A Comprehensive Guide to VA Loans
Are you a veteran, service member, or surviving spouse? Perhaps you’ve heard that the VA can help you get a mortgage loan, but you’re not sure where to start. As a longtime community bank serving the residents and military veterans of the Shenandoah Valley, F&M Bank created this education guide to VA Loans to help you understand what they are, how to apply, and what the process looks like. You can also visit our VA Mortgage Loans page.
What is a VA Loan?
The VA Home Loan Benefit offers eligible homebuyers more favorable terms on a mortgage from a bank or other private lender. You must use your VA loan for a primary residence. The VA guarantees a portion of the loan against loss.
There are 3 types of VA-guaranteed home loans:
- Purchase Loan: Helps you buy a new home at competitive interest rates.
- Streamline Refinance: Obtain a lower interest rate.
- Cash-Out Refinance: Access your home equity to pay off debt or finance a major expense like college or home renovations.
Who is Eligible?
To be eligible for a VA loan, you must meet credit and income requirements and receive a Certificate of Eligibility (COE). Eligibility extends to servicemembers and veterans, spouses, and certain beneficiaries. Browse the list below to see if you might qualify:
- Veterans of WWII and the Korean or Vietnam Wars.
- Gulf War service
- Service during peacetime
- Separated from service (other than dishonorable discharge)
- Active-duty service personnel
- Selected Reserve or National Guard
- Un-remarried spouses of veterans who died while in service or from a service-connected disability.
- Spouses of missing in action or prisoner of war servicemembers
- Surviving spouses who receive Dependency and Indemnity Compensation (DIC) benefits.
- Certain U.S. citizens who served in the armed forces of a government allied with the U.S. during WWII.
- Service members of certain organizations, such as Public Health Service officers, cadets at the U.S. Military, Air Force, or Coast Guard Academy, midshipmen at the U.S. Naval Academy, officers of National Oceanic & Atmospheric Administration, merchant seaman with World War II service, and others.
Read the complete list of VA Loan eligibility requirements.
What are the Benefits of VA Loans?
The VA Home Loan program is designed to help eligible veterans and service members achieve the dream of homeownership. With an experienced VA loan lender like F&M Bank, you can move through the process in a smooth and efficient manner. Here are the primary benefits of applying for a VA loan:
- You don’t need to make a down payment unless:
- The lender requires it.
- The purchase price is greater than the property’s appraised value.
- Unlike other mortgages with less than 20 percent down, Private Mortgage Insurance (PMI) is not required for a VA Loan.
- Rates may be lower.
- Limited closing costs
- You can use a seller’s assist (when the seller pays some or all of the closing costs).
- There are no penalty fees for paying the loan off early.
- If you have trouble making loan payments, the VA may be able to help.
- You don’t have to be a first-time home buyer to qualify for a VA Loan.
- The VA Loan benefit can be re-used (more on that later).
- VA-guaranteed home loans are assumable.
- Disabled veterans are exempt from the one-time VA funding fee.
What does the process look like?
Here’s what you can expect to do during the VA loan application process.
- Determine your eligibility.
- Apply for a Certificate of Eligibility (COE) through the eBenefits portal. Your lender can also request a COE for you.
- Select a VA-approved lender to originate your VA home loan.
- Review the loan origination fee, if applicable. Some lenders charge a one percent flat fee to cover the costs associated with your VA loan, such as the appraisal and inspection, recording fees, your credit report, prepaid items, hazard insurance, flood zone determination, survey, title examination and insurance, special mailing fees, VA funding fee, and the Mortgage Electronic Registration System.
- Consider how you will cover closing costs. As mentioned above, you can submit an offer on a home that has the seller paying the closing costs.
- Take a home buyer education workshop. This isn’t a mandatory step, but it can be very helpful, especially for first-time homeowners. Here in Virginia, the Department of Housing and Community Development facilitates free events and webinars.
- Find a real estate agent to act as a buyer’s agent for you and start the home browsing process. If you need recommendations, our friendly and Shenandoah Valley-based employees can help you find local real estate agencies to work with.
- Once you find a house you love and make an offer, be sure to include a “VA Option Clause” in your contract (which your real estate agent will draw up for you). This contingency, along with clauses for the VA appraisal and home inspection, protects you against contractual obligation in the event that your VA financing doesn’t come through.
- If the VA-appraised value is not enough to cover the purchase price of the home, you can request a Reconsideration of Value (ROV), try to renegotiate the sale price, or pay the difference at closing with your own funds.
- The process ends with closing, where you sign the loan and title paperwork and collect the keys to your new home. Congratulations!
Where can you get a VA loan in the Shenandoah Valley?
