This is a tricky question and one that we, as VA Loan Specialists, have a hard time answering simply. The best answer is, in fact, “it’s complicated”. So, with that in mind, let’s take some time to see how the rules are applied. Thankfully, the VA has recently posted clarifications and examples to make it easier on all of us.
The first thing that we need to understand is that the VA now adjusts the maximum loan amounts by county thanks to recent changes intending to support the ‘Jumbo’ loan market that lenders have shied away from in the past year. Some counties may be at the national limit of $417,000 but if housing prices are higher than average, they may have a higher limit. Here in Honolulu, the limit is currently $793,750 but will adjust downward to $721,050 at the beginning of the year. Remember, that is the max for 100% financing, and that the VA program will actually allow for loan amounts greater than that as with a minimal down payment.
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One of the main reasons we started HawaiiVALoans.com was that we found that there were so many misconceptions about VA Loans. Whether it was the broker/lender giving the wrong information or Veterans finding outdated information from non-reliable websites – it was evident that for whatever reason, the facts about VA Loans were getting distorted.
Over the years – we’ve heard it all. I thought it would be a good idea to debunk the 5 most common myths we’ve heard about VA Loans:
1. “I can only use my VA Loan eligibility once”
This is by far the most common myth we hear – but this is definitely false. There is no limit on the number of times you can use a VA Loan. Now if you’ve had a VA loan previously, you need to have had your entitlement restored by paying off the mortgage (pay off balance, sell the property, refinancing into a conventional mortgage) in order to get another VA Loan. There is a possibility in which you could have more than one VA Loan outstanding at a time – but only if you didn’t use your entire entitlement on the purchase of the first property. Now if you’ve already used a VA Loan previously, you just have to keep in mind that the cost of the VA funding fee is increased from 2.15% to 3.3% (no down payment) for every subsequent use of a VA Loan. If you’ve accumulated equity on the sale of your first home, and you can put a 5% down payment the next time, your funding fee can be reduced from 3.3% to 1.5%.
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The first step in obtaining a VA Loan is to determine whether or not you are eligible. This determination is made based upon the type of service (active duty or reserve) and the time frame.
If you enlisted or entered service before September 7th, 1980 you may be eligible for the VA Home Loan program if you serced at least 90 days in wartime or 181 days in peacetime. If you enlisted after Setpember 7th 1980 or entered service as an officer after October 16th 1981, you would have needed to serve at least 24 consecutive months (or the full period called to active duty not less than 90 days in peacetime or 181 days in wartime) to qualify for VA Loan benefits.
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3 Minute Thursdays: What is Prepaid Interest?