Everything You Need To Know When Shopping for a VA Loan
For a vast majority of service members, the VA loan program is the most popular and beneficial source of credit when buying a home. Even so, most people, including some longtime borrowers, are not aware of all the conditions and benefits of this mortgage program.
Since its creation in 1944, more than 21 million service men and women have used the relaxed application requirements and low-interest rates to get them into the homes of their dreams.
You’ll find all the important VA loans details and information below to see if it may be a good option for you.
What is a VA loan?
Simply put, it is a unique loan program that is accessible to eligible veterans and service members only. The federal government created this military mortgage guaranty program with the aim of helping service members acquire homes more easily. It is managed by the Veterans Affairs (otherwise known as the VA).
How does a VA loan work?
For starters, the VA does not issue VA loans, it only guarantees them. This extra security against default allows mortgage lenders to offer loans with relaxed terms.
In today’s uncertain times, this loan program is becoming a more popular choice for peoplewho would otherwise be unable to purchase a house. Here at TJC Mortgage, we know it all starts with a home loan and would love to look over your situation with you to see what your best solution is.
Are VA Loans Good?
VA mortgages come with unique and exciting benefits. Compared to conventional loans, they are much easier to qualify for, and you don’t even need to pay a down payment in advance, or pay for private mortgage insurance (PMI) if you meet eligibility requirements. VA loans, with their highly competitive interest rates, offer the cheapest mortgage loans for service members.
Even if you have a history of foreclosure or bankruptcy, you may still be eligible. The VA also can step in to help struggling borrowers, if you’re unable to make your monthly payments, by negotiating for more relaxed terms and conditions with your mortgage lender. These perks are not a one-time benefit. As long as you pay off your loan before applying for a new one, you’re able to reuse your VA loan entitlement over and over again.
VA Home Loan Eligibility
Who qualifies for VA loans? Most veterans, members of the military, national guards, and reservists are eligible for this mortgage loan.
If you are an active-duty member who has been in service for six months or have been in the National Guard or Reservist for at least six years, you should be eligible. However, if they are called for active duty the time reduces dramatically to a mere 181 days of service and only 90 during a war period.
Spouses can also apply for a VA mortgage loan if your spouse was a military member who died while on active duty or as a result of a service-related injury.
Most lenders will be able to get the loan processing procedure started even if you don’t have your certificate of eligibility present.
How to Apply for a VA Home Loan
Despite their eligibility, many service members miss out on the benefits of this program because it isn’t clear how to get a VA loan.
Our mortgage advisors at TJC Mortgage have years of experience and can guide you through the application process quickly.
Fees and Regulations
VA Loan Fees
VA loan closing cost is made up of the funding fee paid to Veteran Affairs. This mandatory, one-time payment is used to reducing taxpayer’s burden for any defaulted loans, and to keep this program funded for future generations.
If you are a first-time borrower, you will pay a fee equal to 2.15% of the house’s value. You can reduce this amount to 1.25% if you make a minimum 10% down payment. For a second, or third VA mortgage, the fee is set at 3.3% of the total loan amount.
You have the option of rolling this fee into your loan, so you don’t have to pay out of pocket now, and if you’re entitled to disability compensation, the fee will be waived entirely.
Credit score for VA loans
There is no minimum credit score for VA loans required by the Veterans Affairs, but lenders usually have their own credit score minimums. Most lenders want to see a score of 620 or above, but if you still may be considered if you have a lower one. Just keep in mind, the lower your credit score, the higher your interest tends to be.
Even with less than perfect credit, since the government guarantees VA mortgages up to 25% of the loan amount, lenders generally offer lower interest rates when compared to traditional loans.
Type of house
VA loans are issued for primary residences only. This means you can’t use it for a vacation or investment property. The house also needs to be move-in- ready, meaning it meets minimal living standards.
VA loan limit
The VA doesn’t set a limit on how much you can borrow, but most lenders cap the amount at $417,000. High-cost areas, such as Hawaii or parts of California may increase the limit to $625,500.
Do VA loans require a down payment?
No, you don’t need to make a down payment for a VA loan unless you have a co-borrower who is not your spouse or a VA-entitled borrower.
Do VA loans have PMI?
No, VA loans do not require private mortgage insurance. This allows borrowers to save more money to put towards monthly bills, or to pay off your mortgage more quickly.
Are there pre-payment penalties for VA loans?
No, you will not be fined for paying off your loan quicker. If you have the funds available, go ahead and pay off part, or all of your mortgage and save on any future interest cost.
Are VA loans are a good idea?
Yes, they are. Talk to us today for further detail or if you want to compare different mortgages. We’ll be happy to help you through your application process.