VA home Loans
Michigan
VA home loans are provided by banks, mortgage companies, and other private lenders to military veterans, active-duty service members, and eligible surviving spouses of veterans. They are guaranteed by the Department of Veterans Affairs, which reduces the risk for lenders, allowing them to offer more favorable terms to homebuyers.
Compared to conventional mortgages, they offer more unique benefits for veterans and their families, and due to federal law, eligible surviving spouses of veterans have the right to VA loans, regardless of the spouses' sexual orientation.
VA Home Loan Benefit
As the VA provides a Home Loan Guaranty benefit, you can get a VA mortgage loan without private mortgage insurance, a down payment, or prepayment penalties. Other VA benefits include more favorable interest rates, lenient credit requirements, and payment assistance programs.
No Down Payment Required
A lack of savings for a down payment frequently prevents people from starting the home-buying process, with the average down payment in Michigan reaching a hefty $36,720. This doesn’t have to be the case with a VA home loan — you can put down 0% and still purchase a home.
No Private Mortgage Insurance Premiums
Since the VA guarantees the loan, you don’t need to pay expensive PMI. This cuts down your monthly mortgage payment considerably. Numbers show Michiganders would save $375.10 each month on average without mortgage insurance.
Competitive Interest Rates
With median home values hitting $242,000 in the Great Lake State, LGBTQ+ veterans can benefit from competitively low interest rates. VA loans generally have lower rates compared to conventional mortgages, making homes more affordable to veteran families.
Flexible Credit Requirements
While good credit does get you more favorable terms, the VA doesn’t have any credit score or debt-to-income requirements. Instead, they vary by lender, with typical VA loan requirements including a score of 620, but many lenders will go as low as 500. Many lenders prefer a 41% DTI, but there is not a cap on this number. Lenders can, and often do, go above this number in certain situations. It’s crucial to work with a lender like Pride Lending to determine if you’re eligible for a VA loan.
No Prepayment Penalties
Unlike some conventional mortgages, veterans can pay off VA loans as early as they like without any prepayment penalties. In fact, lenders don’t have the right to charge you a prepayment penalty per their agreement with the VA.
Assistance for Struggling Borrowers
Together with the lender, the VA helps veterans avoid foreclosure and other negative financial implications by offering several financial tools:
Repayment plans
Special forbearance
Interest Rate Reduction Refinance Loans
The Veterans Affairs Servicing Purchase (VASP) program
Eligibility Requirements for VA Loans in Michigan
Military veterans and their families must meet the following qualifications to receive a VA loan:
Eligible veterans and active-duty service members must have served 90 consecutive days in war or 181 days during peacetime.
Having been discharged under conditions other than dishonorable.
National Guard and Reserve members are eligible after six years of service or 90 days of active-duty service, with at least 30 consecutive days.
Surviving spouses are eligible if they haven’t remarried and their spouses died on active duty or due to service-connected disabilities. Spouses may be eligible if their spouse is on active duty but listed as MIA or a POW for at least 90 days.
For the purposes of a VA home loan, any discharge other than dishonorable will do. However, LGBTQ+ veterans who have served during Don’t Ask, Don’t Tell and have been discharged for their sexual orientation can still apply for a discharge upgrade.
Certificate of Eligibility
To verify your eligibility for a VA mortgage loan, you must get a Certificate of Eligibility (COE). You will need it to submit a loan application, and its contents will determine your level of VA entitlement.
You need the COE whether you are a surviving spouse or a veteran, and you can get it through the VA portal, through your VA lender, or by completing the VA Form 26-1880 and mailing it to your regional loan center.
The VA Loan Process
Get your COE: The Certificate of Eligibility verifies a borrower's ability to get a VA Loan. Pride Lending can help you obtain your COE, making the process seamless.
Check Finances: Determining a budget is crucial to ensuring you know how much house you can afford. Examine how much money you have after necessities, such as utilities. An expert at Pride Lending can help you learn more about your debt-to-income ratio and finances.
Choose a Lender: Work with a lender like Pride Lending, a VA loan specialist in the area. Your lender must understand how VA loans work, can guide you through the requirements, and maximize your benefits.
Shop for a House: Next, it’s time to find a house you’d like to purchase. Work with local real estate agents or check out online listings to find houses within your price range. Make sure your home meets your personal requirements, such as how many bedrooms it should have.
Purchase Agreement: A purchase agreement is a legally binding contract between the buyer and seller. These contracts outline the terms of the sale to protect the buyer and seller. For example, a buyer may put a clause in the contract in case the appraisal value is lower than expected. Many contracts include an Earnest Deposit Clause, which details how much the buyer will put down as a deposit and terms for refunding the deposit, such as if the buyer doesn’t make certain repairs.
Inspection and VA Appraisal: An inspection is often recommended because it gives an in-depth look at the home’s condition. Buyers can negotiate a more favorable price if they have to spend a significant amount of money on repairs. A VA appraisal is required to obtain a VA loan. An independent VA appraiser will look at the property’s condition and ensure it meets the minimum property requirements to ensure veterans or their families don’t wind up with an unsafe property.
Complete Underwriting: Underwriting is the process lenders use to evaluate a borrower’s financial situation. You’ll need to submit proof of income, expenses, and assets. A lender will determine your debt to income ratio, look at your credit score, and evaluate your finances to determine if you are eligible for a loan.
Closing: Finally, you attend the closing and sign all necessary papers. The funds are sent to escrow, the loan closes, and you receive the keys to your new home!
VA Loan Limits and Funding Fees
VA loan limits have been removed for most veterans, meaning their maximum loan amount won’t be capped.
However, when using a VA loan, you must pay a one-time funding fee to the Department of Veterans Affairs.
The fee changes yearly and varies depending on your service history, first-time VA loan use, and down payment.
If you’re getting a VA loan for the first time, you will pay:
2.15% for a down payment between 0% and 4.99%
1.5% for a down payment between 5% and 9.9%
1.25% for a down payment of 10% or more
Subsequent uses have a different fee structure:
3.3% for a down payment between 0% and 4.99%
1.5% for a down payment between 5% and 9.9%
1.25% for a down payment of 10% or more
You will be exempt from paying a funding fee if you are:
Veterans receiving VA compensation for service-conencted disabilities
Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay
Veterans who are rated by VA as eligible to receive compensation as a result of predischarge disability examination and rating or on the basis of a pre-discharge review of existing medical evidence (including service medical and treatment records) that results in issuance of a memorandum rating
Veterans entitled to receive compensation, but who are not presently in receipt because they are on active duty
Surviving spouses of veterans who died in service or from service- connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan is considered)