VA home Loans
Texas
VA loans are mortgages created for veterans, active-duty service members, and National Guard members. As the VA guarantees these loans, private lenders can provide eligible borrowers with more favorable terms, including no down payment requirement, competitive interest rates, less stringent requirements, and no Private Mortgage Insurance.
As the Department of Veterans Affairs is required to treat all marriages equally, Texas VA home loans are also available to LGBTQ+ surviving spouses of veterans and military members.
VA loans are primarily used for purchasing a primary residence, although it’s possible to buy investment properties with up to four units if the borrower plans to live in one of them.
VA Home Loan Benefit
At 1.4 million, Texas has the largest veteran population in the country. In Texas, VA home loans help eligible veterans achieve homeownership by offering unique benefits, such as no private mortgage insurance, more competitive interest rates, no down payment requirements, and more lenient credit and income requirements.
No Down Payment Required
One of the top VA loan benefits is the lack of down payment requirements. Military personnel can purchase a home with a 0% down payment if they fulfill other eligibility criteria.
While this is true, a down payment does improve the interest rate and other conditions as it reduces the risk for the VA lender.
No Private Mortgage Insurance Premiums
A VA home loan is backed by the government, so unlike a conventional loan, it does not require PMI. While you do need to pay a one-time funding fee at closing, your mortgage payments could be lower by as much as $548 a month, which is the average Private mortgage insurance in Texas.
Competitive Interest Rates
Another VA loan benefit is the potential for lower interest rates, which greatly reduces your monthly payment and helps you build equity faster because more of the monthly payment will go toward the principal loan amount.
Mortgage companies, banks, and other lenders can offer lower rates to eligible borrowers since the VA guarantees the loan. This also makes buying your dream home more attainable since the median Texan home will cost $357,700 in 2024, which is not a small price to pay for military service members or anyone else.
Flexible Credit Requirements
While each lender’s credit requirements vary, it’s possible to get a VA mortgage with less-than-perfect credit, little financial history, and a debt-to-income ratio that can go higher than 41%. With a VA loan, you can receive much more favorable terms compared to conventional loans.
No Prepayment Penalties
VA lenders cannot charge prepayment penalties, meaning veterans can pay their home loans earlier without losing money. However, although paying off a VA loan early doesn’t come with penalties, borrowers risk losing tax deductions on mortgage interest.
Assistance for Struggling Borrowers
Texas VA loans come with the added advantage of assistance programs that help borrowers avoid foreclosure. Here are the main assistance options for veterans or active-duty service members:
Repayment plans – You create a repayment plan with your VA lender to pay the debt back.
Special forbearance – Your monthly payment is suspended or reduced during a period of three or four months.
Interest Rate Reduction Refinance Loans - You refinance your loan and modify it to reduce your monthly mortgage payment.
The Veterans Affairs Servicing Purchase (VASP) program – Starting in mid-2024, the VASP program helps you keep your home, as the VA will buy the modified loan from your lender.
Eligibility Requirements for Texas VA Loans
To receive a VA loan, you must meet the following requirements:
As an active-duty service member or a veteran, you have served 90 continuous days in war or 181 days during peacetime.
You have been discharged under conditions other than dishonorable.
If you’re a National Guard or Reserve member, you are eligible after six years of service or 90 days of active-duty service (30 consecutive days minimum).
As a surviving spouse, you are eligible if you have not remarried and your spouse died on active duty or due to service-connected disability.
Many LGBTQ+ Texas veterans have also served during Don’t Ask Don’t Tell and have been discharged for their sexual orientation. To be able to exercise your rights fully, you can apply for a discharge upgrade with the United States Military.
Certificate of Eligibility
The most important document for getting a VA loan is the Certificate of Eligibility (COE). The COE has three purposes:
Verifying eligibility
Validating a VA loan application
Determining the level of entitlement
You need the Certificate of Eligibility whether you are a qualified spouse, veteran, or military personnel. You can get it online on 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
Obtaining VA loans is not as complex once you break the process down into steps. We will outline the process below, but if you have any questions about obtaining a VA loan, our mortgage officers are at your disposal.
Here’s what the process looks like:
Obtain your Certificate of Eligibility - The first step towards getting a VA loan is getting your COE. You can get it online, through your lender, or by mailing it to your regional loan center.
Prequalify for your loan - While this is not obligatory, it can help you understand your house-hunting budget. Contact your VA-approved lender and start a prequalification process.
Start pre-approval – Fill out the loan application and submit documentation on your financial health. This includes proof of income, proof of employment, assets, and debts.
Receive a pre-approval letter – After reviewing your finances, the lender will accept or reject your application. If they accept, they will send you a pre-approval letter which will help you prove your financial capabilities to sellers.
Find a home and sign a purchase agreement – With the pre-approval letter in hand, you can now look for a home with more confidence. Once you find it, sign a purchase agreement.
VA appraisal and underwriting – VA home loans, like other loans, require an appraisal to ensure the home is worth the price. The underwriter will then review the documentation and make the final decision to accept or reject your VA loan.
Closing on your loan – All that’s left to do is review your Closing Disclosure document, sign all the documentation, pay the closing costs, and take the keys to your new home.
VA Loan Limits and Funding Fees
VA loan limits have been removed for most veterans, meaning most active service members and other borrowers don’t have a maximum loan amount for their VA loans.
However, borrowers need to pay a one-time funding fee expressed as a percentage of the total loan amount to alleviate the burden on taxpayers. Here is how the funding fee varies in 2024.
Borrowers who are using a VA loan for the first time will pay:
2.15% for a down payment between 0% and 5%
1.5% for a down payment between 5% and 9.9%
1.25% for a down payment of 10% or more
For each subsequent use, borrowers will pay:
3.3% for a down payment between 0% and 5%
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 a funding fee:
Borrowers who are receiving or eligible for compensation for a service-connected disability
Borrowers with a pending pre-discharge claim
Borrowers receiving Dependency and Indemnity Compensation
Purple Heart recipients