Buying a home can be complicated and expensive. However, if you are a veteran, you can get extra help with a Veterans Administration (VA) mortgage loan.
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You’ve served your country, and now you have the chance to get a home loan that works for you. Here’s what you need to know about the VA mortgage:
What is a VA Mortgage Loan?
First of all, it’s important to understand that, even though these are loans backed by the Veterans Administration, the government doesn’t make the loans. Instead, your mortgage is originated by an approved lender. The government guarantees the loan, so lenders are more willing to provide better terms — and even take a bit of a risk on you.
Your VA mortgage loan can be used to buy a home or refinance an existing mortgage. There are also cases in which you can use funds from VA loans to repair your home.
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Eligibility for a VA Mortgage
For the most part, if you are a member of the military, a veteran, a member of the National Guard, or a reservist, you can qualify for a VA mortgage. You need about six months of service to qualify if have been on active duty. If you are in the reserves or National Guard, you need to wait six years to apply — unless you get called up. Then, after 181 days of active service, you are eligible for the program. Another exception is during wartime when you might become eligible after 90 days of service.
You do need to get a certificate verifying your eligibility, however. You can learn exactly how to do that on the Department of Veterans Affairs website.
Down Payment Requirements for a VA Loan
One of the main benefits of a VA mortgage loan is that you don’t need a down payment. While a down payment can reduce your overall costs, if you’re struggling to come up with money to put down, you might not need to worry about it after all.
On top of that, you don’t pay mortgage insurance when you get a VA mortgage. With an FHA loan, you have to get mortgage insurance, and that adds significantly to the cost of your loan over time.
Depending on your situation, a VA loan could help you get into a home faster, since you don’t have to wait to save up a down payment, and you won’t have to worry about mortgage insurance.
VA Loan Fees
You do have a one-time fee to pay, though, with a VA mortgage loan. Your fee depends on whether or not you have a down payment, as well as what type of service you have given. The fee is also bigger if you are taking advantage of the program for the second time, rather than the first time. Finally, you can have the fee waived if you are receiving disability compensation.
If you want the lowest possible fee, you need to make a 10% down payment on your home and have completed the minimum amount of time on active duty.
Your Credit Score and VA Loans
Whenever you borrow money, lenders like to see that you are likely to make regular payments. One way to do that is to check your credit history. The VA doesn’t have minimum credit requirements for the program, but individual lenders might have their criteria. In many cases, mortgage lenders like to see a credit score of at least 620 before they commit the funds to your loan.
On top of that, some lenders will look at your income to make sure you are capable of making payments and ultimately repaying your loan. Finally, they are likely to look at your debt levels to see if the mortgage would add undue hardship.
Even with some of these requirements, though, in many cases, a VA mortgage loan is still more flexible than a conventional loan or even an FHA loan.
A VA loan isn’t a blank check for whatever mortgage you want, but it can help you find more flexible terms and afford a home. Double-check your situation and compare different mortgage offers to see if a VA mortgage is the right path for you.