VA Loan - Everything You Need to Know
The VA Loan program has helped more than 24 million service members become homeowners since 1944.
If you’re a service member thinking of buying you are most likely weighing using your VA Loan option.
Here, I would like to breakdown the VA Loan and provide everything you need to know about the program.
What is a VA Loan?
A VA loan is a $0-down mortgage option issued by private lenders and partially backed, or guaranteed, by the Department of Veterans Affairs (VA).
Eligible borrowers can use a VA loan to purchase a property as their primary residence or refinance an existing mortgage.
How Does a VA Loan Work?
The Department of Veterans Affairs (VA) does not make or originate loans, but backs a portion of each loan against default.
If you have a VA entitlement, the agency typically guarantees up to a quarter of the loan amount.
This backing, or guarantee, is what gives private lenders the confidence to extend $0 down financing and advantageous rates and terms.
Is the home-buying process different with a VA Loan?
From a process perspective, VA loans work fairly similar to most other mortgage options, but with a few caveats like obtaining a VA appraisal as opposed to a conventional appraisal.
Once under purchase contract, your lender will order a VA appraisal of the property.
The VA appraisal ensures the property meets fair market value and the VA's minimum property requirements.
What type of property can I buy with a VA Loan?
VA loans are for primary residences only and not intended for investment properties or vacation homes.
Although, you can use it to buy a duplex or another multiunit property, provided you live in one of the units.
If you're planning to buy a fixer-upper, the VA loan may not be for you.
It's mainly designed for properties in "move-in ready" condition, including single-family homes, condos, modular housing, some multi-unit properties and more.
What are other benefits to the VA Loan?
We already covered that VA Loans are guaranteed by the government giving lenders confidence to lend service members $0-down mortgage loans with great rates.
Here are a few more upsides to the program:
THERE'S NO LIMIT TO HOW MUCH YOU CAN BORROW.
With the VA loan benefit, qualified veterans can borrow as much as a lender is willing to give them, all without the need for a down payment.
THEY DON’T HAVE A PREPAYMENT PENALTY.
You can make extra payments any time you want, saving you a boatload in interest over the life of your loan.
THEY DON’T HAVE MORTGAGE INSURANCE.
Mortgage insurance is a monthly fee you pay with other programs when you're not putting at least 20 percent down.
The VA's guaranty eliminates the need for any mortgage insurance or mortgage insurance premium, helping borrowers save even more money each month.
THEY’RE REUSABLE.
You can use your full VA entitlement over and over again as long as you pay off the loan each time.
But you may be able to obtain another VA loan even if you've lost one to foreclosure or currently have one.
THEY’RE AVAILABLE DESPITE FORECLOSURE OR BANKRUPTCY.
Service members with a history of bankruptcy or foreclosure can secure a VA loan.
Even borrowers who have had a VA loan foreclosed on can still utilize their VA loan benefit.
How hard is it to get a VA loan?
For eligible Veterans, VA loans are relatively easy to qualify for due to their relaxed credit score requirements (640 min fico), no down payment, and no maximum loan limit.
How do I become eligible for a VA Loan?
When getting pre-approved for a home loan, your Loan Officer will assist you in obtaining your VA Certificate of Eligibility which verifies you are eligible.
You’ll need a copy of your DD-214 for veterans or a statement of service letter signed by your commanding officer for active military.
TO BE ELIGIBLE YOU MUST MEET ONE OF THE FOLLOWING REQUIREMENTS:
You have served 90 consecutive days of active service during wartime.
You have served 181 days of active service during peacetime.
You have more than 6 years of service in the National Guard or Reserves.
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.
Conclusion
The VA Loan is a great government backed loan program with more lenient qualifications and allowing you to buy a home with zero money down.
If you’re a service member or veteran looking to buy, you should consider asking your mortgage lender about your VA Loan benefits.
If you don't have a lender, contact me to refer you to a quality Loan Officer that will work with you every step of the way through the buying process.
