Whether you are a retired member of the U.S. military or still on active duty, a VA home loan could offer you significant benefits when financing a new home or refinancing your current one. If you have yet to take the plunge into homeownership, the program may also help you do so a bit sooner than you may have thought possible.
Do You Qualify?
To qualify for a VA home loan, you need to meet one of these criteria:
- 90 consecutive days on active duty during war time
- 181 consecutive days on active duty in peace time
- At least six years in the National Guard or Reserves
Additionally, surviving spouses of those who served may also qualify for a VA loan. To verify that you qualify, you can request a Certificate of Eligibility from the U.S. Department of Veterans Affairs.
Why You Want to Do This
VA home loans were created several decades ago to address the special circumstances military personnel face due to repostings and periods of deployment, as well as in recognition of service. As a result, they offer six key advantages over other types of home loans:
1. No down payment required. This limits the savings you need to commit to buying your home.
2. No mortgage insurance. Under other mortgage programs, borrowers whose down payments are less than the standard down payment amount usually pay mortgage insurance, which boosts their monthly payments. Mortgage insurance is not required under the VA program.
3. Limit on closing costs. VA home loans limit the amount of fees a lender may charge at closing, which can save you money.
4. Lower mortgage interest rates. As a government-supported program, the rates tend to be a little lower.
5. Flexible credit standards. Since the underwriting standards are more flexible, lower FICO scores than typically required by other programs are allowed.
The VA home loan program recognizes that active military personnel not only move frequently, they often have to move quickly. As a result, closings tend to be faster with this type of mortgage. This may also be due to the fact that it’s easier for participating VA lenders to verify income and be comfortable with its stability, given it comes from the U.S. government. In fact, VA lenders will even count your Basic Allowance for Housing (BAH) toward your income in their calculations, if you are still active. This could make it easier for you to qualify for a loan.
VA lenders also have more relaxed underwriting standards, which means they can work with borrowers who have lower credit scores than those allowed under other programs. That said, applicants under the VA home loan program should still try to follow the same advice civilians do when managing their credit: maintain the outstanding credit balance on each of credit card at 30 percent or less of the credit limit, be timely with payments, and avoid taking actions that will negatively impact a credit score, like opening and closing accounts. You can review your credit report by visiting AnnualCreditReport.com, which is free of charge. Discussing your credit and homeownership goals with a Loan Consultant is the best way to understand your loan options and move toward getting qualified.
There Is No Reason Not to Explore VA Loans
Due to the advantages the program offers, a VA loan can be an attractive option if you qualify for it. After all, it’s a valuable benefit, you’ve earned for your service.
This is a VA program. Current guidelines for VA Financing can be found at http://www.benefits.va.gov/homeloans/index.asp