You, like many veterans and active duty service members, may not realize that you are eligible for a VA home loan let alone know anything about its unique benefits. Ready to take a tour? Let’s get it!
Like any other home loan, a VA loan is offered by a mortgage lender … but with a BIG advantage. VA serves as a co-signer of sorts, guaranteeing a portion of the loan. That backing from VA makes you very attractive to lenders.
For most first-time home buyers, the down payment is a big hurdle to overcome. Who has that much cash lying around? The VA loan requires no down payment. (Epic, right?) This makes buying a home super do-able for a VA-eligible buyer. And if you do want to put down some money, you can save on your VA Funding Fee and may get a lower interest rate.
Because VA is guaranteeing part of the loan, lenders, who may require higher credit scores to qualify borrowers for conventional loans, give you a break. You can get a VA loan with a credit score of 620 or better, depending on the lender’s guidelines.
Home buyers who finance via a conventional loan and make a down payment of less than 20 percent are required to purchase private mortgage insurance (PMI). The insurance protects the lender from losing money should a borrower go into foreclosure. PMI usually costs up to 1.5 percent of the original home loan.
Because a VA loan is guaranteed, you, the buyer, get to keep that money in your pocket.
VA loans have some of the lowest interest rates on the market.
This feature comes in handy if you sell your house to a VA-eligible buyer. An assumable mortgage is one that a buyer of a home can take over from the seller with little to no change in terms. The buyer agrees to make all future payments on the loan as if he or she took out the original loan.
VA loans have the lowest rate of foreclosure of all home loans on the market, a fact that’s been true for several years now. The upshot? Rates tend to be competitively low and lenders want to work with VA-eligible borrowers.
Even with a cautious purchase and the safety net of the VA loan, things happen. If you should find yourself in bankruptcy or foreclosure, don’t freak out. While conventional home loans require that a buyer wait seven years after a foreclosure to apply, the VA loan only requires a two-year waiting period.
The VA loan appraisal process can seem like a blessing and a curse. Financing will only be granted to a home buyer if the house is in good condition. This situation can turn a seller off if he or she is afraid the home won’t meet the minimum requirements. But it also means that you’re buying a home that meets strict livability standards. The house you buy should be safe, structurally sound and sanitary, three things seriously important to VA.
There are many ways to break down the financial perks of a VA loan — for both the buyer and the lender. But at its core, it’s a benefit program, a “thank you” for your service.
Chris Birk of Veterans United Home Loans contributed to this post.