The Basics

VA Loan Bootcamp: Understanding the Basics of Your VA Homebuying Benefits

Published: May 17, 2024

VA Loan Bootcamp: Understanding the Basics of Your VA Homebuying Benefits

If you served, are currently serving, or are a widower of a past service member, you have earned the right to a VA loan. Before we get started, a VA loan is a home loan benefit backed by the Department of Veteran Affairs (VA) to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.

VA home loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.

In this blog, we'll delve into the fundamentals of VA loans, help you understand the eligibility criteria, and give you a look at the benefits that come with a VA loan. Whether you're a first-time homebuyer or looking to refinance your existing mortgage, partnering with experienced VA experts at UMortgage ensures a seamless journey toward homeownership.

How Do VA Loans Work?

While the VA backs VA loans, they do not provide them. Rather, eligible borrowers work with a VA-approved mortgage lender to get their VA loan. Below, we’ll give a high-level overview of the eligibility requirements and VA loan process.

How to Know if You're Eligible for a VA Loan

To qualify for a VA loan, veterans and active-duty service members must meet different service requirements to qualify. Military members or surviving spouses can qualify if they or their spouse served:

• 90 consecutive days on active duty during wartime

• 181 consecutive days on active duty during peacetime

• 6 years in the National Guard or Reserves, or 90 days under Title 32 orders with at least 30 days served consecutively

For full qualification guidelines, you can refer to the VA’s comprehensive eligibility requirements.

How to Obtain Your Certificate of Eligibility (COE)

A Certificate of Eligibility (also known as a COE) is required to qualify for a VA loan. Your COE is a formal document issued by the VA confirming that you’ve met the eligibility requirements noted above. You don’t need to obtain this document before starting your mortgage process; your UMortgage Loan Originator can obtain your COE on your behalf as you work with them to kickstart your homebuying journey.

Understanding the VA Funding Fee

The VA funding fee is a one-time fee paid to the VA when obtaining a VA loan. The VA funding fee helps offset the cost of the VA loan program to taxpayers in place of a down payment requirement.

The amount of the funding fee varies based on your down payment amount, the type of transaction (purchase or refinance), your service branch, and whether it’s your first time using your VA loan benefits.

If you're a Veteran or active-duty buyer receiving compensation for a service-connected disability or are deemed 10% or more disabled by the VA, you are exempt from paying the funding fee.

Your VA Loan Benefits Explained

A common misconception about VA loans is that they’re riskier and sometimes more expensive than a conventional loan. This couldn’t be further from the truth! In fact, VA loans work a lot like any other home loan but also include a plethora of benefits that help to make the homebuying process significantly easier and more affordable for Veterans and active-duty service members. Below, we’ll break down some of these key benefits:

0% Down Payment

One of the biggest benefits of your VA loan benefit is the ability to purchase a home without a down payment. A down payment is often the most expensive part of the homebuying process, with conventional loans requiring at least 3% down and FHA loans requiring a minimum of 3.5%. This benefit alone can make a home purchase significantly more affordable for eligible borrowers.

No VA Loan Limits

The VA-backed home loan limit refers to the amount the VA guarantees, or the maximum amount paid to your lender if you default on your loan. The VA doesn't limit how much you can borrow to finance a home. This means that if you still have your COE intact, you can borrow the maximum amount that you qualify for at 100% financing.

Additionally, the Federal Housing Finance Agency (FHFA) increased its county loan limits throughout the United States for borrowers with partial eligibility available. In layman's terms, this means that you are entitled to greater flexibility as a borrower throughout your journey of homeownership. To learn more specifics about how much you can qualify for, feel free to consult with your UMortgage Loan Originator.

Flexible Underwriting

Compared to conventional loans and other loan products, VA home loans come with incredibly flexible underwriting terms. With lower credit score requirements and no stipulations for debt-to-income ratios, qualification will be based on residual income requirements.

In certain regions across the country, borrowers might qualify for tens of thousands more than they might with a conventional loan.

Lower Interest Rates

VA loans typically have more competitive interest rates than other loan types. Because these loans are backed by the VA, lenders have less risk associated when funding VA loans and therefore can offer lower rates than a conventional loan.

No Private Mortgage Insurance

Because they’re backed by the VA, VA loans don’t require mortgage insurance. In contrast, conventional loan or FHA borrowers who pay less than a 20% down payment have to pay for private mortgage insurance, which is an additional cost added to their monthly mortgage payment which can negatively impact purchase power.

Capped Lender Fees & Closing Costs

The VA limits lender fees to 1% of the total loan amount. Because of these capped lender fees, VA borrowers typically have lower closing costs compared to those with conventional or FHA loans.

