No money down
Conventional home loan programs require down payments to purchase a home. But, the VA Home Loan does not. So, instead of paying upwards of 20 percent of the home’s purchase price, the VA Home Loan benefit allows you to finance up to 100 percent with no down payment. See VA funding fees here.
No monthly mortgage insurance
Conventional lenders will usually require mortgage insurance when down payments of less than 20 percent are made as private mortgage insurance (or PMI) to protect lenders if you default in repaying your loan. Because the federal government guarantees a portion of your VA loan, VA Home Loans require no down payment and no need for mortgage insurance.
Low minimum credit score
VA loans require an acceptable credit history and sufficient income to make your mortgage payments. But, as compared to other home loan programs, the VA guidelines are more flexible. Because of the Department of Veterans Affairs guarantee, approval for credit scores below 580 is possible.
Limits on closing costs
The Veterans Administration sets fixed limits on closing costs charged to Veteran applicants. The money you save on closing costs can provide money for home improvements or much-needed furnishings for your new home.
A common misconception about the VA Home Loan benefit is that it’s only a one-time benefit. This is not true! In fact, you can have more than one VA loan at the same time.
Competitive interest rates
Since the Veterans Administration guarantees a portion of every VA loan, in many cases lenders are able to offer lower interest rates to Veteran borrowers compared with other loan programs. On average, these lower rates are approximately 0.25 to 1 percent lower than traditional rates.
VA Home Loan Limitations
You cannot use your VA Home Loan benefits to purchase a vacation home or rental property. However, you can buy a new primary residence if you have lived in your prior home for at least 12 months. Likewise, you can use your benefit to purchase a 2-4 unit home, but it must be your primary residence.
Who is eligible to receive VA home loan benefits?
Do you have the proper service requirements to get a VA loan?
To qualify for the VA home loan benefit you must be a current or former service member. If you are a Reservist or National Guard member you can qualify as well. If you are currently receiving compensation for a service-connected disability you may find the VA Home Loan beneficial.
Private lenders, banks, and mortgage companies provide loans themselves. A percentage of your VA loan is guaranteed by the Department of Veterans Affairs. These terms may be more favorable than other home loan programs.
If you or your deceased spouse served a minimum of 90 consecutive days of active military duty during wartime, or a minimum of 181 days of post-wartime service, or served a minimum of 6 years in the National Guard or Reserve, you may be eligible for a VA Home Loan benefit.
VA Lenders and the Veterans Administration have income requirements that must be met in order to qualify for a VA Home Loan. These types of requirements vary from state to state and also take into account your family size and the size of your home. The bottom line on income requirements is you must have enough income to carry your current debt including your new mortgage payment. On average, the VA has placed a maximum debt-to-income ratio of approximately 41%, but in some cases, a higher ratio is allowed.
VA loans do not have specific credit scoring requirements. Lenders set their own standards for risk. However, VA loans do require borrowers to have no delinquent accounts in the last 12 months unless there are extenuating circumstances that caused the delinquency or the delinquency reporting by a creditor is disputed. It’s best to wait at least two years before applying for a VA loan after bankruptcy or foreclosure, but in some cases, loan approval is allowed 12 months after a bankruptcy or foreclosure.
Certificate Of Eligibility (COE)
If you’re eligible for a VA Home Purchase Loan or Cash Out Refinance, you’ll need to prove to lenders you qualify by getting a Certificate of Eligibility. A surviving spouse may only apply for eligibility through a lender like HomePromise or via mail. If you are a surviving spouse, then apply for a COE with HomePromise today.