A Veteran’s Administration (VA) loan is an excellent option for qualifying U.S. Armed Forces members looking to purchase, refinance, or remodel a home. The U.S. government backs these loans, meaning lenders are often willing to overlook less-than-ideal credit scores and financial histories because the loans are guaranteed.
That’s just the start of what makes a Colorado VA loan great. In this article, we’ll explore eligibility requirements, go through the process of securing a VA loan in Colorado, and share some of its benefits over other types of loans.
VA Home Loan Eligibility in Colorado
Before you get started, you need to confirm your VA home loan eligibility in Colorado. Let’s review all you need to know about VA loans to ensure you qualify.
Service Requirements
There are specific service requirements when applying for a VA loan. Typically, VA loans are available for active military members who served at least 90 days during wartime or 181 days of continuous service during peacetime. Honorably discharged veterans who have served at least 24 continuous months also qualify.
Additional circumstances can qualify you or an eligible spouse if you do not meet these service requirements. Contact your local VA if you have questions about your eligibility.
Obtaining Your Certificate of Eligibility (COE)
A COE proves you are eligible for a VA home loan in Colorado. You can obtain this document by applying:
- online through the Department of Veterans Affairs
- through your lender if they have access to Web LGY
- by mail, filling out VA Form 26-1880
The quickest ways to obtain your COE are online or through your lender. Be sure to apply as soon as possible. When you have this document and your pre-qualification, sellers will know you are serious, making you a more attractive potential buyer, especially in the competitive Colorado market.
Specific Circumstances
Surviving spouses of eligible service personnel may also qualify for a VA loan in Colorado. National Guard and Reserve members are eligible if they meet specific service requirements.
Additional exceptions to the rule and other scenarios may qualify you for a VA home loan, so check with your local VA to learn your options.
Finding a VA-Approved Lender in Colorado
Finding a VA-approved lender in Colorado is critical to ensure the loan process goes smoothly and you get the most out of your VA loan.
The U.S. government has vetted Arnaiz Mortgage to offer VA loans. We know what we’re doing, and with many happy customers, you can trust you’ll receive the highest care and support during the process.
The Importance of Choosing the Right Lender
Not all lenders are equal, so it’s essential to make sure you choose the right one. You want to pick a lender who understands the loan process, especially regarding a VA loan.
The VA home loan process can be complicated for those unfamiliar with this type of loan. For example, not everyone can access the online portal to help you receive your COE promptly.
Working with experienced, qualified lenders can help shorten and streamline the process. Arnaiz Mortgage is well-versed in all types of loans, including VA home loans, and can help you find the right mortgage quickly and efficiently. When you work with us, you’ll be well on your way to securing your dream home.
The VA Loan Process in Colorado
Follow the steps below to secure a VA home loan in Colorado.
Pre-Qualification
Colorado’s housing market is highly competitive, so you’ll want to ensure you receive your pre-qualification letter before you start house hunting. This letter indicates the maximum you can likely borrow and will give you a sense of the range of houses you should look at.
Work with your lender to secure your pre-qualification letter. This letter differs from your COE, which proves you are eligible for a VA loan. Your pre-qualification letter is the maximum VA loan amount you may qualify for.
Share your pre-qualification letter with your realtor to find houses that match your budget, space requirements, amenities, and more.
Property Appraisal and Inspection
All VA loans require a property appraisal before closing on a home. These appraisals are intended to determine the home’s fair market value. They explore the comps of similar properties in the area to help inform their assessment.
Also, the home must meet the minimum property requirements (MPRs) set out by the VA to ensure the house is safe to live in and a sound investment. The VA appraisal is different from a home inspection.
The home inspection is a separate process with an additional fee. It involves taking a closer look at the home to help uncover any potential underlying issues that affect the property. These could be previous work, current problems, or issues that may arise in the future.
Home inspections help you make an informed decision about the home you are purchasing. While you can waive a home inspection with a VA loan, you cannot waive the VA property assessment, which is required for all VA home loans, regardless of the type.
Underwriting
Once you find the home you want, you must officially apply for the loan. You will need to submit proof of income, assets, gifts, and debts so the underwriter can assess your creditworthiness. Documents to include are your:
- COE
- W2 statements
- tax returns
- bank statements
- pay stubs
- other sources of income
Underwriters will use this information to review your financial history to ensure you are a good candidate for a loan. There are more accessible credit requirements for a VA loan, including lower credit scores, higher debt-to-income ratio (DTI) allowances, and more. Still, you must demonstrate an ability to repay the loan for a lender to approve it.
If you pre-qualified for the loan, this should make the underwriting process smoother; however, they will still need to carefully review your records to ensure everything is the same as your credit since you last applied for the pre-qualification letter.
It is strongly recommended that you avoid making significant purchases when buying a home or opening new accounts. If you do, you may need to restart the process, which can be frustrating and time-consuming for all involved.
