Helping Military Members Find Their Dream Homes
In an effort to repay the services of those who have fought for our country, the U.S. Department of Veterans Affairs (VA) supports a home loan that will make it easier and more affordable for military members and their surviving spouses to purchase homes. VA loans are typically easier to qualify for; they not only provide a home loan guaranty benefit, but also offer other programs and resources to help build, repair, and maintain your home. But what exactly sets a VA loan apart from other loans, and how do you qualify? Here are the answers to these questions and more.
VA Loan Benefits
As mentioned before, a VA loan is easier to qualify for. This is because the banks and lenders that offer the loan are backed by the government, and therefore assume less risk when loaning you money. In turn, your credit scores wont have as much of an affect in how much you get approved for. Instead, how much you receive is based on your pay grade, where you live, and how many dependents you have.
A huge draw for VA loans is that it doesnt require a down payment (unless the home you plan to purchase is more than the loan amount) or mortgage insurance, meaning it literally is no money down. Couple that with lower interest rates, which are negotiable, and limited closing costs and your savings start to significantly add up.
In addition, borrowers with a VA loan dont need to worry about a pre-payment penalty if they pay off their loan, or, if they choose to refinance to a lower rate in the future, they wont have to requalify for the program.
Only those with adequate income and credit, as well as a Certificate of Eligibility (COE), which is needed so the lender knows you are verified, can qualify for a VA loan. According to the VA website, COEs are only available to those who have not been discharged dishonorably, and meet at least one of these requirements:
- Veteran who has served 90 total days during wartime
- Veteran who has served 181 continuous days during peacetime
- Active duty service member who has served 90 continuous days
- National Guard or Reserve Member with 90 days of active service during the Gulf War, or six years of service
- Unmarried surviving spouse of a Veteran who has passed while on duty
- Spouse of a service member that is missing in action or a prisoner of war
- Surviving spouse who remarries after the age of 57
- Surviving spouse of a disabled veteran whose certain disability may not have been the cause of death
- S. citizen who served in the armed forces of certain governments allied with the U.S. in World War II
How To Apply
If you fulfill the requirements of a VA loan and have your COE, you can apply with any mortgage lender or bank that participates in the program, then complete the loan application as usual. Although the benefits of a VA loan tend to more favorable than other loans, lenders still set their own rates and terms, so shop around for the best offer. Also make sure you have all the paperwork and documents you need to make the loan application process go smoother.
Once youve found a home and put in an offer, the lender will request a VA appraisal, which estimates the homes market value. If the appraisal is approved and your income information checks out, the lender will grant the loan and the rest of the closing process will go on.
SEE ALSO: Finding The Right Mortgage Lender
There are some drawbacks to keep in mind if youre considering a VA loan. One of these downsides are the high fees. Since the loan doesnt require a down payment or mortgage insurance, some lenders will roll those fees into your monthly mortgage payments, and sometimes charge originations fees as much as three percent of the loan.
The lengthy processing time takes a while to verify, which can make it difficult if you already have an eye on a house, but are still waiting for your loan to be approved. The appraisal inspection is also stricter than usual. For example, according to VA appraisal guidelines, exposed wires, improperly installed handrails, and other signs of poor workmanship can eliminate homes from VA contention. This rigid guideline can severely limit the number of homes available for VA loan borrowers to choose from.
These disadvantages may put some people off, but the overall savings and less rigorous qualification standards give it a huge edge over other loans. So, if youre service member, past or present, and are interested in adding homeowner to your list of titles, consider going with a VA loan. More than 20 million veterans and their families already have.