VA Loan

From 1st Colorado Mortgage Solutions

What is a VA Loan?

VA loans are designed to offer long-term financing to American Veterans.VA mortgage loans are issued by federally qualified lenders and are guaranteed by the U.S Department of Veteran Affairs. VA loans are offered exclusively to service members and certain military spouses for the challenges faced by veterans and their families.

VA Benefits

  • No down payment or Private Mortgage Insurance

  • 100% financing

  • FICO scores from 620

  • Lower interest rates

VA Requirements

  • A veteran is eligible for VA home loan benefits if he or she served on active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard after September 16, 1940, and was discharged under conditions other than dishonorable after either:
    • 90 days or more, any part of which occurred during wartime, or
      181 continuous days or more (peacetime).
  • 2-year Requirement: A greater length of service is required for veterans who: enlisted (and service began) after September 7, 1980, or entered service as an officer after October 16, 1981.
  • These veterans must have completed either:
    • 24 continuous months of active duty, or the full period for which called or ordered to active duty, but not less than 90 days (any part during wartime) or 181 continuous days (peacetime).

Must Have a Certificate of Eligibility (COE)

A COE verifies to the lender that the borrower is eligible for a VA loan. The VA determines eligibility, and the COE verifies length and character of service that qualifies the borrower for the housing advantage. Borrowers can start the VA loan process without the COE, but it is required when moving the loan through the steps toward funding. You can contact the VA directly to obtain a COE or through your lender.

VA Purchase

VA Benefits

  • No down payment or Private Mortgage Insurance

  • 100% financing

  • FICO scores from 620

  • Lower interest rates

F.A.Q. About VA Purchases

Is the VA loan the best way for 100% financing?

It’s fast becoming the only way for 100% financing as conventional loans have backed off considerably with high financing levels! The next best is the FHA loan program. But that requires a 3.5%* down payment.

Do I need a down payment?

One of the great benefits of using a VA loan is that you can obtain the loan with no money down. If the loan and sales contract are set up correctly with the seller covering the closing costs, then you essentially get a home loan for 100% of the sales price.

Do I have to pay my closing costs out of pocket?

It depends on how you structure the sales contract. You can have the seller pay as much as 6% of the borrower’s closing costs for a VA loan. Many people take advantage of this. Be sure to talk to your realtor about this seller concession.

What are the benefits of a VA loan vs. a conventional loan?

With a VA loan, you can get 100% financing without mortgage insurance. This alone can save hundreds of dollars a month. You may be able to get approved with flawed credit. If rates improve after you close on your VA loan, you may be eligible for a streamline refinance. There is no similar option with a conventional loan.

Are conventional mortgage rates better than VA rates?

Which rates are lower on any given day will vary. VA rates are comparable to conventional rates where the borrower has a great credit score and money for a down payment. The VA loan is the only way to get 100% financing these days.

If I have my certificate of eligibility, am I guaranteed to get a VA loan?

You are guaranteed for a VA mortgage once qualification is complete. The lender has to make sure you are able to support the mortgage payment for the home. The borrower must still qualify based on their income, assets, and their credit history.

What is the maximum VA loan amount?

The current maximum VA loan amount is $417,000. Even if you are eligible for a VA loan, you still have to qualify for the requested loan amount. This means that you may not be approved for the entire maximum loan amount. If you want to purchase a home that is more than $417,000, you would need to bring in additional money in the form of a down payment.

What is the VA funding fee?

The VA funding fee is what the VA charges to guarantee the loan. It is not a fee that has to be paid at closing out of pocket. This fee can simply be added to your base loan amount and is paid over the life of the loan. This fee basically takes the place of the mortgage insurance that you would normally find on a conventional loan.

I have a service related disability. Am I exempt from the VA funding fee?

Yes. If you are receiving disability income from the VA you should be exempt from any of VA’s funding fees. Be sure to tell your lender this; it can save you thousands of dollars. Visit the VA site for more information on disability funding.

I was turned down for a conventional loan. Can I possibly qualify for a VA loan?

Yes, it is still possible to qualify for a VA loan. Please contact one of our mortgage loan specialists to request a VA loan quote.

Will I have mortgage insurance?

One of the great benefits of the VA loan is that it enables you to borrower up to 100% of the home’s appraised value (up to $417,000) without having to pay mortgage insurance. The VA charges a funding fee that is much less expensive than mortgage insurance and isn’t part of your monthly mortgage payment.

Can I have two VA loans at once?

Yes. Ask David for more info on this one.

VA Streamline Refinance

Whatever the reason for refinancing your home, 1st Colorado Mortgage Solutions can help. Save thousands of dollars today on your current VA Loan by refinancing with a Streamline VA IRRRL refinance. The “IRRRL” stands for Interest Rate Reduction Refinance Loan and is only available to veterans/active service personal who used their VA eligibility when initially purchasing their home.

