From the U.S. Department of Housing and Urban Development’s Federal Housing Administration (FHA) loan to the U.S. Department of Agriculture’s Rural Development Loan (also known as the USDA loan), the United States government provides a number of housing loan programs to help Americans become homeowners. The U.S. Department of Veterans Affairs offers one such program, designed especially for veterans.
Originally included as part of the Servicemen’s Readjustment Act of 1944, the VA housing loan program has helped over 22 million veterans and active duty members become homeowners over the past 75 years. According to the Veterans Affairs website, VA home loans “are provided by private lenders, such as banks and mortgage companies” and “guarantee a portion of the loan against loss, enabling the lender to provide you with more favorable terms.”
Home to three military bases, nearly 189,000 veterans and 4,641 active service members, it’s easy to see why VA loans are a popular option for borrowers in the state of Connecticut. In fact, 2,892 VA loans were granted in Connecticut in 2018 alone; the average loan was for $263,294.
Are you a veteran, active service member or reservist looking to buy a home? Consider this your roadmap to learning about and securing a VA loan.
Benefits of Applying for a VA Loan
There are a number of benefits to applying for a VA loan that make it an appealing option for prospective home buyers:
- VA loans are 100% financed, which means there’s zero down payment unless required by the lender or the purchase price is more than the reasonable value of the property. By comparison, FHA loans require a minimum of 3.5% down and conventional loans require 3% down.
- VA loan recipients aren’t required to pay monthly mortgage insurance premiums or private mortgage insurance.
- VA loans offer low monthly interest rates.
- VA loan recipients only have to pay a one-time funding fee to the VA — however, veterans with a 10 percent or higher disability rating or who currently receive disability payments are eligible for funding fee exemption.
- VA rules limit the amount borrowers can be charged for closing costs; in some instances, a borrower can even ask the seller to pay certain closing costs.
- VA loan recipients are eligible for assistance from the VA if they run into difficulty making payments.
- Lenders can’t charge a penalty fee on a VA loan if the borrower pays the loan off early.
- You don’t have to be a first-time home buyer to qualify for a VA loan and you can reuse the benefit as many times as you’d like.
Types of VA Loans
There are four types of VA loans in CT: purchase loans, refinancing loans, renovation loans and interest rate reduction refinance loans (IRRRL).
Purchase loans are the standard form of VA loan and enable you to buy a home without a down payment. Refinancing loans enable you to access up to 100 percent of your home’s equity and put that money toward things such as college tuition, home renovations, medical bills and so on. Renovation loans enable you to simultaneously purchase and renovate a home with funds guaranteed by the VA. The financing for this type of loan is based on the expected value of the property after improvement. Finally, IRRRLs help borrowers who already have a VA loan improve their interest rates by obtaining a line of credit without a home appraisal or income documentation.
Depending on which type of VA loan you apply for, you can purchase a home or condominium in a VA-approved project, build a home, install energy-related features in or make energy-efficient upgrades to an existing home and more.
In order to qualify for a VA loan in Connecticut, you must verify your eligibility with a Certificate of Eligibility (COE). To receive a COE, you must meet one or more of the following requirements:
- Have served 90 consecutive days of active service during wartime
- Have served 181 days of active service during peacetime
- Have served more than six years in the National Guard or Reserves
- Are the spouse of a service member who has died in the line of duty or as a result of a service-related disability
There are a few other things you should know to make sure you qualify for a VA loan. First, VA loans have no minimum credit score requirement — however, each lender has its own FICO score requirement and each loan profile is subject to extensive lender review. The VA also doesn’t specify a maximum debt-to-income (DTI) ratio, though the average DTI for VA loans is 41 percent or lower.
VA Loan Rates
Since VA loans are government-backed, borrowers benefit from low interest rates. In Connecticut, VA home loan interest rates are based on a number of factors, including the borrower’s debt-to-income ratio, credit score, the duration of the loan and current market conditions, and are determined by the lender.
The current national average interest rate for a 15-year fixed VA loan is 3.875 percent with 4.334 percent APR; the average rate for a 30-year fixed VA loan is 4.125 percent with 4.386 APR.[MC1]
VA Loans in CT
|County||Maximum Loan Amount|
|New Haven County||$484,350|
|New London County||$484,350|
Home prices in Connecticut are higher than the national average, which means the maximum loan amounts on VA mortgage loans in Connecticut are higher than the average, too. To see how maximum loan amounts vary from county to county, refer to the table below.
Not sure whether you’re eligible for a VA loan or require assistance applying for one in the state of Connecticut? Blue Water Mortgage is here to help. As one of the leading mortgage brokerages in New England (and now Florida!), our team of loan officers has extensive experience working in the Connecticut market and helping veterans finance the home of their dreams. Get started on your journey to home ownership by contacting us today.