VA LOANS IN NORTH DAKOTA & MINNESOTA – HOW DO THEY WORK?
27 Apr, 2021
VA loans are a great option for veterans (or current military members) with an honorable discharge and the desire to buy a home.
Despite their name, the VA doesn’t underwrite or fund the loans – it’s all done by VA approved lenders. Understanding the process, how they work, and who qualifies can get you well on your way to owning a home in North Dakota or Minnesota faster than you thought.
What are VA Loans?
VA loans are loans guaranteed by the VA. Local lenders underwrite, approve, and fund the loans and get the VA guarantee. This means the VA pays lenders back if the veteran defaults on the loan, which is good for veterans because it means more lenders will provide this attractive loan.
Borrowers love VA loans for their:
- 100% financing (no down payment required)
- Flexible underwriting requirements
- No mortgage insurance
How do VA Loans Work?
VA loans work like any other loan we offer. You apply for the loan and prove your eligibility for a VA loan. You can do this by providing your Certificate of Eligibility, which proves you have entitlement for a VA loan. If you need help accessing this information, we can help you.
VA loans don’t require a down payment and don’t have strict underwriting guidelines, but we’ll go through an underwriting process to make sure you can comfortably afford the loan and aren’t getting in over your head.
If approved, we fund the loan like we would any other loan and you make monthly payments on your new VA loan with a low interest rate and no mortgage insurance.
Who Qualifies for a VA Loan?
VA loans are among the most lenient loans available today. Here’s how you qualify:
- Very liberal on credit score requirement. Contact Valley Mortgage for specifics.
- Max 50% debt-to-income ratio which compares your total debts to your gross monthly income (income before taxes)
- Stable income and employment for the last 2 years
- Proof of your entitlement (VA Certificate of Eligibility)
- Proof you’ll live in the home as your primary residence
Most veterans qualify as long as you have an honorable discharge, but some non-veterans qualify too. If you’re a surviving spouse of a veteran who died while in service or who is held as a Prisoner of War, you may be eligible too.
What you Must Know About VA Loans
There are some quirks you should know about VA loans since they’re different from other loan programs.
- You can only use it on a primary residence. VA loans are meant to help veterans secure a safe and stable home for their families, not for investment or even vacation purposes. You must prove you’ll live in the home to get a VA loan.
- There isn’t any monthly mortgage insurance. Unlike other government-backed loans, VA loans don’t require mortgage insurance. They charge one fee, called a funding fee at the start of the loan, which is equal to 2.3% of the loan amount for first-time users.
- VA loans don’t have loan limits. If you have full entitlement (you never used your VA benefits), you likely won’t have to worry about any loan limits. As long as you qualify for the payment, you won’t need a down payment on your VA loan no matter the amount.
- VA loans don’t have a prepayment penalty. You’re free to make extra payments or pay the loan off in one lump sum before maturity if you’re able. There’s no fee for doing so.
The Benefits of a VA Loan
Veterans enjoy many benefits with the VA loan including:
- You won’t need a down payment
- You’ll save money on your payment since there’s no mortgage insurance
- The VA limits the type and amount of closing costs you must pay
- VA loans have some of the lowest interest rates out of all programs
- VA loans are assumable by another veteran
- The VA has an advocacy program to help you avoid foreclosure
Are VA Loans Right for You?
If you’re a veteran of the military with at least 181 days served and are either currently serving or are a veteran, you may qualify for a VA loan.
With its flexible guidelines, no down payment requirements, and absence of mortgage insurance, it’s a great program to help you buy a home with little money out of your own pocket. You’ll get the satisfaction of owning a home much earlier than you would with any other loan program that requires a down payment.
If you believe you would qualify for a VA loan and would like to know more about the process, please contact us or by calling 701-461-8450. Our Valley Mortgage professionals are happy to visit with you about a VA loan. If it sounds like something you’d like to consider, we’ll gladly provide you a Pre-Approval letter which will help you when you look at homes for sale.
Please contact us for a no-obligation conversation. Valley Mortgage is the largest independent mortgage lender in North Dakota and northern Minnesota. We arrange many VA loans for homebuyers, so we will walk you through the process easily. We’ve be helping folks like you for more than 38 years. If you’ve haven’t reviewed our website, please click here. Please call us at our Fargo, ND office at 701-461-8450. There is no cost, no obligation. We are independent and we do all the processing right here in Fargo.