These modern times have made homeownership simpler than when you’d have to be quite wealthy to buy a home. Let’s face it, we are evolving, and each new day presents a different alternative to our world’s problems. Mortgage loans have significantly impacted how American residents approach home ownership quests.
This dependable means of buying a home has further stretched to particular groups in society. The disabled, widowed, elderly, and now military personnel or veterans can access home loans. VA loans are now becoming more popular as young lads are looking to start their homeownership journey while they are still young and vibrant in their military days. VA loans can be used to buy or refinance a house.
Many borrowers seek to educate themselves on how much they’d qualify for or what’s needed to vet them for a VA loan. But is that all that you should know about VA home loans? VA home loans were introduced to provide active military persons and veterans with the opportunity to own a home. Nonetheless, other groups were added to the category, which now covers several service members. However, it remains true that they are only credited to qualified individuals.
VA Home Loans vs. Conventional Loans
Before we head over to the VA home loan requirements, let’s first go through the several differences that make them superior to conventional loans.
You’ll have to pay up to 20% of the down payment for conventional loans, but VA loans are issued with 0% down payments for qualified applicants.
Private Mortgage Insurance (PMI) is necessary for conventional loan applicants for borrowers who finance north of 80% of the home’s value. PMI is not essential for VA home loans since the government backs them.
VA loans have somewhat competitive interest rates compared to what you’d be offered on conventional loans. You’d require a significant credit score and a good bargain to get low rates on traditional loans.
VA loans are easier to qualify for as they serve as a complement for the effort in service. There are many requirements to meet for you to qualify for a convenient conventional loan.
VA Loan Eligibility, Requirements, and Verification
For a VA loan qualification, applicants ought to meet the minimum requirements set by VA, hold a valid Certificate of Eligibility, and satisfy the lender’s income and credit requirements. Brave men and women in the Army, Navy, Air Force, Military Corps, Coast Guard, Space Force, Military Spouse, and other VA-eligible applicants can apply. However, even people with no military experience can now apply.
Applicants who don’t meet the basic VA loan service requirements can also be eligible depending on their discharge type. Applicants who can also qualify for VA loans are those that fall into the following discharge categories:
Those discharged for hardships, a reduction in force, or at the government’s convenience.
Those discharged for a service-connected disability or other medical conditions.
Those discharged for early out. They must have served for a minimum of 21 months in a 2-year enlistment.
A home loan specialist such as Blake Mortgage will ensure you have all your VA home loan requirements and help you verify your eligibility status. COE is a crucial document in the VA loan application process, and there are three ways of getting the document. You can choose to:
Apply through a VA-approved home loan lender.
Go with an online application through VA’s eBenefits portal.
Send a mail application with VA Form 26-1880.
Your lender requires several documents during the application process, which differ depending on the section you’re serving. Despite the VA having control over the guidelines, private lenders also set their requirements to be met by borrowers. The basic ones include sufficient and reliable income to service your loan, a credit score best suited for the lender, and an acceptable level of debt.
Benefits of VA Home Loan
Successfully applying for and getting a VA loan has tons of benefits. According to its reputation and feedback from former and current VA loan beneficiaries, some of the advantages of a VA loan include:
No down payments – There are no down payments involved in VA loans. You can get your loan without paying anything upfront, which is very convenient for applicants.
Competitive interest rates – VA loans offer competitive rates compared to conventional home loans. They are slightly lower than the latter and can be negotiated further downwards if you have good overall scores.
Closing cost limits – VA aimed to cut as many costs as possible. There are few to no closing costs as most of the costs are pushed to the lender per the VA guidelines.
No prepayment penalties – You won’t be subject to a penalty if you pay your loan before the agreed loan period. While some lenders charge prepayment penalties, that’s not the case for VA loans, as you will clear the loan earlier without any penalties.
VA appraisal – The VA also gets to screen the property you intend to buy. This is crucial as it saves buyers from deals that look too good to be true. The VA appraisal involves establishing an appraised home’s value and ensuring the house meets the property requirements.
Varieties – There are different types of VA loans that you can go for. This will depend on the purpose of the loan, whether for buying or refinancing a house, the timeline you intend to pay the loan, the amount, and the terms you are comfortable with. It gives you options, which is a good thing for the borrower.
Exemptions of funding fee – In certain conditions, you can be exempted from the funding fee depending on the VA’s assessment of your application. This is a win for individuals unable to pay the funding fees.
No PMI – No Private Mortgage Insurance is required on VA loans because the government backs these loans. This will free you from sourcing for an insurer for your home loan.
