A VA home loan is a home financing program for eligible veterans, active duty military and their spouses to purchase, construct or improve a home. The VA home loan program is a home loan guarantee program sponsored by the United States Department of Veterans Affairs or VA.
Eligibility Criteria To qualify for a VA home loan, you must meet certain eligibility criteria related to your military service record:
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You must have completed at least 90 consecutive days of active duty in a designated wartime period. Some of the wars of the twentieth century include the Second World War, the Korean War, the Vietnam War, the Gulf War, and the War on Terrorism. It also includes disabled persons discharged from service irrespective of their period in service.
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You must have been on active duty during peacetime for more than 181 days in a row.
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Another acceptable scenario is active participation in the National Guard or Reserves and at least six years of service.
- Other potential applicants include: surviving spouses of veterans who did not remarry and passed away in service or due to service incurred injuries or diseases.
Key Benefits A VA home loan offers several unique benefits for eligible borrowers, including:
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No Down Payment – It is also important to note that no down payment is needed when obtaining a VA loan. This makes it easier for the veterans and military families to afford a home in this country.
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No Mortgage Insurance – Unlike almost all other loans, conventional loans require the borrowing of a private mortgage insurance if the down payment was less than 20%. Moreover, the VA loans do not require the borrower to pay any monthly mortgage insurance.
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Fixed Rates – VA home loans come with lower fixed interest rates compared to non-VA conventional loans hence cheaper in the long run. They are typically 0. 5 percentage points lower on average.
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Credit Requirements – VA loans have less stringent credit score and DTI ratios compared to conventional loans. This makes more eligible veterans able to qualify.
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VA loan gives you the freedom to pay your loan earlier or even refinance at some point in life without the VA demanding any prepayment charges. This gives even more flexibility in respect of funds.
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Closing Costs – Another advantage is that the closing costs can be added to the loan instead of paying cash. This avoids situations where there are high initial costs required to be paid when an organization chooses a particular type of technology.
Maximizing Your VA Home Loan Benefit The VA home loan benefits are non-expirable; thus, the buyer’s eligibility for the VA home loan does not expire. The benefit can be used more than once to buy a home or to take out a mortgage to refinance the home. However, there are limits on the loan amount you can qualify for:However, there are limits on the loan amount you can qualify for:
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The loan limit depends on the county like in the conforming loan limits dictated by the Federal Housing Finance Agency. VA publishes limits annually.
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In case a loan amount is above $144,000, a down payment for the part exceeding this amount must be made. Or you can pay 25% down payment to eliminate the limit.
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For VA loans, there are no restrictions on the amount of interest rate or points that a lender can set. Shop lenders for the best rate.
The property for which you are buying or refinancing a home must be your principal residence, where you are planning to live in the near future. However, it cannot be utilized for dwelling purposes or as a rented house or a holiday home. However, VA loans can be assumed by qualified veteran buyers in the event you decide to sell the home.
How to Apply Ensure that you work with a lender that provides VA home loans. Collect papers to substantiate your military service history and income/assets. The lender will guide you in completing the application and get a COE from VA on your behalf. It certifies to the lender that you meet the requirements of a COE.
From there, the lender will explain the mortgage process from application through underwriting approval to closing. VA appraisers will verify that the home being purchased is worth the price at which it has been sold. VA staff will also look at the loan terms with a view of ensuring that one is well dealt with in as much as the loans are concerned.
To sum up, VA home loans give an opportunity to obtain credit under favorable terms for veterans and members of their families. They are endowed with unique advantages that are not associated with traditional loans. If you served, the VA home loan should be strongly considered when looking to purchase or refinance a home.
