If you served in the military, Chicago VA loans can help you buy a home in Chicago and the Chicagoland area with no down payment and relaxed guidelines. This complete guide covers all the key details about VA loans in the Windy City.

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What is a VA Loan?

A VA loan is a mortgage partially guaranteed by the U.S Department of Veterans Affairs. Private lenders like banks issue these home loans to eligible members of the military and reserves.

Because they are insured, lenders face less risk issuing VA loans. This allows them to offer favorable terms like no down payment, no monthly mortgage insurance, and discounted interest rates.

According to federal law, lenders must meet certain requirements when offering VA loans. These protections help veterans, active duty personnel and surviving military spouses purchase homes.

Chicago VA Loan Benefits

VA home loans offer many advantages over conventional mortgages and loan programs like FHA.

Benefits include:

• No Down Payment Required
• No Monthly Mortgage Insurance
• Relaxed Credit Guidelines
• Low Closing Costs
• No Prepayment Penalties
• Cash Out Refinancing Option

Let's take a closer look at some of the top perks.

No Down Payment

Qualified borrowers can purchase a home with a VA loan at 100% financing. This removes the top hurdle most buyers face – saving for a down payment.

Instead of 20% down, VA borrowers can borrow the full appraised value of the home. You can apply gifted funds or cash toward closing costs.

Lower Rates & Fees

Interest rates on VA mortgages currently average around 6.5% in Chicago as of January 2024. And rates are often below market averages for other loan types.

Closing costs and other lender fees are capped with VA loans, saving borrowers $2,000+ on average. There are also no private mortgage insurance premiums required.

Flexible Guidelines

Compared to conventional loans, VA underwriting guidelines are more relaxed across credit scores, debt-to-income ratios, employment history and bankruptcy wait periods.

Pre-approvals are based more heavily on your current financial stability versus past credit blips. Easing military members into home ownership is the VA's primary role.

VA Loan Requirements

While Chicago VA loans are easier to get, you still must meet eligibility standards and the home must qualify.

Borrower Eligibility

To get a VA home loan, you must be:

• A military service member with at least 90 days active duty
• An honorably discharged veteran
• A surviving unmarried spouse of a qualified military member
• Certain spouses of active duty members

If you don't meet these credentials exactly, you may still qualify under certain circumstances.

Home Eligibility

The VA has its own home appraisal system and sets property guidelines. The home must be:

• Occupied as your primary residence
• A single family house or 2-4 unit multifamily
• In livable condition with no major repairs needed
• Located in an eligible neighborhood

Condos can also qualify but must be VA approved first.

Credit Score & Income

Lenders impose their own credit score and income rules for VA borrowers:

• Credit Scores: Typically 620+, but some lenders go lower
• Debt-to-Income: Follows the same 43% limits as conventional loans
• Residual Income: Must have enough left over each month to pay other bills

So while the VA doesn't mandate thresholds for these areas, most lenders still review your finances carefully before approving. Working with a mortgage broker can make your home loan search easier since they can find lenders that have lower credit score and debt-to-income ratio requirements for Chicago VA Loans.

VA Loan Limits in Chicago 2024

The Department of Veterans Affairs sets maximum conforming loan limits by county across the US each year. Here are the current VA mortgage loan limits for Chicago and surrounding areas: So a veteran buying with a VA loan can borrow up to $766,550 in most counties near Chicago. Additional exceptions and higher limits apply for elite ZIP codes.

While uncommon, jumbo VA loans above the limit may also be issued.

VA Home Loan Interest Rates

Current 30-year fixed VA mortgage rates are averaging around 6.5% in Chicago as of January of 2024. Actual interest rates vary by lender and your financial profile.

Borrowers with higher credit scores, lower debt ratios, and more cash to put toward closing costs tend to qualify for the lowest rates.

VA mortgage rates also follow broader economic trends like:

• Federal Reserve rate policy
• Home loan demand
• Global markets
• Employment levels

So shop multiple lenders for your best deal and lock rates ASAP before they rise.

