Veterans Affairs Mortgages: What You Need to Know about Them

VA mortgages make it easier for a veteran to get the funds to buy a home. The biggest selling point for VA loans is that they do not always need down payments. Veterans Affairs does not give out the loans; it only guarantees active military members and veterans who want to buy homes.

A VA loan does not require mortgage insurance and there is no minimum requirement for credit scores. If you want to apply for this loan, here are some things that you need to know:

Eligibility Requirements

People who are eligible for VA loans include reservists, regular military, National Guard, and veterans. If your spouse was in the military and died because of a service-connected disability or in active duty, you can apply. If you are active military personnel, you have to wait six months to apply for a VA loan.

Advantages of VA Loans

If the VA guarantees your loan, you can get it without making a down payment. Moreover, you will not have to pay insurance for not making any down payment. This means that you will make significant savings when you apply for this loan.

Funding Fee

Though the costs of applying for this loan are lower than for other types of mortgages, they tend to carry a one-time funding fee that will vary depending on the veteran and down payment. For instance, if you are in the armed forces and want to apply for a VA loan for the first time, you would have to pay 2.15 percent of the loan amount when you have no down payment.

However, if you make a down payment of at least 10 percent, the funding fee will be lowered to 1.25 percent. If you are applying for a VA loan for the second time without a down payment, you have to pay 3.3 percent of the mortgage amount. The fee is usually waived for those who receive disability compensation.

Underwriting Requirements

Although the VA does not ask for a specific credit score, the private lenders usually have their own special requirements. For instance, most lenders only accept applicants who have a credit score of 620 or higher. You can find lenders who accept lower scores but you would have to pay a higher rate of interest.

As a borrower, you need to show that you earn sufficient income to repay a loan. Moreover, you should not have many debts. VA guidelines will permit veterans to continue using their home loan benefits for a year or two after foreclosure or bankruptcy. You need to know that you can only use a VA loan to finance your primary home.

This means that if you want to buy investment or vacation homes, you cannot use a VA loan. The loan limits that apply to VA loans vary from one county to another because a property’s value depends on its location. In 2018, the maximum guaranty is 679,650 dollars in high-cost areas and 453,100 dollars in other areas.

Struggling Borrowers

VA loans assist struggling borrowers. This means that if you cannot make your monthly payments on time, the VA will negotiate with the lender on your behalf. They are dedicated to assisting struggling veterans who cannot repay their loans. However, you can use a mortgage payment calculator to figure out your monthly payments in advance.

Financial counselors at the Department of Veterans Affairs can help you to negotiate better payment plans as well as foreclosure alternatives.

If you are thinking about applying for a VA loan, the above information will come in handy. A VA mortgage can be the best loan for your needs.