VA Streamline Refinance Benefits

  • No appraisal needed
  • No income verification
  • Standard underwriting process is omitted.
  • Skip up to two monthly payments plus the ability to receive your past loan escrow account balance back from previous lender
  • Ability to finance Energy Efficient Improvements into the loan

F.A.Q. About VA Streamline Refinance:

What is a VA Streamline Refinance (IRRRL)?

An IRRRL is the VA’s Interest Rate Reduction Refinancing Loan program and is referred to as a VA Streamline Refinance. With this loan, you refinance your existing VA mortgage into a new VA loan with a lower interest rate. Or if you have an adjustable rate mortgage you can replace it with a fixed rate loan.

Do I have to be eligible for a lower interest rate in order to qualify for a VA IRRRL?

Usually yes unless you have an adjustable rate mortgage. In order to qualify for an IRRRL, the VA requires that if you already have a fixed rate you should only refinance to a lower rate. But if you have an ARM (adjustable rate mortgage) you can refinance to a fixed rate even if it doesn’t lower your interest rate.

Do I have to pay my closing costs out of pocket?

It depends on how you structure the sales contract. You can have the seller pay as much as 6% of the borrower’s closing costs for a VA loan. Many people take advantage of this. Be sure to talk to your realtor about this seller concession.

Why would the VA allow me to get a higher rate if I have an adjustable rate mortgage right now?

With adjustable rate mortgages you may have an initial lower interest rate than a fixed rate mortgage for the first few years, but after the initial period your interest rate will adjust and you could be paying higher payments than you would with a fixed rate mortgage. The VA recognizes this and wants to encourage stability.

Must I use my current lender to refinance?

No. You can choose from any mortgage lender on the VA approved lender’s list. Make sure that you shop around for your VA streamline refinance. By researching several lenders you will get more offers and you can choose the best loan terms for you and your family. Be careful of lenders that try to deceive you into thinking they are the only lender that can finance a VA streamline refinance. The VA has a long list of approved lenders and you should shop around.

What should I look for in a lender?

There is no shortage of brokers/banks that offer a VA streamline refinance. But there is a wide variety in the quality. You should look for low lending fees and no origination fees on VA loans. If you are asked to pay an origination fee, you can do much better looking elsewhere.

Does the VA have any requirements for me to get an IRRRL?

You must be refinancing an existing VA-backed loan into a new VA-backed loan in order to use this program. You cannot receive any cash at closing. The loan amount can only increase slightly as a result of fees and closing costs being financed into the mortgage. However, with a low cost lender, there should be no trouble making sure there is very little out of pocket costs.

Do I have to go through a credit check and appraisal process again when refinancing?

The VA does not require this, because they have already approved you for the loan when you bought the house. However, lenders usually do require a credit check to make sure there are no new judgments or mortgage delinquencies which could disqualify you from being eligible for a VA streamline refinance.

Do I have to get another Certificate of Eligibility?

Since you already provided this when you bought the property, no additional proof of a Certificate of Eligibility is needed.

How can I refinance if I am using my eligibility already on my current loan?

As long as you are refinancing your VA-backed mortgage you can use this program to get more favorable loan terms. Since this is a VA refinance, you do not need to provide your Certificate of Eligibility again.

What out-of-pocket expenses will I have when refinancing?

None. VA allows all closing costs of refinancing to be financed into your new mortgage. Your lender may have some fees, but you will need to ask to find out what they expect you to pay out of pocket, if anything.

What fees does the VA charge for a streamline refinance?

The VA only requires a nominal funding fee of the amount of your new loan. There are no other fees involved with the VA.

I am exempt from paying the VA funding fee. Does this apply on an IRRRL?

Yes. As long as you are still classified as 10% disabled or more you should be exempt from any of the VA’s funding fees.

I am exempt from paying the VA funding fee. Does this apply on an IRRRL?

You are allowed to include up to $6,000 in your refinancing loan for the purpose of energy efficient home improvements. Any other home improvements are not eligible.

Can I take cash out with a VA streamline refinance?

No. An IRRRL from the VA is only for the purposes of receiving a better interest rate on your mortgage loan in order to save you cash over the life of the loan.

What is a VA Cash-Out Refinance Loan?

This is the type of refinance that the VA offers for those veterans who want to take cash out of the equity in their homes. You must be refinancing an existing VA loan in order to use the VA cash-out refinancing program.

Can I convert from a conventional loan to a VA Loan?

Yes, eligible veterans who currently have a conventional loan can still look at refinancing into a VA loan. This is not the same as the VA streamline refinance mentioned elsewhere. If the circumstances are favorable, the borrower can use their VA eligibility to refinance.

