To be eligible for a VA loan, you or your spouse must meet the basic service requirements set by the Department of Veterans Affairs (VA), have a valid Certificate of Eligibility (COE) and satisfy the lender’s credit and income requirements.
You may be eligible for a VA loan by meeting one or more of the following requirements:
- 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 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. There are many benefits to using this type of loan.
What is a VA Loan?
The VA loan is a $0 down mortgage option available to Veterans, Service Members and select military spouses. VA loans are issued by private lenders, such as a mortgage company or bank, and guaranteed by the U.S. Department of Veterans Affairs (VA).
The VA Home Loan was created in 1944 by the United States government to help returning service members purchase homes without needing a down payment or excellent credit. This historic benefit program has guaranteed more than 24 million VA loans, helping veterans, active duty military members and their families purchase or refinance a home. Today, the VA Mortgage is more important than ever. In recent years, lenders nationwide have tightened their lending requirements in the wake of the housing market collapse, making the VA loan a lifeline for Veterans and active Military homebuyers, many of whom find difficulty when faced with tough credit standards and down payment requirements.
Like all home loans, VA Mortgages have considerable details and information to review. Call me today to learn more.
VA Loan vs. Traditional Mortgages
Veteran and military homebuyers have access to one of the most unique and powerful loan programs ever created. See how the VA Loan compares to a traditional home mortgage:
Regulations and Fees
Although the VA Loan is a federal program, the government generally does not make direct loans to veterans. Instead, private lenders including Veterans United Home Loans finance the loan while the Department of Veterans Affairs offers a guaranty.
This guaranty, which protects the lender against total loss should the buyer default, provides incentive for private lenders to offer loans with better terms.
Qualified veterans with their full VA loan entitlement can borrow as much as a lender is willing to extend, all without a down payment. The VA loan limits only come into play for buyers with less than their full entitlement, either because they have one or more active VA loans or because they’ve lost a previous one to foreclosure.
The VA Funding Fee goes directly to the VA to ensure the program keeps running for future generations of Veteran and military homebuyers by removing any additional burdens off tax payers and veterans. The fee varies depending on the borrower’s circumstances and does not apply for veterans with service-connected disabilities. For example, if this is your first time using the VA Home Loan Program, the funding fee is typically 2.3 percent of the purchase price of the home. For subsequent use of your VA Loan benefit, the fee is 3.6 percent.
VA borrowers can roll the funding fee into their overall loan amount. The VA also limits closing costs for veterans and allows sellers to pay most or all of those expenses. Many of our borrowers purchase a home with no money due at closing.
THE VA LOAN ADVANTAGE
The VA Loan program is the most powerful home loan program on the market for many veterans, service members and military families. These flexible, government-backed loans come with significant benefits that open the doors of homeownership to veterans who might otherwise struggle to obtain financing.
VA loans require no down payment or private mortgage insurance. They feature competitive rates and terms and allow qualified borrowers to purchase a home with little to no money out of pocket.
The increasing popularity has stemmed from the loan program’s signature benefits, which include:
1. No Down Payment
Saving money and building credit can be difficult for service members who are constantly on the move. With the VA Loan, qualified borrowers can finance 100 percent of the home’s value without putting down a dime. Take a look at the chart below to see how much you can save through the no-money-down benefit of the VA Loan.
2. No Private Mortgage Insurance
Many conventional lenders require borrowers to pay private monthly mortgage insurance unless they’re able to put down at least 20 percent, which is a tough task for many veterans. Private mortgage insurance (PMI) is an insurance that protects lenders in case of a borrower default.
With a VA Loan, however, there is no PMI. This is because the federal government backs all VA Loans and assumes the risk on behalf of the borrower that is typically covered by the PMI.
This VA Loan advantage allows you to build more and more equity in your house, effectively saving you thousands of dollars over the life of your mortgage. On a $250,000 loan this can be a savings of almost $200/month.
3. Competitive Interest Rates
Interest rates on home loans are based on risk assumed by the bank to finance the loan. Because the VA backs each VA Loan with a guaranty, financial institutions carry less risk and can offer interest rates that are typically 0.5 to 1 percent lower than conventional interest rates.
Pair that lower interest rate with the ability to purchase a home with no money down and no private mortgage insurance and the savings start adding up significantly.
To see what you qualify for and what additional benefits are available to you, contact me atfor more information.
I am a partner realtor with Veterans United. Many Lenders offer a VA Loan, but not all can successfully close a VA loan. Give me a call to be sure you know the difference.