Every past, or present, military member should explore a VA home loan option. Most Veterans have probably heard of a VA loan, but don’t know too much about them. They may know bits and pieces of the process but aren’t on top of all the guidelines and qualifications.
With a VA loan you don’t need a sizable down payment and you may be able to qualify with less than perfect credit. The government wants to do everything in their power to offer affordable, and easy, home loans to our Veterans. If you have served you need to talk to a local lender about a VA specific loan. Here are four important benefits you may not be aware of.
No down payment. One of the biggest hurdles for most first-time homebuyers is the down payment. They see the benefits of homeownership but are hamstrung by their lack of savings. With a VA loan an eligible borrower does not need any money for down payment, it is a true no money down program. They are still responsible for any closing costs or property taxes, but those can also be absorbed by a lender/seller credit. On average all the buyer will need is 1-3% of the purchase price at closing. This is a much lower amount than any other program available to any other type of buyer. It is the single biggest advantage of a VA loan.
No Private Mortgage Insurance (PMI). There are several advantages of increasing the size of your down payment. Obviously, the smaller the amount of your loan the lower the monthly payment. But, there is also something called PMI that must be considered. PMI is the lenders insurance against default. Any loan with less than 20% down payment is subject to this additional monthly payment. With a VA loan the PMI option is waived, regardless of down payment. This is a short-term monthly savings of anywhere from $75 to $250, depending on the size of the loan. It is also a long-term savings in not having to pay this for the next 360 months.
Reduced lending guidelines. The average credit score in the US is a 695. With the range between 300 and 850 a 695 score is considered above average in the eyes of lenders. Generally speaking, if you want a home loan the lower your score the higher the required down payment. There are two basic exceptions to this. The first is on an FHA loan. FHA is another government backed loan with reduced loan guidelines allowing for a minimum of 3.5% down payment. They have a minimum credit score of 620, but with an increased monthly PMI payment. The second is for a VA loan. Lenders make their own guidelines, but most fall in the 620-minimum range. Additionally, there are some exceptions for the debt to income ratio. A VA loan may allow ratios close to, or in excess, of the standard 50% limit.
Flexibility. A VA loan is a government loan that is offered by most lenders. With that you can shop around to find the lowest rate and the lender you are most comfortable with. It is not uncommon to find a lender that will offer a VA rate a quarter point, or more, lower than another lender. Just because you are looking for a VA loan doesn’t mean you don’t have options. You can still find a lender that has the right fees and guidelines you desire.
If you have served in the military talk to your local bank or mortgage broker regarding eligibility. The process is much easier than you may think and may just be the key to getting you in your dream home.