What Veterans Should Know About VA Home Loans
As a veteran, you gain access to a variety of benefits to assist with everything from your personal finances to medical care. The ability to secure a VA home loan is one of the top benefits. In short, a VA home loan is a mortgage product guaranteed by the United States Department of Veterans Affairs (VA).
Here’s what that means: the VA doesn’t originate loans itself, but instead guarantees the loans so that lenders can provide them to veterans with confidence. There’s a lot to learn about VA home loans, with every detail important to the process and your ability to secure the money needed to make your dream a reality. Here, we outline the top things veterans should know about VA home loans.
The Money Doesn’t Come From The VA
Thanks to the name, it’s easy to assume that a VA home loan comes from the United States Department of Veterans Affairs. While the VA plays a big part in the process, it doesn't actually lend you the money.
Instead, the VA guarantees the loan, which takes the risk off the lender's plate. They’re able to provide loans to veterans without the risk of the unknown should the borrower default for any reason.
Thousands Of Lenders Offer VA Home Loans
The United States Department of Veterans Affairs has done a great job building a large network of lenders. In fact, there are thousands to choose from, thus allowing you to find the one that best suits your borrowing needs and financial circumstances.
With thousands of lenders offering VA-backed home loans, there’s a good chance that you already have a relationship with a financial institution that can help. And if they can’t, you won’t have to look far to find one that can.
It's A Good Idea To Compare Local And National Lenders
With thousands of lenders offering VA home loans, you’ll soon find both local and national financial institutions that are willing to answer your questions, provide additional information, and work with you should you decide to proceed.
It’s always a good idea to compare both local and national lenders to ensure yourself of the best terms and conditions, as well as a borrowing experience that you’ll be happy with over the long run.
No Down Payment Requirement
Today, it’s more difficult than ever to buy a home without a down payment. But with a VA loan, this doesn’t hold true. You’re not required to make a down payment, although you can do so if you have the money and/or desire.
Since you don’t need a down payment, you’ll find it easier to make a purchase when the time comes. There’s no need to wait several months or years just hoping you can save enough money for a down payment on your dream home.
There's Also No Private Mortgage Insurance Requirement
In most cases, if you don’t put down a minimum of 20 percent when buying a home, the lender will charge private mortgage insurance. And you continue to pay this until you have at least 20 percent of the equity in your home.
VA home loans don’t require private mortgage insurance, which can save you hundreds of dollars every month. Subsequently, you’re able to afford a more expensive home, since you don’t have this additional cost weighing you down.
It’s Easy To Check For Eligibility
You may have some questions about whether or not you’re eligible for a VA home loan, not to mention the fact that you probably have some questions about buying a home in general.
Checking your eligibility is as simple as getting in touch with a VA-approved lender. They can help request your VA Certificate of Eligibility, which puts you on the right path. From there, if you’re eligible, your lender can help you determine how much money you can borrow.
Apply For A Loan As Often As You Want
Get this: a VA home loan isn’t something you can only apply for once. If you need to move from your home for any reason -- such as downsizing or to relocate for a new job -- you can once again apply for this type of loan.
It doesn’t matter how old you are, where you live, or how much time has passed since you last served, you can apply for a VA home loan multiple times.
VA Loan Rates Are More Competitive
The higher your interest rate, the higher your monthly payment. With this in mind, you want to secure the lowest rate possible, and it’s easy to do that when you opt for a VA home loan.
Generally speaking, this type of loan is roughly 0.25 percent lower than a conventional loan. The reason is simple: since the VA backs the loan, there is less risk to the lender. For this reason, they’re more comfortable offering a lower rate to borrowers.
Some Surviving Spouses Qualify, Too
If your spouse has passed on, you may be able to use their benefits to secure a VA home loan. Every year, thousands of surviving spouses do this as their means of buying a home.
As long as your spouse died in action and you haven’t remarried, you’re likely to qualify. If you have questions on what to do next, contact a VA approved lender for guidance. They can review your situation, help you complete an application, and seek a VA Certificate of Eligibility.
Use A VA Home Loan To Refinance Or Remodel
Many people use a VA home loan to buy a property. However, that’s just one of your options. You can also use the loan to refinance an existing mortgage, such as to secure a lower interest rate.
