interest rates. Additionally, the VA offers a special ‘streamlined’ refinance program exclusively to Veterans with existing VA loans that will allow you to easily reduce your mortgage payment if interest rates improve after you have purchased your home.
Am I Eligible for a VA Mortgage?
Over time the VA program has been expanded to include many different kinds of veterans. To be eligible for the program, veterans, service members who are in active duty, National Guard members and reservists must meet a set of basic requirements that have been determined by the U.S. Department of Veterans Affairs. Additionally, the program benefits have also been extended to the spouses of military members who died while on active duty or suffered a disability while in service.
If you meet one of the following criteria, you may be eligible for a VA Home Loan:
- Service totaling 181 days or more of active service during peacetime
- Service totaling 90 consecutive days or more of active service during wartime
- Service totaling 6 years or more in the National Guard or Reserves
- Suffered a service-connected disability
- You are the spouses of a military member who died while on active duty or from service-connected causes
The financial requirements of VA loans are also less stringent than some other types of home loans. For instance, the low down-payment requirement eliminates the need to worry about having a lot of capital to get started. Also, while many of the income requirements have been relaxed, you still must prove that you have the financial means to make your payments. You also don’t need to have perfect credit to qualify for a VA Home Loan. In fact, FICO scores as low as 640 often meet PennyMac’s minimum requirements for most kinds of VA loans.
While you don’t need it to begin the process, you will need a Certificate of Eligibility (COE) to obtain a VA Home Loan. This certificate is simple to obtain from the U.S. Department of Veteran Affairs and will verify your basic eligibility for VA loan programs.
Frequently Asked VA Purchase Questions
What Is the Certificate of Eligibility (COE) and Why Do I Need It?
A Certificate of Eligibility (COE) will establish that applicants that meet the basic service requirements to obtain a VA Home Loan. PennyMac uses the COE to verify your eligibility for home loan benefits but it is not required to get started on the applications. Your loan officer will help walk you through the simple steps to verify your eligibility and obtain your COE.
If you’d like to get a head start on the process, the U.S. Department of Veterans Affairs have set up a system for veterans to obtain their Certificate of Eligibility through the eBenefits section of its website. Alternately, borrowers can request a COE by mail using VA Form 26-1880 (Request for a Certificate of Eligibility for Home Loan Benefits). More information and all the forms you need can be found on the U.S. Department of Veterans Affairs website.
What Types of Properties Can I Purchase?
VA Purchase Loans are flexible enough to accommodate different kinds of homeowners. A VA borrower can use a VA mortgage to help purchase residences ranging from townhomes to condominiums to single-family homes.
While there is a lot of flexibility within the VA program, different types of dwellings may have different sets of requirements. In the case of condos and townhomes, the entire complex must be approved by the Dept. of Veterans Affairs in order for a borrower to get approval for a single unit. A PennyMac loan officer can help clarify how the process may change for the specific kind of property you’re interested in.
What Is the Funding Fee for a VA Purchase?
The VA funding fee is unique to VA loans. The fee is paid directly to the VA and is designed to help cover losses on the few loans that go into default. Most VA home loans require a funding fee between 1.25% and 3.3%, although many Veterans are exempt from paying the fee if they are disabled. An example of how this works is, if you’re paying a 2.15% funding fee on a $200,000 mortgage, your total funding fee will come out to $4,300. You will usually have the option of rolling this fee into your total loan and spreading it out over the life of your loan, if you choose to do so.