Happy Home InsiderVeteran Affairs mortgages, or VA Loans, make it easier for Veterans to get assistance in order to finance homes. VA Loans, available to both Veterans and active service members don’t always require a down payment. VA loans have no minimum credit score requirements, are granted by private lenders, and backed by the department of veteran affairs, therefore, they don’t require the borrower to purchase mortgage insurance. VA loans are excellent options for borrowers who don’t necessarily have the cash to make a down payment large enough to secure a mortgage and can be easier to qualify for than conventional mortgages.
Most active service members, veterans, reservists, and members of the National Guard can apply for a VA loan. Service members on active duty are typically able to apply for VA loans while reservists and National Guard members must wait six years in order to apply; however, if reservists or National Guard members are called into active duty prior to six years, they become eligible for application after just 181 days and in as little as 90 days during war times. While those seeking approval for VA loans will require a certificate of eligibility in order to enjoy their benefits, they do not necessarily need to have the certificate on-hand in order to begin the mortgage process; lenders are usually able to obtain this document for applicants during the preapproval process.
There are many benefits to VA loans; perhaps most notably is the fact that VA loans can be granted without requiring a down payment. Additionally, VA loans don’t require the borrower to have mortgage insurance, as is typically required with standard FHA loans or conventional loans with down payments lower than 20%. Ultimately this benefit enables veterans and service members to be approved for an affordable mortgage without having to save up as much initial capital as would be customarily be required in order for a civilian to obtain approval. The possibility of being able to obtain VA loan approval without an initial down payment, coupled with the lack of a requirement for mortgage insurance on VA loans, these benefits can potentially net the borrower tens of thousands in savings over the life of a loan.
While costs associated with VA loans are usually lower than other low-down-payment mortgages, they do require a one-time funding fee that is dependent on the size of the down payment as well as the type of veteran. First-time borrowers that are members of the armed forces applying for a loan, with no money down, will pay a fee of 2.15% of the total loan amount. National Guard members and reservists will typically pay fees that are a quarter of a point higher than active duty service members. A borrower applying for a second VA loan, with no down payment, would be required to pay a fee of 3.3% of the total loan amount. Funding fees are waived for applicants who receive disability.
While the VA doesn’t have a minimum credit score requirement in order to obtain a VA loan, in many cases lenders will have their own set of requirements; for example, most lenders want credit scores of 620 or higher in order to grant loan approval. There are lenders that would approve individuals with credit scores below their usual requirements however, they would likely charge a higher interest rate for that consideration. While VA loan applicants are required to show proof of income in order to repay the loan, and shouldn’t have any large outstanding debts, the guidelines with VA loans are usually much more flexible than those typically associated with conventional loans.
VA loan benefits are only available to those looking for a primary residence and may not be used in order to finance investment properties or vacation homes. While there is no cap on the amount of money one may borrow, there may be limits on the amount of liability the VA can assume, which in turn, can affect the amount of money a financial institution is willing to lend.
VA loans are set up in order to benefit and honor those who have served to protect our freedoms in all capacities. If VA loan borrowers are struggling to make payments, the VA may negotiate with the lender on behalf of the borrower in order to help ameliorate the issue by arranging repayment plans and loan modifications as well as other alternatives to foreclosure. Veterans can call (877) 827-3702 at any time for assistance with mortgage-related issues.
