Are you a veteran or member of a military family and need information about VA Loans? You might have a multitude of homebuying benefits at your fingertips that you never knew about. So, make sure you know all of your options when home hunting.
In addition to the financing options available to other buyers, there is the option of a VA Home Loan, which includes no down payment and no private mortgage insurance.
Are you eligible for a VA Loan?
Firstly, if you don’t know, The Home Loan Specialists at Veterans United can help you determine if you’re eligible for a VA Loan, and even help you obtain your Certificate of Eligibility. Questions about whether you qualify? Call (855) 541-5915 to speak with a loan specialist.
You may be eligible for a VA home if:
- You have served 90 consecutive days of active service during wartime, or
- You have served 181 days of active service during peacetime, or
- You have more than 6 years of service in the National Guard or Reserves, or
- You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.
According to The Department of Veterans Affairs, it backed a record number of loans in fiscal year 2015, with volume expected to increase 36 percent over the next five years. Created originally to help World War II veterans get a foothold in the housing market, this benefit has evolved into a powerful mortgage option, according to VeteransUnited.com
No Down Payment
Considered a signature benefit of VA home loans: Qualified buyers can purchase up to $424,100 in most parts of the country before putting money down. This figure is even higher in costlier housing markets.
Conventional loans often require a 5 percent down payment, while FHA loans require a minimum 3.5 percent down payment. On a $244,000 loan, which was the average VA loan amount last year, buyers would need $12,200 for a conventional down payment or $8,540 for FHA. It can take years for veterans and military families to save that upfront cost.
This is another big expense that VA buyers don’t have to worry about. Conventional borrowers who can’t make a 20 percent down payment often get stuck paying for private mortgage insurance. FHA buyers pay an upfront and an annual form of mortgage insurance. These expenses can add $100 or more to your monthly mortgage payment and linger until you’ve built sufficient equity in the home. FHA buyers now pay mortgage insurance fees for the life of their loans.
VA buyers don’t pay for mortgage insurance, but they do have an upfront funding fee that most choose to roll into the loan. The VA Funding Fee is paid to the VA and helps keep the loan program running. Buyers who receive compensation for a service-connected disability are exempt from this cost.
Flexible Credit Guidelines
This loan program’s financial flexibility is matched by common-sense credit underwriting. VA loans were created to boost access to homeownership for those who serve our country, and the government urges lenders to take a more holistic look at a buyer’s credit and financial profile.
In fact, the VA doesn’t set a credit score requirement for these loans. But the private companies actually making these loans typically will have a score cutoff, albeit a lower one than conventional lenders often require.
Would-be buyers can also bounce back faster in the wake of a bankruptcy or foreclosure. Veterans can often obtain a VA loan just a year removed from filing a Chapter 13 bankruptcy and two years following a Chapter 7 discharge or a foreclosure.
For conventional mortgages, the “seasoning period” can be considerably longer – four years following a Chapter 7 discharge, two years after a Chapter 13 discharge and seven years after a foreclosure.
Veterans and military members also have access to the lowest-rate loan product available. VA loans have had a lower average interest rate than conventional and FHA loans for the past 30 consecutive months and counting, according to data from mortgage software firm Ellie Mae.
Rates vary depending on your credit, the lender you’re working with and more.
VA buyers can ask a seller to pay all of their loan-related closing costs and up to 4 percent of the home’s value in concessions. Those concessions can cover a host of costs, from prepaid property taxes and homeowners insurance to paying a buyer’s funding fee and even paying off collections or judgments at closing.
The VA also limits what costs and fees lenders can charge, and there are a few that buyers aren’t allowed to pay.
VA loans aren’t for all military homebuyers, but these flexible government-backed loans continue to make a difference for millions of veterans and military families.
Information provided by VeteransUnited.com and Bankrate.com.