General and Frequently Asked Questions About VA Home Loans

1) What is a VA Home Loan?
2) What are the benefits of a VA home loan?
3) Does my VA eligibility guarantee I will get a new home loan?
4) How do I get a VA Home Loan?
5) What will you look at when I apply for a mortgage?
6) How much time does it take to close?
7) May a veteran join with a non veteran who is not his or her spouse in obtaining a VA loan?
8) What will my mortgage payments include?
9) What closing costs will I have to pay?
10) What documents do I need to provide ?
11) What are discount points and should I pay them?
12) How do I know how much house I can afford?
13) What is the difference between a fixed-rate loan and an adjustable-rate loan?
14) How do I know which type of mortgage is best for me?
15) How much cash will I need to purchase a home?

1) What is a VA Home Loan?
VA guaranteed home loans are made banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home which must be for their own personal occupancy. The guaranty is substituted in place of a down payment which a lender would normally require to get a great rate.  
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2) What are the benefits of a VA home loan?

• Buyer informed of reasonable value.
• Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5% and exemption for veterans receiving VA compensation).
• Closing costs are comparable with other financing types (and may be lower).
• No mortgage insurance premiums
• An assumable mortgage.
• Right to prepay without penalty.
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3) Does my VA eligibility guarantee I will get a new home loan?
No, VA cannot make a lender do a loan that would violate their own policies. Lenders must abide by VA credit and income standards as well as their own. If a lender is unwilling to make a loan to you, we can only suggest that you try other lenders.
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4) How do I get a VA Home Loan?
Here are the steps: Find a home and discuss the purchase with the seller or selling agent. Get a signed purchase contract conditioned on approval of your VA home loan. Then you select a lender, present them with your Certificate of Eligibility if available, and complete a loan application.  The lender can also obtain a Certificate of Eligibility on your behalf.The lender will develop all credit and income information. They will also request VA to assign a licensed appraiser to determine the reasonable value for the property. A Certificate of Reasonable Value will be issued. The lender will let you know the decision on the loan. You (and spouse) attend the loan closing. The lender or closing attorney will explain the loan terms and requirements as well as where and how to make the monthly payments. Sign the note, mortgage, and other related papers.

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5) What will you look at when I apply for a mortgage?
We will consider many factors in evaluating your loan application, but we will mainly focus on:

• Income and Debt: How much money you make and what other bills you have to pay helps us determine whether you can afford to make mortgage payments.
• Assets: We need to make sure you have enough money to cover the costs of buying a home.
• Credit: Whether you’ve met other financial obligations helps us predict whether you will repay your mortgage.
• Property: The home you want to buy has to be worth enough to act as collateral for the mortgage.
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6) How much time does it take to close?
Average loan processing time periods fall between 21 & 45 days. To properly write a purchase contract, you will need to include a closing date, and that date should be coordinated with your real estate agent. We will evaluate your loan and anticipate:

• How quickly do you want to close?
• Are there any obstacles that could possibly prolong a closing?
• How long after final application approval will the loan close?
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7) May a veteran join with a non veteran who is not his or her spouse in obtaining a VA loan?
A: Yes, but the guaranty is based only on the veteran’s portion of the loan. The guaranty cannot cover the nonveteran’s part of the loan. Consult lenders to determine whether they would be willing to accept applications for joint loans of this type. Lenders that are willing to make these types of loans will likely require a down payment to cover risk on the un-guaranteed, nonveteran’s portion of the loan. Unlike other loans, the lender must submit joint loans to VA for approval before they are made.
Both incomes can be used to qualify for the loan. However, the veteran’s income must be sufficient to repay at least that portion of the loan related to the veteran’s interest in (portion of) the property and the nonveteran’s income must be adequate to cover the rest.
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8) What will my mortgage payments include?
For most borrowers, each monthly mortgage payment goes toward the following:

• Principal: the total outstanding balance of the loan (interest not included).
• Interest: the cost of borrowing money.
• Taxes: Levied on the property by the local government.
• Insurance: protects the owner and the lender from the losses caused by fire and natural hazards.
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9) What closing costs will I have to pay?
Closing costs vary (generally 2-3%) based on a number of factors. You will be provided an estimate of your closing costs soon after your application has been received. Closing costs depend on the mortgage type, the mortgage program, purchase contract, and location, but closing costs usually include the following:

• Lender Fees: Included in these are appraisal fees, credit report fees, origination points and discount points.
• Third Party Fees: Charges for services not provided by Old Virginia Mortgage, Inc. – Virginia Beach Branch , including settlement fees, title insurance and attorney’s fees.
• Prepaid Items: Certain mortgage costs must be paid to Old Virginia Mortgage, Inc. – Virginia Beach Branch in advance. The most common of these are pre-paid interest, hazard insurance and deposits to set up an escrow account.
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10) What documents do I need to provide ?
Other documentation may be required depending on your loan situation, but the most common requirements are:

• Pay stubs covering the most recent 30 day period.
• W-2 forms for the most recent 2 years.
• Most recent 2 months bank statements (all pages) for all bank accounts.

• Photo ID and evidence of Social Security Number.
• Tax returns for the most recent 2 years will be required for self employed clients.
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11) What are discount points and should I pay them?
Discount points are equal to 1% of the loan amount. Therefore, 2 points on a $100,000 loan cost is $2,000. This is often called “buying down” your rate. The more points you pay, the lower the interest rate. In addition, discount points are tax deductible. So does paying points make sense for you? The answer depends primarily on how long you plan to stay in your home. First, we’ll let you know how much lower your monthly payments will be if you pay point. Then, we will calculate how long it will take for those monthly savings to add up to the cost of the points. If it would take five years to break even and you’re planning on staying in your home for at least ten years, paying discount points may be a smart move.
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12) How do I know how much house I can afford?
Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford.
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13) What is the difference between a fixed-rate loan and an adjustable-rate loan?
With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.
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14) How do I know which type of mortgage is best for me?
There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. We can help you evaluate your choices and help you make the most appropriate decision.
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15) How much cash will I need to purchase a home?
The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:
Earnest Money: The deposit that is supplied when you make an offer on the house
Down Payment: A percentage of the cost of the home that is due at settlement
Closing Costs: Costs associated with processing paperwork to purchase or refinance a house.
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