Repeat Use of VA Loan Benefits

As long as you maintain your Certificate of Eligibility, your VA loan benefits are lifetime benefits that can be used more than once! Consult with your UMortgage Loan Originator to discover your buying power if you’ve already used your VA benefits to purchase a home in the past.

The benefits of buying a home with a VA loan can help make the homebuying process significantly more affordable over time for eligible borrowers. For more insight into these benefits, reach out to your UMortgage VA expert!

Why You Should Work With an Experienced VA Loan Originator

VA loans historically prove to be the best loan product on the market with the benefits they offer borrowers. However, there are plenty of misconceptions surrounding VA loans throughout the mortgage industry which might lead many mortgage brokers and real estate agents to try and lead VA borrowers away from VA loans.

UMortgage is a staunch advocate for military homeownership with leaders throughout the organization ensuring proper education on all things related to VA loans. When you work with UMortgage to purchase your home with a VA loan, you can trust that you’ll unlock a homebuying experience that puts your priorities first and possesses the knowledge necessary to utilize every benefit and get your loan closed with ease.

If you’re ready to unlock your VA loan benefits, fill out this form to get your homebuying journey underway!

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The BasicsDecember 18, 2024

How to Read Your Loan Estimate

Getting your loan estimate is an essential step in the homebuying or refinancing process. What’s even more essential, though, is knowing how to read your loan estimate. We’ve seen plenty of clients work with other lenders and get hit with extra fees that were hidden in plain sight on their loan estimates. Reading your loan estimate doesn’t have to feel overwhelming. This guide will break it down step-by-step so you can understand every detail and feel confident about your mortgage. What is a Loan Estimate? A loan estimate is a detailed document provided by your mortgage lender that outlines all the different details and fees that will go into your mortgage once approved. It details things like your rate, the type of loan you have, what your monthly payment will be, an estimate of your closing costs, and much more. Remember, these figures are estimates. They can change if your mortgage rate, home price, or down payment changes. It’s important to work alongside your loan originator to understand all of the costs that go into your mortgage to make sure you know what you’re paying for and get the best deal possible. The Different Sections of Your Loan Estimate When you receive your loan estimate, you’ll notice that it’s broken down into a few different sections. It’s important to know what these sections cover and what they mean to avoid hidden fees and make sure your mortgage is structured the way you want it to be structured.Below are some of the sections you should review in detail and the different sections you’ll see on each page. Page 1 - Loan Terms Page 1 of your loan estimate summarizes the basic details of your loan. This includes your loan amount, interest rate, monthly principal & interest, prepayment penalty, and balloon payment. At the very top of the page, you can see whether you locked your rate, the length of your loan, and the type of your loan. As you review this section, keep in mind the things you agreed upon with your loan originator. Things like whether you locked your rate, what type of mortgage you got, and whether or not your rate can or cannot increase after closing. Page 2 - Closing Costs Page 2 of your loan estimate will cover all of the fees that make up your closing costs. The only thing on this page that’s controlled by your loan originator is section A: origination charges. This section includes charges like application fees, underwriting fees, or points to ‘buy down’ your rate. These are the only fees your loan originator controls, so review them carefully to ensure they align with what you discussed. The other sections are the services that you can and cannot shop for, taxes and government fees, prepaid interest, taxes, and insurance, initial escrow payment due at closing, and other costs. At the bottom of this page, you can see your estimated cash to close. This is the amount of money you’ll need to pay to close your loan and get the keys to your new home. It combines the fees outlined on that page with your down payment and accounts for paid fees like a deposit, seller credits, lender credits, and other things that help lower your total closing costs. Page 3 – Additional Information Finally, on page 3, you can see a few pieces of information specific to your loan. At the top of your page, you can find information about your lender and loan originator. Beneath that are figures that you can use to compare this loan estimate with any others you receive. Finally, at the bottom of the page are details about your appraisal, loan assumption if you sell or transfer the property to someone else, late payment details, refinance qualification, and servicing. Servicing lets you know whether your lender will transfer servicing of your loan to someone else. This is important to know—if your lender intends to service the loan, you will pay that lender each month. If they plan to transfer service, you will need to pay a different lender. You can confirm all of those payment details with the lender at the time of your closing. How to Use Your Loan Estimate to Your Advantage Understanding every section of your loan estimate will help empower you to shop around for the most affordable mortgage available with terms that fit your short- and long-term financial goals. It will also protect you from different hidden fees that some lenders utilize to make a loan look more affordable than it actually is. The most common is discount points that allow a lender to give you a lower mortgage rate than the market allows. If you think your quoted rate is too good to be true, make sure to check section A on page 2. Discount points aren’t always bad, but it’s important to know whether you’re paying them and if it makes sense to pay discount points before you sign the dotted line. When you work with a UMortgage Loan Originator, you’ll unlock expert guidance to walk you through the entire mortgage process, including your initial loan estimate and your more detailed closing disclosure. You can also trust that you won’t get hit with any deceptive fees—just a mortgage that allows you to unlock the life-changing benefits of homeownership. Want to get started? Follow this link and fill out the form to get connected with a Loan Originator in your area today!

