VA home Loans

Minnesota

Veterans, active-duty service members, eligible surviving spouses, and their families are in a unique position when trying to buy a home in Minnesota. VA loans are backed by the Department of Veteran Affairs and offer these borrowers an opportunity to secure a home without going for a conventional loan.

VA loans offer more favorable terms to veterans and other eligible individuals, allowing them to feel less stressed financially when buying a home. If you know you’ll be eligible for a VA loan but aren’t sure where to start, here’s everything you need to know about them, their benefits and how to apply.

Learn About VA Loans

VA Home Loan Benefit for Minnesota Borrowers

Those eligible for the VA home loan program often don’t realize all the benefits that they can take advantage of. For most people who are eligible, the VA home loan benefits far exceed the benefits of going with a conventional loan. VA home loan specialists can help you better understand the benefits, but let’s dive into them briefly.

No Down Payment Required

VA loans are known for not requiring borrowers to have a down payment on the property they’re trying to buy. Most lenders that home buyers work with when they’re going with a loan outside of a VA mortgage will require around 3-5% for a down payment.

For most people, the down payment is a huge hurdle to becoming a homeowner. Having a VA loan that doesn’t require a down payment will help the borrower save that money for other bills, home improvements, mortgage monthly payments, and more. Being able to finance 100% of a home’s value in Minnesota’s competitive market is a huge draw to a VA loan.

No Private Mortgage Insurance Premiums

Another way VA loans help people save money during the home buying process is by not requiring private mortgage insurance (PMI) premiums. Most conventional loan lenders will require a buyer get PMI when they can’t provide 20% of the home’s value for the down payment.

Since most VA loans don’t require a down payment, lending offices that work with eligible parties won’t require this additional monthly cost. When you can eliminate this requirement, you’ll see a large reduction in the monthly payment you’ll have to make when owning a home.

Competitive Interest Rates

Interest rates are a part of taking out any loan, even VA loans. Interest rates can be one of the most difficult things to deal with when borrowing because the higher the rate, the more financial strain it can place on buyers.

When taking out a VA loan, you’ll have competitive interest rates. This means that your VA mortgage will likely be less than if you were to go to a lender and look at conventional home loans. That being said, your VA home loan eligibility affects what your end interest rate will be.

Flexible Credit Requirements

To be VA home loan eligible, the lender will run your credit score. While VA home loans in Minnesota don’t have solid credit score requirements, they do prefer anything over 620, which is far more flexible than when dealing with other types of home loans.

The flexibility of a VA mortgage helps make owning a home more accessible and affordable to our veterans, active military, and surviving spouses. Of course, the higher your credit score, the better when it comes to VA loans, but a lower one doesn’t immediately disqualify you from getting a VA loan. We work with some lenders who will consider credit scores as low as 500.

No Prepayment Penalties

The main goal of the Department of Veterans Affairs with the VA home loan program is to make buying and owning a home as accessible and affordable as possible. Making sure they don’t have any prepayment penalties for borrowers fits into this goal.

If you have the money to pay off your VA loan before the loan term is up, you can do so without repercussions. You can enjoy making additional payments to the principal of the loan to pay it off early. Once you’re done paying off your loan, you can enjoy more financial freedom to do the things you love, like travelling.

Assistance for Struggling Borrowers

Since they pride themselves on helping veterans, active duty service members, and surviving spouses secure housing, the Minnesota VA has programs that make it as easy as possible.

A VA funding fee is a one-time fee that all borrowers must pay to alleviate the impact of VA loans on public funds.

VA funding fees for 2024 amount to:

2.15% for a down payment between 0% and 4.99% (for first-time VA loan users)
3.3% for a down payment between 0% and 4.99% (for all subsequent uses)
1.5% for a down payment between 5% and 9.9%
1.25% for a down payment of 10% or more

Some borrowers are exempt from paying funding fees:

Veterans receiving or eligible for service-connected disability compensation
Borrowers with pending pre-discharge claims
Borrowers receiving Dependency and Indemnity Compensation
Purple Heart recipients

Eligibility Requirements for VA Loans

Just like with a conventional home loan, a VA loan has very specific eligibility requirements. Requirements for a VA loan often vary depending on your military status, whether you qualify as an eligible spouse, meet the qualifications for an active duty member, and more.

The eligibility requirements for a VA loan are:

90 days of consecutive active duty during wartime or 181 days of consecutive duty during peacetime
Six years of service for those in the National Guard or Army Reserves
Eligible surviving spouses

Those are the main requirements that set a VA loan apart from others, but then you’ll still need to provide income and other financial information, credit reports, and other standard loan application documentation.

Obtaining a COE (Certificate of Eligibility) is crucial to ensuring you’re eligible for a VA loan. A COE provides proof that you meet the verification requirements determined by the Department of Veterans Affairs. Pride Lending can help you obtain a COE if necessary.

The VA Loan Process

The VA home loan process isn’t very different from a conventional one, but there are a few extra steps. The VA home loan process looks something like this:

Get your COE: The Certificate of Eligibility verifies a borrower's ability to get a VA Loan. You’ll need to provide proof of service to obtain a COE. Veterans often need to provide their DD214, their discharge or separation papers. A statement of service is necessary if you’re on active duty, and it must include information such as your name, social security number, and the day you started service. Pride Lending can help you obtain your COE, making the process seamless.
Check Finances: Carefully examine your finances before contacting mortgage brokers. You should know how much debt you pay monthly and how much you can afford for expenses such as mortgage insurance and payments. Consider how much you typically spend on necessities like car insurance and utilities. An expert at Pride Lending will work with you to help you determine your debt-to-income ratio.
Choose a Lender: Working with a specialist like Pride Lending is crucial. Pride Lending can help connect you with lenders who can help you obtain home ownership. Pride Lending specializes in helping underserved communities, including the LGBTQ+ community.
Shop for a House: Local real estate agents can help you find a house that meets your needs. Carefully consider how many bedrooms and bathrooms you need in a home. Make sure the house is in a neighborhood you enjoy, and ensure it’s within your budget.
Purchase Agreement: The buyer and seller sign a legally binding contract that outlines the terms of the sale. It’s common to include what repairs the seller must make before the purchase is finished. Many agreements outline the deposit details, including why the deposit may be refunded. These contracts protect the buyer and seller.
Inspection and VA Appraisal: An inspection is often recommended because inspections tell buyers the home's condition, including repairs that must be made. These are only sometimes required, but they are advised to ensure buyers know the condition of the home. Buyers must get a VA appraisal to get approved for a VA loan. Your lender or mortgage broker can help you find an independent VA appraiser to examine the property. The property must meet minimum requirements to be approved for a loan. This ensures buyers don’t accidentally purchase 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. Lenders also want to see how much debt you have.A lender will determine your debt-to-income ratio, look at your credit score, and evaluate your finances to determine your eligibility 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 in Minnesota

Other significant components are Minnesota VA loan limits and the VA funding fee. Most loans have a limit to how much they can offer each borrower, but with VA loans, most limits have been removed for veterans. As long as you have full entitlement, you likely won’t have a loan limit, but with partial entitlement, you might.

As for the VA funding fee, this is a one-time charge that helps offset the cost of the VA loan program to taxpayers. How much you’ll have to pay for the funding fee varies from state to state and it’s also based on the type of VA loan you take out as well as any down payment amount you can afford.