Everything you need to know about VA loans
Owning a home is something that everyone deserves the chance to obtain. Those that have served the country or are currently serving and their families are certainly deserving of this benefit. While conventional loans are an option for active-duty service members, veterans, and surviving spouses, there is an even better alternative for those looking to buy a home.
Loans Backed by the Department of Veterans Affairs
The Department of Veterans Affairs looks out for current service members, veterans, and their families by insuring a specific category of home loans known as VA loans. The VA loan benefit reduces the burden of purchasing a home for qualified candidates, allowing them to achieve their dreams of homeownership. Unlike conventional and FHA loans, this mortgage option is only available to a select group of people who have been involved in military service in some capacity. Since the federal government partially subsidizes these loans through this home loan program, any service member can have a better chance of affording the home that they desire. When lenders offer VA loans, you simply have to demonstrate that you qualify in order to obtain one.
Other Considerations
VA loan borrowers benefit from the program because of a lower mortgage payment, no down payment requirement, and no mortgage insurance. There are other advantages to the VA loan process as well. For example, determining your VA loan entitlement will inform you of the maximum borrowing amount that will not require a down payment. A full VA loan entitlement means that there is no maximum limit for borrowing.
Additionally, if you want to refinance loans on your home, you can apply for a VA cash-out refinance. This allows you to borrow cash against the value of your home or refinance mortgages for better terms.
You are also allowed to take out a second VA mortgage if certain conditions apply. For example, if you have paid off a previous VA loan and still own the home, you may qualify. If you have enough left in your entitlement, then a new loan replaces current VA mortgage.
Factors that Affect Loan Terms
Whenever you apply for any type of home loan, there are going to be many factors that affect the terms of the agreement and the cost. Here is a brief breakdown of some of these factors that you should know about when applying for VA home loans.
VA Funding Fee
When you participate in the VA loan program, you will pay a one-time upfront fee known as the VA funding fee. This fee is part of the VA closing costs. It helps to lower the cost of the loan to taxpayers since there is no down payment requirement. Some exceptions may exempt you from having to pay the funding fee, such as a service-related disability.
VA Loan Limits
There are a few loan limits that will determine the status of the loan. First, the home you are buying must become your primary residence. Second, you must move into the home within 60 days of closing. Debt-to-income ratios and credit scores will also play a role in the VA loan limit requirements for eligibility. Some individuals may qualify for specific programs like the Native American direct loan initiative as well. Another limit that exists is a maximum borrowing amount with no down payment.
Candidate Qualifications
A VA-approved lender will only give out this type of loan to qualified individuals. If you are not an active-duty service member, veteran, or surviving spouse, then you will not be able to acquire any VA mortgages. You will also need to obtain a certificate of eligibility (COE) to inform VA lenders that you qualify for the VA home loan benefit. VA benefits are only available to these specific parties.
Closing Costs
VA loan closing costs also play a role in the total amount of the mortgage. There are many costs associated with this phase, including the funding fee, any real estate agent fees, attorney fees, and more. You can choose to wrap these costs up in the loan amount to slightly raise your monthly payments if you wish, or you can make a larger down payment to cover them.
What to Know About a VA Loan
If you qualify for a VA loan, then there are a few things that need to be taken into consideration, whether they are what VA loans require, the benefits, or the smaller details of qualifying.
No Private Mortgage Insurance
One of the biggest benefits of acquiring this type of mortgage is that it does not require mortgage insurance. A conventional loan or even an FHA loan will usually require private mortgage insurance premiums to be paid unless the borrower puts down a significant down payment. However, the backing from the Department of Veterans Affairs reduces the risk to VA-approved lenders, paving the way for private lenders like brokers, credit unions, and mortgage companies to offer loans without mortgage insurance requirements.
No Down Payment
VA loans do not require a down payment either. Though you can certainly make a down payment if you wish to lower the loan amount or decrease the lifetime of the loan, you do not have to make a down payment to obtain the mortgage. This is one of the ways that the VA home loan program significantly helps service members, veterans, and surviving spouses.
Low Interest Rates
Another benefit is the ability to obtain a low interest rate. While conventional loans usually yield higher interest rates that make more money for the mortgage lender, VA loans offer a reduced interest rate to lower monthly mortgage payments and the total cost of the loan amount. The better your credit score, the lower that rate will go.
Low Interest Rates
Another benefit is the ability to obtain a low interest rate. While conventional loans usually yield higher interest rates that make more money for the mortgage lender, VA loans offer a reduced interest rate to lower monthly mortgage payments and the total cost of the loan amount. The better your credit score, the lower that rate will go.
Determine Your VA Loan Eligibility Today
Unsure if you qualify for VA loans from private lenders for your next home purchase? Reach out to District Lending today and we can discuss the types of VA loans that are available and what VA loan benefits you qualify for. VA borrowers deserve to be rewarded for their military service to this country, so let's talk about your VA home loan.
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