The BasicsOctober 11, 2024

Spruce Up Your Fall Open Houses With This Checklist

Autumn is the perfect time to create a warm, welcoming atmosphere that invites buyers to envision themselves living in the home they're visiting. As the weather cools and the leaves start to turn, real estate agents have a unique opportunity to set the mood for open houses by adding a touch of seasonal charm. With just a few simple touches, you can help potential buyers feel at home while also reminding them of important fall maintenance tasks. Here’s a checklist to give your open houses that cozy, autumnal vibe while also emphasizing the importance of seasonal upkeep. 1. Set the Mood with Fall-Scented Candles or a Simmer Pot When potential buyers walk into a home, the first thing they’ll notice is the atmosphere. Scents are incredibly powerful, so setting the right mood with fall-scented candles or a simmer pot with seasonal spices is a must. Opt for warm, inviting aromas like cinnamon, pumpkin spice, allspice, or cedarwood. These scents create an immediate sense of comfort and coziness. Tip: Choose subtle, natural fragrances to avoid overwhelming guests. You want the scent to be pleasant, not overpowering. For a fall-scented simmer pot, slice an apple, an orange, and a lemon and add to a saucepot. Sprinkle them with a tablespoon of nutmeg and ground ginger and add up to 5 cinnamon sticks. Cover with water, bring to a boil, and lower the heat to simmer for as long as desired. 2. Incorporate Seasonal Decor Fall is all about beautiful colors and textures, so why not bring those elements into your open house? You don’t have to go overboard—just a few tasteful touches will do the trick. Think decorative pumpkins, a simple wreath on the door, cozy throw blankets, and vases filled with autumnal foliage or wheat stalks. Tip: Neutral tones and natural materials, like wood and cotton, blend well with most interiors and help potential buyers focus on the home itself, not just the decor. 3. Create Cozy, Inviting Spaces Fall is the season of warmth and relaxation, so highlight areas of the home that encourage comfort. Stage the living room with plush pillows and soft throws or set up a reading nook with a comfy chair and a stack of books. If the home has a fireplace, make sure it’s clean and staged, and consider lighting it for the event (if it’s a gas fireplace) to showcase how the space could feel on a chilly evening. Tip: Dim lighting and warm, ambient lamps create a relaxed atmosphere that makes the space feel more intimate and inviting. 4. Highlight Outdoor Spaces with Seasonal Touches Don’t forget about the exterior! Add seasonal touches to the front porch or backyard to make outdoor spaces shine. A simple pumpkin arrangement or a few pots of mums can make a big difference. Clean up leaves and debris to ensure the yard looks well-maintained. Tip: Don’t forget to highlight the potential for cozy outdoor living. Adding a fire pit, some string lights, or a patio heater can inspire buyers to imagine gathering outside even in cooler weather. Seasonal Maintenance Tips to Share with Buyers In addition to creating a cozy atmosphere, fall is an important time for homeowners to tackle seasonal maintenance tasks. By offering these tips during an open house, you can help buyers think ahead and show that you’re a knowledgeable resource. 1. Turn Off Outdoor Spigots and Drain Hoses One of the most important fall tasks is to turn off outdoor spigots and drain hoses before freezing temperatures arrive. Remind buyers that failing to do so can lead to burst pipes, which can cause costly damage. Tip: Suggest purchasing insulated faucet covers to protect outdoor water sources during the winter months. 2. Clean Gutters and Downspouts Fallen leaves and debris can easily clog gutters and downspouts, leading to water damage when the rain starts. Make sure buyers are aware of this essential task to prevent overflow or ice damming during winter. Tip: A gutter guard can help reduce the amount of debris that accumulates, saving time and effort in the long run. 3. Trim Dead Limbs and Clean Up Spent Plants Fall is the perfect time to trim dead or damaged tree limbs to prevent them from breaking under the weight of snow or ice. It’s also a good idea to clean up spent plants and flowers from garden beds to give the yard a tidy appearance and prepare for next spring. Tip: Encourage buyers to save time in the spring by planting bulbs in the fall that will bloom early next year, like tulips or daffodils. 4. Inspect and Seal Drafty Windows and Doors With cooler weather coming, now is the time for homeowners to check windows and doors for drafts. Encourage buyers to inspect the home’s seals and weatherstripping to prevent heat loss and save on energy bills. Tip: Window insulation kits and door draft stoppers are affordable and effective ways to block cold air from seeping in. Adding fall vibes to your open houses is more than just setting the mood—it’s about helping potential buyers feel comfortable, welcome, and excited to imagine themselves living in the space. By combining seasonal decor and cozy touches with important homeownership tips, you’ll not only create a memorable experience but also position yourself as a trusted resource for your prospective buyers.

