Overview

Veterans Affairs (VA) loans are mortgage products partially guaranteed by the U.S. Department of Veterans Affairs. At SMBC, our VA loan program is structured to leverage that guarantee to deliver competitive interest rates, flexible terms, and low upfront costs for qualified borrowers. These loans can be used to purchase a primary residence, refinance an existing VA loan, or make needed improvements to an eligible property.

Key Benefits

• No down payment required: One of the most valuable features of a VA loan is the potential to finance up to 100% of the purchase price, subject to lender approval and entitlement.
• No private mortgage insurance (PMI): Unlike conventional loans with low down payments, VA loans typically do not require PMI, helping to lower monthly payments.
• Competitive interest rates: VA loans often carry interest rates that are competitive with or better than conventional loan rates, reflecting the government-backed guarantee.
• Flexible credit guidelines: SMBC considers the whole borrower profile, including service history and overall financial stability, to provide fair access to financing.
• Limited closing costs: The VA limits certain closing costs and fees that veterans can be charged, and SMBC strives to keep out-of-pocket expenses reasonable.
• Assumable financing: VA loans may be assumable by a qualified buyer in certain situations, which can be a selling point when market rates rise.

Eligibility

To qualify for a VA loan at SMBC, applicants must meet both VA and lender criteria. Typical eligibility categories include:

• Veterans with an honorable discharge or other qualifying discharge status.
• Current active duty service members who meet length-of-service requirements.
• National Guard and Reserve members who meet specific eligibility timelines.
• Certain surviving spouses of service members who died in the line of duty or as a result of a service-related disability.

Applicants must obtain a Certificate of Eligibility (COE) from the VA or allow SMBC to assist in obtaining it during the application process. In addition to VA eligibility, SMBC evaluates income, assets, debts, and credit history to determine loan approval and terms.

Available Loan Types and Terms

SMBC provides a range of VA loan options to suit different financial goals:

• Fixed-rate mortgages: Stable monthly payments with terms typically ranging from 10 to 30 years.
• Adjustable-rate mortgages (ARM): Lower initial rates that adjust periodically after an initial fixed-rate period; ARMs may suit borrowers planning to sell or refinance within a known timeframe.
• IRRRL (Interest Rate Reduction Refinance Loan): A streamlined refinance option for current VA loan holders seeking a lower rate or payment with minimal documentation.
• Cash-out refinance: Allows eligible borrowers to tap home equity for home improvements, debt consolidation, or other needs, subject to underwriting guidelines.

Application Process

1. Prequalification: Begin with a preliminary review of income, assets, and credit to estimate borrowing capacity.
2. Obtain COE: Provide proof of military service to receive a Certificate of Eligibility, which confirms entitlement amount.
3. Loan application: Complete the mortgage application and submit required documentation, including pay stubs, tax returns, bank statements, and asset verification.
4. Underwriting and appraisal: SMBC’s underwriting team reviews the application and orders a VA-compliant appraisal to determine the property’s market value and condition.
5. Loan approval and closing: Upon final approval, closing disclosures are issued and the transaction is completed at closing with funding to the seller or payoff of prior loans.

SMBC assigns experienced loan officers to guide borrowers through each step, helping to streamline documentation and address potential underwriting issues early.

Documentation and Requirements

Applicants are generally asked to provide:

• Certificate of Eligibility (COE) or permission for SMBC to obtain it on the applicant’s behalf.
• Proof of income (pay stubs, W-2s, tax returns for self-employed borrowers).
• Bank statements and asset documentation.
• Credit report authorization and explanations for any derogatory items.
• Details of existing debts and monthly obligations.

SMBC evaluates each application holistically, recognizing the unique circumstances of veterans and service members.

Costs and Fees

While VA loans reduce some costs associated with home purchases, borrowers should be aware of potential fees:

• VA funding fee: A one-time fee paid to the VA to support the program; the fee amount varies by loan type, down payment amount (if any), and veteran category. Some borrowers with service-connected disabilities may be exempt.
• Closing costs: Includes appraisal, title, recording, and other customary fees. VA rules limit certain fees that the veteran can be charged, and SMBC aims to keep these costs transparent.

SMBC provides detailed loan estimates early in the process to help borrowers plan for expenses and understand long-term payment obligations.

Refinancing and Servicing

SMBC supports VA loanholders with refinancing options to reduce monthly payments, shorten loan terms, or access equity. The IRRRL is a key option for borrowers already in a VA loan who seek a lower interest rate with simplified documentation. Servicing options include flexible payment arrangements when borrowers face temporary hardship, subject to program eligibility and regulatory guidelines.

Tips for Success

• Obtain your COE early to expedite the application process.
• Maintain stable employment and document all income sources thoroughly.
• Address credit issues proactively and provide explanations for any derogatory items.
• Understand total monthly housing expenses, including taxes, insurance, and HOA fees if applicable.
• Discuss the suitability of fixed vs. adjustable rates with an SMBC loan officer based on your plans and market expectations.

Compliance and Disclosures

All VA loans through SMBC are subject to VA program rules, federal and state regulations, and SMBC’s internal lending policies. Loan availability, terms, and conditions may vary by location and are subject to change. SMBC recommends that applicants review all disclosures carefully and consult with their loan officer regarding eligibility, fees, and potential exemptions.