If you’re a veteran or active military member trying to buy a home, the VA home loan is one of the best programs available to you.
Veterans don’t need a down payment and the program has flexible underwriting guidelines. The VA makes it easy for veterans to buy the home of their dreams.
Top VA Loan Benefits
VA loans have many benefits that other loans (even government-backed loans) don’t offer including:
No down payment
Veterans don’t need to put any money down on a home. They can borrow 100% of the home’s purchase price as long as they qualify for the loan amount, and prove they can afford it. VA loan is the only program that has a no down payment option.
VA loans don’t have loan limits
VA loans don’t have a limit. As long as you prove you can afford the loan amount, you can borrow any amount. This is unlike FHA loans, which have a loan limit based on the average home price in the county.
For example, if you want to buy a home for a million dollars, you can do so without a down payment! As long as you qualify for the loan and can afford to make the monthly payments. This would be called a VA jumbo loan.
Low credit score requirements
VA doesn’t have a minimum credit score requirement. Most lenders, though, require a 620 or higher credit score. Compare that to a conventional loan with a 640+ credit score requirement and you see the benefit.
Every lender is different. We only require a 620 credit score.
No mortgage insurance
Most loan programs require mortgage insurance, especially with less than a 20% down payment. VA loans don’t require any mortgage insurance or a down payment. They only charge an upfront funding fee, which most veterans roll into the loan unless exempt.
With a VA loan, you may be able to qualify for more and your payment will be lower since there wouldn’t be any mortgage insurance.
No specific debt-to-income ratio requirements
Most loans have strict debt-to-income ratio requirements. It’s how you prove you can afford the loan. VA loans don’t get hung up on DTIs, like other loan programs. Instead, they focus on your disposable income. If you have enough money left each month after paying your bills, you can qualify for a VA loan.
Lower closing costs
VA limits the amount of closing costs veterans can pay. You will pay some costs, but they are often less than you’d pay on other loans. The VA also allows sellers to pay some of your closing costs to make it more affordable for you. Any closing costs credit would need to be negotiated when making purchase offers.
Funding fee options
Veterans pay a 2.3% funding fee the first time they use their VA loan benefit (with no down payment), and 3.6% on subsequent uses.. But if you don’t have the cash to pay it upfront, you can wrap it into your loan amount. When purchasing a home, the funding fee is the only closing cost that can be rolled into the loan. You may be exempt if you are receiving VA disability.
Read More: VA Funding Fee Chart
Veterans can assume your VA loan
If you sell your house to another veteran, they can assume your loan (take over your VA loan). This may make it easier to sell your home to veterans. However, this isn’t recommended.
Home Inspection Conducted by the VA
As part of the appraisal process, the VA appraiser/inspector verifies that the property up for purchase meets all living standards and codes established by the Veterans Administration. The home must be a habitable domicile in safe condition. Buyers are protected from purchasing a home that is in damaged or unsafe condition by the VA. The plumbing, roof and furnace (among other areas) will be inspected by the VA inspector.
Please note: We always recommend getting a home inspection in addition to the VA appraisal. A home inspector will be able to provide much more detail about any repairs that are required.
VA Streamline Refinance for lower rates
VA home buyers can always refinance to take advantage of lower rates without having to worry about providing employment and income documentation or getting an appraisal.
No pre-payment penalty
The majority of traditional loans call for a pre-payment penalty. This means, that in the event of a home being sold or refinanced; the lender will potentially charge you fees as a result of an early full payment. Under some circumstance, this can amount to as much as thousands, or tens of thousands of dollars.
With a VA loan, there is no such thing as a pre-payment penalty. The loan can be paid off at any time without any penalties.
VA home loans generally carry extremely low interest rates. Since the VA loan is a government loan, it usually has lower rates than most of the other loan programs available.
A VA Home Loan with a fixed rate will never increase. Because the interest rate is set for a period of time that may be as long as thirty years, the veterans monthly payments will remain unchanged for the life of the loan.
Are VA loans harder for sellers?
It’s an old myth that VA loans are harder for sellers. Today, VA loans work like any other loan you can get. The appraisal isn’t any harder than other loan options, and the terms are more flexible for buyers that widen a seller’s potential audience.
What is the minimum credit score for a VA loan?
The VA doesn’t have a minimum credit score requirement. They leave it up to the lender and most lenders want a 620 credit score. But with compensating factors (a low debt ratio, down payment, etc.) you may get approved with a credit score as low as 580.
What is VA entitlement?
After you serve enough time in the military, you earn entitlement. This is what tells lenders you are eligible for a VA loan. All qualified veterans get full entitlement right away. Once you buy a house, you use up the entitlement equal to your loan amount. The entitlement remains tied up until you sell the home AND pay off the loan in full.
Do VA loans take longer to get approved?
No, VA loans don’t take any longer than any other loan program. The time it takes to go from application to closing depends on the lender and their workload. The VA doesn’t look at the loan – they only set the requirements for VA lenders.
Who pays for the VA appraisal?
Borrowers pay for the VA appraisal. It’s an approved fee and may cost anywhere from $450 – $800 depending on where you live.
Take Advantage of your VA Home Loan Benefits
If you served in the military, take advantage of your VA home loan benefits. You don’t need a down payment and don’t even need perfect credit or a low debt-to-income ratio. As long as you prove you can afford the loan, you’re in good shape to get loan approval to buy the home of your dreams.
Since the Department of Veterans Affairs first rolled out the VA housing loan program as part of the Original GI Bill, 20 million veterans have taken advantage of it to secure a mortgage. Although the financial backgrounds of the men and women who use the loan are varied, many borrowers would not have otherwise been able to secure financing. According to National Mortgage News, the typical VA loan borrower has below $7,000 in total assets. Eighty percent of individuals who take out the loan would be unable to qualify for a conventional loan. Currently, a millions active mortgages were acquired through the VA loan. Despite the benefits of the program, the popularity of the loan is a relatively a recent phenomenon. Only thirteen percent of the 22 million American Veterans living in this country have used the entitlement.