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What You Need to Know About Getting a VA Loan

By on April 6, 2017     Views: 361

Demand has been sizzling for Veterans Affairs mortgages, better known as VA loans. In fact, last year’s 700,000-plus loans were more than double the agency’s total from five years ago.

These low-interest loans are home loans designated specifically for qualifying U.S. military veterans, active military members, and eligible surviving spouses who are wanting to purchase a primary residence. And they offer qualified borrowers a wealth of benefits.

VA loans are backed by the U.S. Department of Veteran Affairs as an effort to help qualifying individuals receive favorable terms on a home loan and become homeowners. The VA is not the direct lender that actually lends anyone money. Rather, the loan is made through a private lender (banks, savings and loans, or mortgage companies) and guaranteed by the VA who backs the loan and reimburses the private lender if borrowers default on them. Because this provides a safety net for private lenders, VA loans are widely available and at a reasonable cost.

Advantages of a VA loan

The VA loan program is offers some of the most attractive and flexible loans available, for military personnel, veterans and their families.

1. No down payment. One of the biggest benefits that make these loans more appealing and affordable than a typical loan is the borrower typically does not need to make a down payment. The average VA loan last year was for about $253,000. Getting a conventional loan for that amount often requires a down payment of at least $12,000. FHA loans require at least 3.5% down. That’s no small sum in either case, particularly for younger veterans and military families. With VA loans remaining one of the few mortgage options for borrowers who don’t have the money for a down payment, these type of loans can make home ownership a reality for active military or veterans who might otherwise not be able to afford it.

2. No mortgage insurance. A second advantage of a VA loan is that there is no private mortgage insurance (PMI) requirement since the loans are guaranteed by the VA. Conventional buyers typically need to pay for private mortgage insurance unless they can put down 20%.

3. Flexible credit guidelines. A final benefit of VA loans is that that have flexible credit guidelines. Since VA loans were created to boost access to homeownership for veteran and military families, they’re naturally more flexible and forgiving when it comes to credit underwriting. Lenders typically have lower credit score benchmarks for VA loans than for conventional mortgages. Last year, the average FICO score on a VA purchase last year was 50 points lower than the average conventional mortgage score. Compared with conventional borrowers, qualified VA buyers can also bounce back faster after a bankruptcy, foreclosure, or short sale.

Eligibility

VA loans are designed for military personnel, veterans, and military families. The list of those who are eligible for this home-buying military benefit include:

  • Veterans
  • Active-duty personnel
  • Reserve members
  • National Guard members
  • Some surviving spouses

Potential borrowers must also have suitable credit, sufficient income, and a valid Certificate of Eligibility (COE) from the VA proving you are eligible for a VA loan. This form can be found online or a lender can request one on your behalf.

What’s the Maximum VA Loan a Veteran Can Get?

According to the VA, there is “… no maximum that an eligible veteran may borrow using a VA-guaranteed loan.” However, there are county limits that must be used to calculate the VA’s maximum guaranty amount for a particular county. In other words, there’s no limit to how much you can spend on your new home with a VA loan, but the VA has limits on how much liability it will assume, which can affect the amount of money your lender will let you borrow.

Generally, an eligible veteran can get a loan up to $424,100 with no money down. That number can be as high as up to $721,050 for some counties and locations where there is a higher cost of living.

How to Find a VA Lender

There are many ways for veterans and military personnel to find a VA lender, such as getting recommendations from friends, or searching on the VA website. And just like conventional loans, it can pay to shop around and talk to several different lenders.

If you think a VA home loan is right for you, the next step is to do your homework and get mortgage quotes from competing VA home loan lenders.  Use this link to answer a few questions about the home you want to buy, and you’ll find a VA lender in minutes. Be sure to answer “Yes” to the question regarding whether you have served in the military so that VA loans will come up in your search results.

Timothy Chandler

About Timothy Chandler

Timothy Chandler is a frequent contributor to Smart Life Now. A Michigan native, Chandler grew up on his parents’ farm outside of Detroit. In college, he majored in computer science and went on to work as a consultant in New York’s Financial District. In his free time, when he’s not writing or cycling, he loves heading down to the racetrack with his car club.

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