Applying for a Chicago VA Loan

Once you are ready, it’s time to complete a FHA mortgage application and supply all required documentation to complete your pre-approval. Then, we will issue you a pre-approval letter so you can start submitting offers on any houses you want to buy.. 

Documents commonly needed include:

• Pay stubs: Last 30 Days
• W2s: Last 2 years
• Tax returns: Last 2 Years 
• Bank statements: Last 2 Months
• Debt information

Once you have your house under contract, we will send out initial mortgage disclosures, order an appraisal, finalize your approval, schedule closing and handle every mortgage detail for you from start to finish!

Ready to move forward with VA loan pre-approval? Here is an overview of what to expect during the application process:

1. Find a VA Approved Lender

Not all mortgage lenders can issue VA loans. Reach out to a few VA approved lenders first.

2. Complete you free mortgage consultation

On this call you will go over your mortgage and home buying goals and complete your mortgage application.

3. Submit your required documents for your VA Loan..

Documents commonly needed include:

• Paystubs: Last 30 Days
• W2s: Last 2 Years
• Tax Returns: Last 2 Years
• Bank Statements: Last 2 Years
• DD Form 214
• Debt Information

4.Receive Your Pre-Approval Letter

Once your loan officer has reviewed your mortgage application and documents and everything meets the VA loan guidelines, you then receive a pre-approval letter which you will need so you can submit offers on any houses you want to buy.

VA Loan Approval Process

Once you apply and have your home under contract, here is the general event timeline for VA mortgage underwriting and approval:

1. Initial Mortgage Disclosures are sent to you
2. Your appraisal is ordered and your mortgage file is submitted into initial underwriting
3. Your mortgage comes out initial underwriting approved with conditions
4. The appraisal is received and you submit your documents to clear your mortgage conditions
5. You receive a clear to close and closing is schedule
6. Closing day, sign your mortgage paperwork and congrats you are now a homeowner!

At MacLagan Home Loans, we can get your VA loan closed in 3 weeks or less.

Using a VA Loan to Refinance

In addition to buying, VA loans can refinance existing non-VA mortgages into a lower VA rate. You may also take cash out or switch to better term length during refinancing.

Common Refi Scenarios:

• Lower mortgage rate from what you currently have
• Consolidate high-rate debts into your home loan
• Access your home equity without extra fees
• Shorten or extend your mortgage term length
• Drop mortgage insurance premiums

Talk to one of our VA loan specialists for personalized advice on whether refinancing with a VA loan makes sense in your situation.

Differences from FHA Loans

FHA and VA loans have some overlap, but more differences as far as their purpose and guidelines for military borrowers.

VA Loan Perks

• Requires no down payment or mortgage insurance
• Available only to qualified veterans/military spouses
• Doesn't limit maximum loan amount

FHA Loan Perks

• Available to all borrower types
• Down payments from just 3.5%
• Lower minimum credit score requirements

So an FHA loan fills affordability gaps for civilian borrowers, while VA loans deliver specialized no-cost financing and better rates to honor military service.

Alternatives to Chicago VA Loans

If you don't qualify for a VA mortgage, here are two alternatives that are relatively easy to obtain:

FHA Loans

Popular government-backed option allowing down payments from 3.5% for buyers with average credit.

USDA Loans

Special 0% down payment loans from the Department of Agriculture reserved for rural/suburban regions.

Additionally, many states and cities offer first-time home buyer grants and down payment support programs. These taxpayer funded products provide essentially free money to qualifying residents - often reserved for critical service personnel like teachers, healthcare workers and of course military members.

Let’s Start Your VA Loan Process

We hope this guide gave you a full overview of leveraging your VA benefits to buy a home in Chicago with Chicago VA Loans. Our lending experts have helped hundreds of service members purchase homes over the years. We’re ready to help you.

To get started, 847-899-6882 or complete our free VA Loan qualifier and we will contact you to go over your results to map out your VA loan options. Thank you for your service – now let us serve you as a valued home loan customer!