VA home loan is an initiative of United States Department of Veterans Affairs and was established in 1944 following the signing of the Servicemen’s Readjustment Act. It was an attempt to assist the World War II veterans to get back into civilian life by providing them with mortgage loans that they could easily afford. Since then, over 25 million veterans have benefited from VA loans and it has become one of the most popular and successful government mortgage programs. But how exactly do VA loans work and what makes them different than conventional mortgage programs?
To be able to qualify for a VA home loan, one has to undergo a qualification process just like any other form of loan. In order to use the VA home loan and realize the benefits it provides, certain conditions must be fulfilled. First of all, one must be a veteran who has spent at least 90 days serving during war time or 181 days during peacetime and has been discharged under honorable conditions or under general discharge. You also need to have a valid Certificate of Eligibility that shows the period and nature of your military service. This certificate is acquired from your lender. However, VA loans also come with income and credit requirements that meet the qualifications of a majority of lenders though the requirements are less stringent than those of conventional loans. The only thing you need to understand about the VA loan program is that as long as you qualify for it based on the above factors, then you can benefit from all the pros and cons that come with this loan package.
This paper aims at providing insights on the VA loan approval process and the factors that can lead to the approval or rejection of the loan request. It is to note that the procedure of getting VA home loan approval and finally closing the loan is quite similar to that of a conventional loan. When purchasing a property, you will have to supply your lender with proofs of income, assets, military service, and financial background. From there, they will decide the loan amount as well as the term that you are eligible for. VA loans do not require a down payment or mortgage insurance so generally the maximum amount you can borrow will be higher than with other loans.
Once you locate a home you wish to buy within your qualified loan amount, the lender will then complete an appraisal of the property, provide a loan estimate that includes closing costs, and prepare all documents needed for the closing. It will also involve an upfront VA funding fee that is a proportion of the total amount of the loan. It usually takes 30 to 60 days for the delivery of the closing on average after accepting the offer. And voila’ you will own the keys to your new home through a VA home loan.
VA loans have a number of benefits, which include the following. In this tutorial, we will discuss the benefits of financing your home with a VA mortgage rather than a conventional loan. Here are some of the top benefits:Here are some of the top benefits:
No Down Payment Required VA loans are not like traditional loans that usually come with the 3-20% down payment requirements; rather, they do not require any down payment to begin with. This eliminates the biggest challenge that working class and first time homeowners face in their quest to own homes.
No Monthly Mortgage Insurance Private mortgage insurance – optional for conventional loans but can cost you between $200-$300 extra per month if you put down less than 20%. VA loans do not charge this expensive and unneeded factor.
Lower Interest Rates VA loan interest rates are usually 0. 5 – 1% lower than those of conventional or FHA mortgage loans. This results to significant amount of money being saved over the course of ones loan period.
More Flexible Credit Guidelines VA loans are more flexible than most loan programs in terms of credit scores and debt-to-income ratios for borrowers. Depending on other factors one with a low credit score of 580 may be considered.
No Prepayment Penalties VA loans allow borrowers to refinance and pay before the due time without extra charges. This is useful in case you want to sell your home or if you decide to refinance in the future.
Financing of closing costs is allowed but this should not be done in a way that compromises the ability of the borrower to pay off the loan. This only leaves the VA funding fee that cannot be avoided but nearly all the closing costs can be incorporated into your loan if necessary. This minimizes the amount of cash that you will be required to bring to the closing table.
Assumable Financing If you ever decide to relocate, VA loans can be assumed by the new homeowner, thus enabling the new person to take over the loan and terms instead of needing to seek another mortgage. This increases the chances of finding a buyer for your home because it becomes more appealing to prospective buyers.
VA Loans Protect Borrowers Thanks to the governmental support, VA loans provide borrowers with many benefits if they face some difficulties such as deployment, disabilities, job loss, etc. Possibilities to defer payments, to have forbearance, to modify the loan, and much more are given to the borrowers if they need them and use VA loans.
How Much Can You Borrow? As a result, many people want to know if VA loan limits exist due to the fact that no down payment is needed. The answer to the question is that, yes, there are limits when it comes to the amount the VA is willing to guarantee. For 2023, the base amount of the loan for which any qualifying borrower is entitled is set at $759,000. Nevertheless, some counties of the United States of America are characterized as high-cost areas and, therefore, allow for higher VA loan limits of up to $1,074,000 for certain regions. This is the amount your lender will tell you that you are eligible to borrow.
Is A VA Mortgage Right For You? To sum it up, VA home loans provide great opportunity to the members of the military and veterans who want to purchase a home with low and fixed rates, no down payment and numerous borrower protections. If you are a veteran who wishes to own your piece of the American dream, it is always advisable to check if you qualify for the VA mortgage to enable you to achieve your dream of owning a home.