Closing
Closing costs are the fees you pay to close on your loan, and many are the same regardless of what type of loan you apply for. Origination, appraisal, and inspection fees can quickly add up even on VA home loans.
The VA limits some closing costs, and the seller must cover some fees during this process. Qualified VA loan borrowers can ask for up to 4% of the total home cost in concessions to cover any insurance, taxes, and other issues related to the home.
A VA funding fee will be included in all VA loans, helping to fund the program year after year. Generally, qualified disabled veterans and surviving spouses don’t need to pay this fee. Check your certificate of eligibility for the requirements.
The funding fee amount depends on various factors. If you cannot pay your funding fee outright, you can roll it into the terms of your loan, though it will increase the monthly payment amount.
You should budget to pay about 3-5% of your total loan amount in overall fees. This percentage can include a down payment, but remember, you may not be required to make one if the home appraises for more than or equal to what you are purchasing it for.
Benefits of VA Home Loans in Colorado
There are many benefits for those who qualify for a VA loan. The most significant ones are as follows:
- No down payment: You are not required to make a down payment on VA loans. There are even limited closing costs to help make it more attractive.
- No private mortgage insurance: You are not required to carry private mortgage insurance even without a down payment. This differs from FHA loans, which require an upfront mortgage insurance premium in addition to monthly payments, and conventional loans, which require mortgage insurance if you put down less than 20%.
- Competitive rates: Because the government backs VA loans, they often have the best, most competitive mortgage rates. Typically, they are about 0.05-1% lower than other types of loans.
- Lower Credit Requirements: Although VA doesn’t have a minimum credit score requirement because the government guarantees the loan, lenders often have more flexible credit requirements than other loan types. Requirements will vary by lender, but typically, you will want at least a 620 credit score to qualify.
- Lifetime benefits: Another great VA home loan benefit is that you can get multiple VA loans throughout your lifetime. You do not need to pay off your existing VA loan if you want to take out a new one. Unlike some other loans, it is not limited to first-time home buyers.
- No prepayment penalties: It is possible to pay off the terms of your loan early at no additional cost. Some other mortgages will not allow you to pay early without a fee because they will lose out on interest.
VA Loan Limits in Colorado
VA loan limits refer to the maximum amount you can take out as a VA loan and are limited to the types of properties you can purchase. They vary by county and change yearly based on changing market values.
Generally, the VA loan limit in Colorado is $766,550; however, there are several counties where they are higher based on the cost of living, some of which are:
- Eagle County: $1,149,825
- Garfield County: $1,149,825
- Pitkin County: $1,149,825
- Routt County: $1,012,000
- Summit County: $1,006,250
Remember that just because there is a VA loan limit does not mean you will qualify for that amount. Work with a mortgage lender who can explain your specific options.
Types of Colorado VA Loans
Depending on your goals, you can choose from three different types of VA mortgage programs.
VA Purchase Loans
A VA Purchase loan is a fixed-rate mortgage that can be used to:
- buy a single-family home (up to 4 units)
- buy a condo (in a VA-approved project)
- buy a manufactured home or lot
- buy a home to improve
- build a home
- make adjustments to existing homes to make your house more energy-efficient
VA purchase loans do not require a down payment, and you will face no penalty for paying off your loan earlier.
VA Cash-Out Refinance Loan
A VA cash-out refinance loan helps people replace their current loan terms with a new VA home loan. These loans are ideal for:
- taking out cash from your home equity to reduce debt, pay for school, make home improvements, or other personal needs
- refinancing a non-VA loan into a new VA loan
Remember that you’ll still need to pay closing costs. If it’s a new VA loan, you must pay the VA funding fee.
VA Interest Rate Reduction Refinance Loan (IRRRL)
An IRRRL allows you to replace your current loan with one with different terms. You can take advantage of better rates in the current market.
To qualify for an IRRRL, you must have an existing VA-backed loan and use the home as your primary residence. This type of loan is often called a streamline refinance loan, and it could help you:
- lower your monthly payment thanks to lower interest rates;
- make your monthly payment more stable at a fixed interest rate rather than a variable or adjustable one.
Again, as with the cash-out refinance loan, you will be required to pay closing costs. However, you will not be required to pay the VA funding fee as your original VA home loan covered it.
Summary
When you work with the right lender, who can help you navigate the process, getting a VA home loan in Colorado doesn’t need to be intimidating. Arnaiz Mortgage is here to help when you’re ready.
We are VA-certified and ready to work with you on all your home loan needs. Whether you are looking to purchase a home or take out equity in your existing one, we can help you find the right mortgage for your needs.
What are you waiting for? Contact Arnaiz Mortgage today at (623) 806-4645 or tarnaiz@arnaizmortgage.com to get started and secure your dream home in Colorado with a VA home loan.