VA home loans are a fantastic option for eligible veterans and come with many benefits.
If you’re a veteran, you may be aware of the fact that you can buy a house with zero down, but there are many more reasons why a VA loan could be a good choice for you.
Following are just 5 reasons why a VA loan is one of the best loans for veterans out there.
1. Generous eligibility
All branches of the military, including reservists and National Guard members and in some cases their spouses, are eligible to apply for a VA home loan.
Specifically, those spouses of veterans who died while on active duty or have become disabled while in service are eligible to apply as well.
After six months of active duty, veterans typically qualify whereas reservists and National Guard members must wait six years to become eligible, unless they’re called to duty. In such case they gain eligibility after serving for 181 days.
During war periods, however, National Guard, reservists and active duty members become eligible to apply after 90 days.
Anyone who wants to apply for a VA loan must present a certificate of eligibility from the VA, which can be done online. You don’t, however, have to have the COE in your possession to start the mortgage process. Lenders can obtain the document for you during the pre-approval phase if you’d rather not wait to apply.
Either way, the document can be easily obtained from the VA’s online portal.
2. No down payment, no mortgage insurance
As noted above, VA home loans allow members to buy a home with zero down. This is a huge advantage over most other mortgage programs.
FHA and conventional loans typically require a minimum of 3.5 to 5 percent down which means up to $12,500 for a $250,000 home loan.
On top of the large outlay of cash these other programs require, if less than 20% is paid down, mortgage insurance will be required which adds thousands more to the loan.
Mortgage insurance is not required, which can save borrowers tens of thousands of dollars over the life of the loan.
A one-time funding fee is required that varies in amount depending on the type of veteran applying and the size of any down payment they choose to make.
- Zero down payment – 2.15% of loan amount
- 10% down payment or more – 1.25%
- Zero down payment – 3.3% of loan amount
Disabled veteran – no fee
National Guard and reservists typically pay .25% more than active duty members
There’s also no prepayment penalty, so you can pay extra on your mortgage as much as you’d like.
4. Underwriting requirements
As these types of loans are considered benefits, lenders tend to be somewhat lenient, depending upon each individual’s circumstances.
The following underwriting requirements are typical with most lending institutions:
- Credit score – 620 or higher is the norm with lenders, although the VA doesn’t set a minimum required credit score
- Income should be high enough to repay the loan, with a minimum of debt (lenders will often be more flexible with this requirement)
- Even if you’ve filed bankruptcy or have been foreclosed on, VA guidelines allow individuals to use their benefits again within a year or two
- The loan must be for the home you plan to live in
- Loan limits can vary ranging from $417,000 to as much as $625,500 or higher, depending upon where the home is located and of course how much the borrower can afford
5. Can use more than one time
Many people are surprised to learn that your benefit can be used multiple times. Here’s how:
If you’ve used a VA loan to purchase a home but you’ve outgrown it, you can obtain another loan once the existing one is paid off in full when closing on the new home.
Eligible veterans and service persons who have paid off the loan on their residence, or who refinanced it with a non-VA mortgage, are allowed a one-time restoration of benefits.
Time has no effect on eligibility. Even veterans who served decades ago can still qualify to apply because eligibility is based on time and period served.
For example, a Vietnam era veteran who served at least 90 days is most likely eligible.