To obtain a VA loan in the Shenandoah Valley (or anywhere else in the country), you must find a lender that is approved by the U.S. Department of Veterans Affairs to originate VA mortgages. Of course, that only narrows your options somewhat. Ultimately, you want to choose a VA-approved lender with extensive VA loan experience in Virginia.
For example, F&M Mortgage has been offering full-service home mortgages to the Shenandoah Valley and beyond since 1999. With offices in Woodstock, Harrisonburg and Staunton, Va., our Mortgage Advisors also have expertise with other government-insured loan programs like FHA. We can help you evaluate all of your options to ensure the VA loan is the best fit. Then we’ll put our experience to work for you to get you to closing as soon as possible.
VA Loan Limits in the Shenandoah Valley by County
VA loan limits reflect the maximum qualified veterans with full entitlement can borrow without making a downpayment. Limits vary by county due to varied real estate markets. You can view the complete list of counties and loan limits. Below, we’ve listed the loan limits for each Shenandoah Valley county we serve.
- Rockingham County: $484,350
- Shenandoah County: $484,350
- Page County: $484,350
- Augusta County: $484,350
- City of Harrisonburg: $484,350
- City of Staunton: $484,350
Closing Cost Assistance for VA Loans in Virginia
In 2018, the Virginia Housing Development Authority (VHDA) launched its Closing Cost Assistance (CCA) Grant program. Receive up to 2 percent of either the purchase price or appraised value (whichever is less) of your home. The CCA grant is for first mortgage loans only and must be used for closing costs, including the VA Funding fee. Talk to your lender about reserving grant funds for your VA mortgage loan.
How does the VA Loan Compare to Other Home Loan Types?
- No down payment: Only VA and USDA loans offer 100 percent financing. You may be able to make a low down payment on a conventional mortgage, FHA loan, or VHDA loan, but you will pay private mortgage insurance (PMI) until you have 20 percent equity in your home (FHA loans require mortgage insurance for the life of the loan).
- No mortgage insurance requirement: As mentioned above, FHA borrowers will pay mortgage insurance through the life of the loan. Conventional borrowers must pay it until they reach 20 percent equity. Even USDA loans have (albeit low) mortgage insurance. Only the VA loan waives the PMI requirement for borrowers.
- Conforming Loan Limits: VA loans have the same limits as other types of mortgages. The conforming loan limit is set by Fanny Mae/Freddie Mac. If you want to borrow more you’d need a jumbo loan.
- Home Inspection: Government-backed loans like the VA and FHA programs have quality standards that a home must meet to qualify for financing. With conventional mortgages, a home inspection is not required by the lender. However, it is always recommended that buyers schedule a private home inspection before closing to uncover any potential issues.
- Appraisal: Lenders always appraise the home before approving a mortgage. This is true regardless of the loan program you choose. It is usually difficult or impossible to borrow more than a house’s appraised value.
What can VA Loans be used for?
VA Home Loans can be used for purchasing a primary residence, purchasing and making improvements to an existing house, financing the construction of a new home, or refinancing an existing loan. Eligible properties and uses include:
- Existing single-family homes and condominiums
- New construction
- Simultaneously purchase and improve
- Refinance an existing non-VA loan
- Refinance an existing VA loan to reduce the interest rate
- Manufactured homes and lots
- Energy-efficient improvements
VA loans cannot be used to purchase an investment property, finance a business, buy farmland without a residence, buy property abroad, or purchase a vacation home. Recreational vehicles (RVs) and boats are also ineligible.
Surviving spouses who remarry before age 57, as well as divorced spouses, lose their VA loan eligibility.
Restoration of Entitlement
You can use your VA loan benefit again as long as your prior VA loan has been paid in full (and the property sold). You can re-use your benefit just once if you pay off your first VA loan but do not sell the associated home. You can also find a qualified Veteran-transferee to buy your home and assume your VA loan by substituting their entitlement for yours.
F&M Mortgage is your local VA loan lender in the Shenandoah Valley
F&M Mortgage, a division of F&M Bank, has been helping Virginia’s military veterans and their families become homeowners since the VA home loan program was introduced. Our Mortgage Advisors pride themselves on offering friendly, personalized service with local expertise.
Ready to apply for a VA loan? Use our online mortgage application or apply in person at your nearest F&M Bank office. We have locations across the Valley, including dedicated mortgage offices in Harrisonburg, Staunton, and Woodstock, VA. Have questions about choosing the right mortgage loan for you? Give us a call today!
Check out our Loans for Local Heroes Home Loan Program, which provides up to $500 off your closing costs, and visit our VA Mortgage Loans page.