You can also tap into the equity in your home to take on a big home remodeling project, or for a variety of other expenses ranging from college tuition to a once-in-a-lifetime trip.
Qualify With A Low Credit Score
For many individuals, there’s one thing stopping them from buying a home: a low credit score. Even if you have your finances in order, a low credit score can make it difficult to secure a mortgage that allows you to make a purchase.
With a VA home loan, there are no minimum credit score guidelines in place. Therefore, lenders have more flexibility when it comes to providing loans to individuals with lower credit scores.
You Can Qualify After Bankruptcy
A bankruptcy is sure to damage your credit history and score, thus making it a challenge to secure a home loan. However, with a VA home loan, you can still qualify after a bankruptcy. This holds true of both Chapter 7 and Chapter 13 bankruptcies.
Even though a bankruptcy filing will remain on your credit report for seven (Chapter 13) or 10 (Chapter 7) years, the VA considers your credit re-established after a period of only two years.
Qualify After Foreclosure
A past foreclosure may have you thinking twice about applying for another mortgage. You might even be concerned that you won’t qualify.
But you can secure a VA home loan, even if you have a foreclosure on your credit report. Lenders don’t look at this nearly as strongly as they do with a more conventional mortgage. Keep in mind that if you’ve foreclosed on a home you purchased with a VA loan, you may be required to pay back the past due money before you can once again apply for this type of financing.
There's Potential To Secure A Funding Fee Waiver
The United States Department of Veterans Affairs typically charges the borrower a funding fee to offset the cost of the program and ensure its sustainability over the long run. This fee generally falls between 0.50 and 3.3 percent of the amount you borrow.
Some veterans qualify for a funding fee waiver, such as those who are disabled. Ask about this when applying for a VA home loan, as it can save you thousands of dollars.
Use A VA Home Loan To Buy Many Types Of Property
Even if you’re most interested in a single-family home, you may want to look into other property types before concluding your search. You can also use a VA home loan to purchase a condo, townhouse, manufactured home, or property with as many as four separate units.
With so many options, search far and wide for the perfect property. This will help you make the most of your purchase, regardless of your budget.
Sufficient Income Is Required
Even though VA home loans are designed to make life easier on veterans, it doesn’t mean that lenders will give money to anyone who qualifies. You must still be able to prove sufficient income.
On the plus side, once you share the necessary information with your lender, they can review your application and tell you exactly how much you can borrow. This will help guide your home search, as you have a clear idea of your price range.
You Can Still Shop Around
Don’t assume that one lender is the same as the next. Just the same as a traditional mortgage, you should shop around to better understand the terms and conditions offered by each lender.
Focus on things such as interest rate, available terms, customer satisfaction, and customer service. As a general rule of thumb, request more information from a minimum of three to five lenders. This will position you to make an informed decision when the time comes to move forward with the process.
No Prepayment Penalty, Ever
There’s no better feeling than paying extra on your mortgage. Doing so accelerates the payoff, which allows you to become mortgage-free sooner. There are no prepayment penalties with a VA home loan. You can pay it back as fast as possible, with no concerns about a penalty costing you money.
Also, if you decide to move, VA home loans don’t have an early-exit fee clause. You’re free to sell the home whenever you want, even if it’s within months of moving in.
There Are Similar Programs
In addition to a traditional VA home loan, there are other programs that have just as much to offer veterans. Some of the most popular include Interest Rate Reduction Refinance Loan (IRRRL), Native American Direct Loan (NADL) Program, the Native American Direct Loan (NADL) Program, and Adapted Housing Grants.
All of these loans and programs are worth your consideration, as you don’t want to miss out on any benefits that you qualify for. You never know when you’ll find something that helps you purchase a home and/or save you money.
Remember, You’re Not Alone
You won’t make your decision to apply for a VA home loan based on what others are doing, but it’s nice to know that this program is so popular. Every year, the VA guarantees hundreds of thousands of loans. And with so many benefits, such as a lower interest rate and more lenient eligibility requirements, this is sure to continue into the future.
If you have any questions about your eligibility, consult with a VA approved lender.