RefinanceSeptember 24, 2024

Your Guide to VA Interest Rate Reduction Refinance Loans (IRRRLs)

Understanding VA Interest Rate Reduction Refinance Loans (IRRRLs) If you're a military homeowner with a VA home loan, you may be able to lower your monthly payments through a VA Interest Rate Reduction Refinance Loan (IRRRL). A VA IRRRL, often called a "VA Streamline Refinance," is a simplified way for veterans to refinance their existing VA-backed home loan. This program allows you to replace your current VA loan with a new one, typically offering a lower interest rate or more stable payment terms. Below, we’ll outline the benefits you can unlock with an IRRRL, the requirements to meet before you qualify for an IRRRL, and what the process looks like to unlock these savings. Benefits of a VA IRRRL With an IRRRL, homeowners can unlock countless benefits to save money both immediately and in the long term. The primary benefit of an IRRRL is to replace your existing mortgage with one that has a lower interest rate, thus lowering your monthly mortgage payment and interest paid over the life of the loan. Unlike traditional refinances, IRRRLs require very minimal documentation, making the process move a lot quicker than a conventional refi. Homeowners can often get an IRRRL without paying any cash out of pocket by rolling closing costs and fees into the loan balance. This means you’re saving money from your first new payment. If you bought your home with a VA loan, you’re probably familiar with the VA funding fee. The good news with an IRRRL is that when you refinance, non-exempt borrowers only have to pay a 0.5% funding fee. This fee can also be added to the loan balance, meaning no money out of pocket at closing. Finally, a VA IRRRL doesn’t use any of your VA loan entitlement, ensuring that you’re set up for success if you have entitlement remaining when the time comes to buy your next home. How to Know When You’re Ready for an IRRRL Before you get an IRRRL, you need to check the three boxes outlined below to make sure that you maximize these benefits: 210 Days Since the First Payment on the Original VA Loan First and foremost, your closing date for your new loan needs to be at least 210 days after you made your first payment on the loan that you’re refinancing, and you must have made at least 6 consecutive monthly payments on that loan. These requirements are set by law to protect you from predatory lending practices. Qualify for a Rate at Least 0.5% Lower Than Your Current Rate Second, the interest rate you qualify for needs to be lower than your existing interest rate by at least 0.5%. Refinancing includes additional costs such as closing costs, title fees, and other associated charges. If the interest rate reduction is too small, the monthly savings might not be enough to recover these upfront costs in a reasonable time frame. By waiting for a 0.5% or greater rate reduction, you increase the likelihood that the savings from refinancing will recoup these costs relatively quickly. Recoup Your IRRRL Costs Within 36 Months That takes us to the final and most important requirement. To make your IRRRL worthwhile, you need to make sure you recoup these additional costs via your new, lower monthly payment in 36 months. These three requirements act in tandem with each other. Rates take a combination of economic conditions and time to drop by at least 0.5%. The more you reduce your interest rate, the faster you’ll recoup the savings unlocked with your IRRRL. With all things related to your mortgage, it’s important to work with a Loan Originator who will help you get the most out of your IRRRL and can find a solution that keeps more of your money in your pocket. That takes us right into step 1 of the IRRRL process: working with a loan originator who can guide you through your IRRRL without slamming you with unnecessary added fees. The IRRRL Process: Streamlined Refinancing Getting an IRRRL is generally simpler than a regular refinance. Below, we’ll outline the easy, 6-step process for getting an IRRRL: Find an experienced VA loan originator: By working with an experienced LO, you will ensure that you’ll receive honest and straightforward financial advice with a personalized IRRRL experience that provides terms that work best for you and you alone. Provide basic information: You'll need to certify that you previously occupied the home, but current occupancy isn't required. Skip the appraisal: In most cases, no new appraisal is needed for an IRRRL. Minimal credit checks: While the VA doesn't require a credit check, some lenders may still request one. No income verification: Unlike regular refinances, IRRRLs typically don't require income documentation. Close on your new loan: Once approved, you'll sign the new loan documents and start enjoying your lower payments. Remember, while IRRRLs are designed to be straightforward, you need to ensure that the new loan provides a tangible benefit, such as lower monthly payments or a more stable rate structure. Taking advantage of a VA IRRRL allows you to save money on your monthly mortgage payments while enjoying a simplified refinancing process. If you're interested in getting a free quote from a VA loan expert, fill out this form to get the ball rolling on your mortgage savings!