Why a Veterans Affairs (VA) Loan? Among other things, a VA home loan can be used to:
- Buy a home or a condominium unit
- Build a home
- Simultaneously purchase and improve a home
- Buy a manufactured home and/or lot.
Currently, banks are requiring large down payments for many types of loans, putting home ownership out of reach for many prospective buyers. A VA loan still allows the borrower to buy a home, up to a loan amount of $417,000, or even higher in designated high-cost areas, with no money down.
A VA Loan offers two benefits which can substantially lower your monthly payment:
- Private Mortgage Insurance (PMI), an added monthly expense required for conventional loans where the borrower finances more than 80% of the home's value, is not required on a VA loan
- VA home loans are backed by the government, meaning banks can assume less risk with the loan and possibly price it lower than a rate for which you would qualify from a bank. The interest rate offered on a VA loan may be significantly lower in comparison to the rate on a conventional loan. A lower rate combined with monthly PMI savings can substantially lower your monthly payment.
Getting qualified for a VA loan is easier
The qualification guidelines are less stringent for VA Loans. Because the loan is backed by the government, banks have relaxed the strict lending rules for VA Loan applicants, making VA loans easier to obtain.
Additional Benefits of VA Home Loans
- VA home loans have more lenient credit and debt ratio guidelines. You may qualify for a VA loan even if you can’t be approved for other loan types
- The VA program won't deny a loan based solely on a low credit score, and most lenders don't tier interest rates for better scores. The VA program usually looks at only the previous 12 months of credit history, unless bankruptcy, a tax lien or a collections issue factors into your situation
- Borrowers can often refinance to a lower rate within the VA program without re-qualifying for the program through the VA Streamline Refinance Loan
- With a VA loan, you can refinance or sell your home at any time without penalty
- The seller is allowed to pay all of your closing costs up to 4% of the purchase price
- If the borrower has a service-related disability, they may qualify for the lender to waive the funding fee, further reducing closing costs.
Eligibility for a VA Home Loan
In comparison to other mortgage loans, a VA-guaranteed loan has much more flexibility regarding FICO score requirements. Sufficient income, a valid Certificate of Eligibility (COE), and other criteria are required as well. The home must be for your own personal occupancy. The requirements for active service members, veterans, spouses, and other beneficiaries to obtain a COE vary, depending on the nature, period and duration of the service. Please contact your mortgage professional for additional information, for help in determining your eligibility, and to get pre-approved for your loan.