If the borrower has an adjustable rate mortgage (ARM) or a high fixed interest rate, then converting can be worth looking into. The biggest hurdle in changing to a VA loan is there is the VA funding fee of 2.2%* on this type of refinance. However, if the borrower is exempt from the VA funding fee this can make the refinancing even more lucrative.

VA 100% LTV Cash-out Refinances

Whatever the reason forrefinancing your home, 1st Colorado Mortgage Solutions can help. VA Cash-out Refinances allow Veterans to tap into the equity in their home to consolidate bills, payoff higher rate mortgages or just to obtain cash for other projects.
The Department of Veterans Affairs has a broader classification of what constitutes a cash-out refinance than other types of mortgage financing. The VA considers any refinance that pays off a non-VA mortgage or pays off a VA mortgage plus any other debt to be a cash-out refinance, regardless of whether the Veteran receives cash at closing or not. Essentially this means that the VA will call any refinance, a cash-out refinance, unless it is a VA streamline refinance.
Technically, the VA does allow a Veteran to take 100% of the appraised value with a cash-out refinance to pay off any mortgages, any other non-mortgage related debt and to receive cash at closing. While these might be the base VA underwriting guidelines, practically all lenders have their own requirements on top of the base VA guidelines. These additional underwriting guidelines, often called Underwriting Overlays, create additional restrictions that put limits on what the VA will allow.
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Cash-out Refinance Guidelines

  • 620 Minimum Fico Score
  • An explanation of the use of the cash proceeds is required.
  • A cash-out refinancing loan is a VA-guaranteed loan that refinances any type of lien or liens against the secured property. The liens to be paid off may be:
    • current or delinquent, and
    • from any source, such as
      • tax or judgement liens, or
      • VA, FHA, or conventional mortgages.
      • Existing lien of a least $1 required. Property may not be owned free and clear.
  • One Unit Properties
    • For limited-cash-in-hand transactions, the maximum loan amount is limited to 100% LTV. The funding fee may be added to the maximum loan amount. 100% LTV transactions may include the following in the loan amount.
      • Liens (first and second),
      • closing costs,
      • preapaids,
      • debt consolidation*, and
      • cash-in-hand to borrow up to the lessor of 1% or $1,000.
      • NOTE: If property listed prior to the application, must be off the market at least 6 months before the application date
    • For unlimited-cash-in-hand transactions, the maximum loan amount is limited to 90% LTV. The funding fee may be added to the maximum loan amount. 90% LTV transactions include the following in the loan amount:
      • Liens(first and second),
      • closing costs,
      • prepaids,
      • debt consolidation*, and
      • cash-in-hand to borrow with no limit provided within required maximum VA loan amount.
    • NOTE:If property listed prior to the application, must be off the market at least 6 months before the application date. *If revolving debt will be paid at close, the most recent statement is required unless the last reported month on the credit report is within 30 days of the note signing.
    • No limit on the allowed CLTV.
  • 2-4 Unit Properties
    • Cash-out transactions that are not allowed on 2-4 unit properties:
      • Debt consolidation that involves non-mortgage debt
      • Unlimited-cash-in-hand to borrower
    • No limit on the allowed CLTV.
    • NOTE: If property listed prior to the application, must be off the market at least 6 months before the application date.
    • The veteran must have sufficient available entitlement for the loan. If an existing VA loan on the same property  will be paid off by the refinancing loan, the entitlement used for that existing loan can be restored for purposes of obtaining the new loan.
    • The veteran must certify that he or she intends to personally occupy the property as his or her home.

What is a VA Renovation Loan?

It isn’t always easy finding a home that is move-in ready, and when you do, sometimes it is out of your price range. The VA renovation loan allows qualifying Veteran, servicemembers, or qualified spouses to receive funds to make improvements in the home. The VA renovation loan is one of the most innovative loans and helps veterans meet property standards. This loan is a VA guaranteed loan that allows home buyers to fund up to $35,000 in repairs and improvements

What is a VA Loan Guidelines:

  • 620 Minimum Fico Score
  • Primary residence only
  • Includes minor and non-structural repairs
  • Accessibility upgrades allowed (ramps, rails, etc.)
  • One or two unit homes
  • Purchase and refinance options
  • No renovation consultant requirement

Since VA renovation loan is in place to make homes livable while meeting VA standard, you cannot use the renovation loan to change every aspect of the home. Only repairs renovations and replacements that are approved by the VA are allowed.

Who can get a VA renovation loan?

Anyone who is VA eligible can get approved for a renovation loan. Current VA eligible homeowners are also able to receive this loan. Borrowers will need to meet the income, asset, and minimum property standard requirements of VA loans. To use this loan program as a refinance, homeowners must still follow the same improvement restrictions as home buyers.

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