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VA Loans 2017-06-06T16:42:30+00:00

VA Loan And What You Need to Know!

A VA loan is a loan specifically for veterans, military personnel, and their spouses. This loan is backed by the Department of Veteran Affairs but it offered through qualified private lenders. VA’s job is to guarantee a part of the mortgage be paid in the event that the borrower is unable to pay the loan. If you are a veteran, active military personnel, or a qualified military spouse, you can apply for the loan with an approved financial institution.  This can be an ideal way to buy or build a home.Veteran moving into a new home

Military personnel, veterans, and military spouses are eligible to apply for this loan but they must meet certain requirements. The VA does not require a specific credit score to be eligible. This is one of the many benefits of a VA loan. Even though the VA will not look at the borrower’s credit score, some lenders may have their own required minimum credit scores.  A VA loan is also one of the best loan options for qualified people who want to buy a house without putting down a down payment. For veterans and active military personnel, VA loans are much easier to get than conventional loans. If you are interested in a VA loan, the following are some of the important factors you might want to know:

Loan Eligibility

Eligibility requirements are determined by the VA. Eligible individuals include veterans, military personnel, National Guard members, and reservists. A spouse to a military member who died on active duty or has disabilities related to military service can also qualify for a VA loan.

An active duty member qualifies for a VA loan after six months of service. National Guard and Reservists qualify after six years of service. If these members are called to active duty before this period is over, they only have to be on active duty for 181 days to be eligible. If it is during a war period, National Guard and Reservists become eligible after 90 days of continuous active duty service.

Advantages of VA Loans

The lack of down payment required is one of the primary benefits to VA loans. Another major advantage is the fact that the loan does not require mortgage insurance like most of the other conventional loans. The lack of mortgage insurance means that the VA loan borrower will be able to afford more or have a lower payment for the same home. For example, a borrower making a 3.5% down payment for an FHA-insured mortgage of $200,000 will have to pay $141 for mortgage insurance every month. A VA loan borrower will be saving this amount every month or can qualify for a higher priced home and pay that amount toward their mortgage.

Applicable Fees/Closing Costs

The costs of VA loans are lower than most other loans, but they do still have fees and closing costs. The loans have a funding fee which is determined by your military status and whether you have taken out a VA loan before. If you are in the active duty armed forces and are applying for the loan for the first time with no down payment, you will have to pay 2.15% of the loan amount as the funding fee. If you make a 5% down payment that drops to 1.5% and if you make a 10% down payment it is further reduced to 1.25% of the loan amount. National Guard members and reservists pay about a quarter of a percentage more than active duty personnel.

If you are applying for a VA loan for the second time, the fee will go up to 3.3%. For disabled veterans, the funding fee is waived.

Underwriting Requirements

While The Department of Veterans Affairs does not require specific credit score for borrowers, lenders have their own internal requirements. Most of the lenders who offer VA loans require a credit score of at least 620.  Some lenders will go as low as 580 but keep in mind that interest rates are higher for applicants with lower credit scores.

You are required to show that you have sufficient income to qualify for a VA loan. This is to make sure that you can make the required payments. The income requirements for VA loans are more flexible than those for many other loan types. The loan guidelines allow VA loan borrowers to use their home loan benefits one or two years after a foreclosure or bankruptcy. VA loans are only available for homes that the borrower will occupy. The loan cannot be used to buy an investment or vacation home.  You can use the loan to buy a house, a townhouse, or a condominium you will live in as your primary residence.

Loan Limits

While the VA does not put a cap on the maximum loan you can get, the lender is private and this means they can impose their own limitations. The limit is the maximum amount of money the borrower can get without a down payment. The limit varies by the county and by the location of the home to be purchased.

What Else Can VA Loans Do?

VA loans have a variety of benefits beyond their low interest rates on lack of required down payment. These other benefits include the ability to get cash out for improvements such as storm windows, doors, insulation, and energy efficiency features, as well as any other home improvements. If eligible, the loan can also be used to refinance an existing loan through an IRRRL loan without being required to verify your income.

What If You Don’t Pay the Loan?

Borrowers who have a VA loan and are struggling financially may be able to have the VA help them to negotiate loan terms.  This is only for borrowers facing severe and unforeseen financial difficulties though.

If you are a veteran, military personnel, a reservist, or a member of the National Guard, you may want to take advantage of a VA loan to help you to become a homeowner. The lack of a down payment requirement and the flexible guidelines of a VA loan will make it easier for you to purchase you very own home.