Relaxed credit requirements – Unlike conventional loans, you don’t need a convincing credit score to get a loan and reasonable interest rates. Considering the financial position of most applicants, the VA factored in the credit requirements, and you can get a loan if you can pay up and not because of a good credit score.
Lifetime benefits – Once approved, VA home loans are a lifetime benefit. You can take a VA home loan any time, several times, and several of them at a time. It gives you lifetime security so you can always buy or refinance a home.
Foreclosure avoidance – The VA has invested in the rules to ensure that the program benefits as many veterans as possible. The loans are available, and there is no risk of having your loan closed, which makes it safe.
Adequate income – You can apply for a VA home loan with your payment. You don’t have to earn six figures to get a VA loan. The terms will be made depending on your income capacity.
No loan limits – You can get as many funds as possible when applying for VA loans. There are no limits on the amount of money or times you can get VA loans.
Who Created The VA Loan Program?
The United States government created VA loans in 1944 to help returning service members buy their homes without worrying about excellent credit scores or down payments. It was a good gesture and goodwill for men and women who have risked their lives to protect the people of the USA. This remarkable program has facilitated over 25 million VA home loans to active military officers, vets, and their families, helping them buy or refinance their homes.
What’s The VA Guarantee?
Despite VA loans being a federal program, the US government doesn’t give direct loans to applicants. Instead, private lenders such as Veterans United Home Loans finance the loans, which the Department of Veterans Affairs guarantees. The guarantee is purposed to protect the lender in case the borrower defaults. This triggers such lenders to offer better deals compared to conventional loan lenders.
Do VA Loans Have Limits?
Fortunately, that entirely depends on the lender. A qualified applicant with their full VA loan entitlement is liable to borrow any amount, as much as the lender can give. Loan limits are only applicable in cases where the applicant doesn’t hold a full VA loan entitlement. You can fall short of that because you have another VA loan or lost a previous VA loan to foreclosure.
What is VA Funding Fee?
A VA funding fee is a cut sent to the VA to keep the program running for future military officers and vets homebuyers. It is meant to remove any additional burdens off veterans and taxpayers. However, the funding fee varies depending on the applicant’s circumstances:
2.3% of the home’s purchase price is charged for first-time VA loan applicants.
3.6% for subsequent use of the VA home loan.
0.5% for IRRRL (Interest Rate Reduction Refinance Loan) regardless of the times you’ve utilized the benefit.
VA can roll the funding fee into your total loan amount if requested. The VA also limits any closing costs for the vets. It allows the sellers to cover most, if not all, of the expenses. The VA sometimes exempts some vets or surviving spouses from the funding fee. However, the most common compensation given is one for a service-related disability.
A VA home loans calculator can help you get the exact amount of the loan and the minor details, such as the funding fee.
Is VA Home Loan a Good Alternative?
VA home loans are arguably the best home loan alternative on the market. They are backed by multiple significant benefits and have minor qualifications. They are flexible and can even forgive poor credit scores. However, their low-interest rates make them the go-to solution for many applicants.
What’s VA Loans’ Performance in the Current Real Estate Market?
Despite being limited to specific service men, every aspiring homeowner would be dashing to get their share of VA loans. They are famous for their terms and have helped countless veterans achieve their home ownership goals, considering how tough it might have been against other lenders, provided they have poor credit scores. The VA reported 1.4 million successful backed loans in the Fiscal Year 2021. The program has also encouraged young homeowners, as serving military officers qualify for VA loans.
How Can I Get a VA Home Loan?
It would be best to approach a reliable lender familiar with VA home loans to take you through all the details. The first process is preapproval which can be carried out through your device (mobile phone, tablet, or laptop). This will allow you to source and make an offer for your dream home. The preapproval gives you the buying power to intrigue the listing agents and sellers of your purchase ability. Once that’s in check, you can begin your application process.
Can I Get a VA Home Loan Again?
VA home loans are not a one-time alternative. You can always get another VA loan since once you earn your VA loan benefit, it lasts for a lifetime. You can use the VA loan multiple times and have several active VA loans simultaneously.
What’s In It for the Sellers and Lenders?
The sellers are assured that their property on sale will be paid off in full. This is also a safe alternative for them as the government will be involved. As for the lenders, in one way or another, whether the borrower can or not, they are assured that they will get their money back. They are also guaranteed many borrowers on their doorstep, which is good for business.
What is the VA Home Loan Process?
The experts follow a systematic procedure when applying for a VA loan. The steps involved are;
Get the VA loan preapproval
Begin your house hunt
Get under a contract
Have your VA home loan underwritten
VA loan closing.
After all, is said and done, you’ll sign the paperwork and have the property’s keys handed over to you.