What is the advantage of having a VA loan?
Since the 1940s, veterans have been able to take advantage of a loan program that’s insured by the Veterans’ Administration and which offers many benefits.
While many people realize that VA loans allow veterans to get into a home for no money down, they include a lot of perks that veterans may not know about.
Following are 13 benefits that VA loans offer:
No down payment
Conventional and FHA loans typically require a down payment of anywhere from 3.5% to 20% down towards the purchase of a home.
In addition, borrowers who put down less than 20% are required to purchase private mortgage insurance (PMI) that can add significantly to the costs of their loan – by as much as 1% of the property’s value.
This means that a $250,000 home will see buyers paying an additional $2,500 per year for their home loan!
VA loans, however, don’t require a borrower to make a down payment, nor are they required to pay any mortgage insurance.
This can be a huge benefit to veterans and their families.
You might be asking yourself, how many times can you use a VA home loan. Well the good news is that you can take out a VA mortgage multiple times throughout your life.
Once you’ve paid off your mortgage, either through paying it off or refinancing with a non VA loan, you can take out another VA loan.
This is a useful feature of a VA mortgage as families tend to move house many times throughout their lives.
You’re always eligible
Your eligibility is based on the time and period you served, not how long ago you were in active duty.
In short, once you’ve obtained your Certificate of Eligibility you’ll always be eligible to obtain a VA mortgage.
Your loan will come from a lender, however the mortgage is insured by the Veterans’ Administration which means that even if a veteran defaults, the lender is reimbursed.
The “VA guaranty” that’s extended to lenders encourages them to provide the generous terms to veterans that they do.
The lower the perceived risk to a lender, the lower the rates they are willing to offer, as evidenced by a report in August of this year which found that VA mortgage rates were .33% lower than conventional loans.
In addition to the VA Guaranty, lenders realize that foreclosure rates of VA mortgages are among some of the lowest of any type of loan.
Refinancing when mortgage rates drop is much easier with a VA loan. With the Interest Rate Reduction Refinance Loan (IRRRL) borrowers can refinance without the need for some documentation such as W-2s, bank statements or even a new appraisal.
And if you want to cash out some of your equity, a VA cash-out loan will give you the difference between your old and new loan when you at closing.
How to get a VA loan with bad credit
While a credit score requirement is not part of VA guidelines, lenders will make some stipulations. It is, however more difficult to be disqualified from a VA home loan based on your credit.
The VA guaranty and leniency in underwriting guidelines encourages lenders to consider borrowers with less than stellar credit, and even prior bankruptcy.
Funding Fee Waivers
A funding fee – typically 2% of the mortgage amount – is typically added onto the loan. This ensures that future veterans are able to secure the same benefits that veterans now enjoy.
In the following situations, however, veterans aren’t charged this fee:
- if you’re disabled because of your service
- if you’re on active duty pay
- if you’re receiving retirement
Types of homes
In addition to single family detached homes, veterans can choose to buy a condominium, assuming it’s in a community that’s approved by the VA. A condominium search tool is maintained by the VA to assist homebuyers in finding an approved community.
Ease of application
The VA requires you to obtain your DD Form 214, which can be provided to your VA-approved lender who can help you obtain your Certificate of Eligibility.
Another option is to visit the VA’s eBenefits website for your COE (Certificate of Eligibility).
You don’t, however, have to wait for the COE to begin the lending process; your approved Sparks VA loan lender can do a lot of the paperwork for you while you’re waiting.
Note: VA loan financing for disabled veterans is just as easy as it is for non-disabled veterans.
You might be surprised to learn that veterans and most active-duty members are eligible to apply for a VA loan after serving for only six months.
The spouses of military members who died while on active duty or as the result of a disability caused by their service are eligible to obtain a VA loan.
In 2015, the VA maintains that more than 3,000 spouses were able to obtain financing as a result of this benefit.
Branches of service
Even members of the National Guard and reserves can apply for a VA mortgage, however they must:
- wait six years to apply unless called into active duty
- if they’re called to active duty they can apply after 181 days
- during war time, they may be able to apply after only 3 months (90 days)
As an approved Reno VA loan lender, we’re honored to help our country’s heroes finance their dream home.
Contact us to find out more about the loan programs we offer and how to get started.