Rebecca Richardson - Mortgage Consultant
The Real Truth About VA Loans
There’s a lot of misleading information out there about VA loans. You probably think that you need a credit score in the mid-600s to buy a home with a VA loan. Or that you can only use your benefit once. Maybe you even think that other types of mortgages are easier to qualify for and close faster.
The truth is that none of these statements are true. One of the most disappointing things that I see as a mortgage lender is the amount of misinformation spread to our Veterans and service members.
When I bought my first home near Fort Campbell, the VA loan that was suggested for my family seemed like it was too good to be true.
Those who have served and are actively serving our country deserve to use the benefits that they’ve earned. Below, I’m going to share some fast facts that you need to know about VA loans.
What is a VA Loan?
But before we get into the nitty gritty, let’s define what a VA loan actually is. A VA loan is a home loan benefit to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.
VA home loans are provided by private lenders such as banks and mortgage companies. The VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms. VA loans are available to Veterans, active service members, or surviving spouses of those who passed in the line of duty or as a result of a service-connected injury.
Now that we’ve defined what a VA loan is, let’s cover some of the program highlights.
No Down Payment Requirements
While most conventional financing requires a 20% down payment (to avoid private mortgage insurance) and FHA loans require at least 3.5% down, VA loans have no down payment requirements. Different lenders come with their own variables, but so long as the sale price isn’t higher than the home’s appraised value, you won’t have to worry about coughing up any cash for your down payment.
No Minimum Credit Score Requirement
Mentioned earlier, you might think that you need at least a 640 credit score to qualify for a VA loan. The truth is that the VA doesn’t set any qualifying criteria for credit scores. Rather, lenders create their own criteria based on their risk tolerance. If you’re curious about what you might qualify for using your VA benefit, a member of my team will be more than happy to help.
VA loan guidelines have some of the most common sense underwriting rules when it comes to things like income and credit. With lower credit score requirements and no stipulations for debt-to-income ratios, qualification for a VA loan is based on residual income requirements. These more flexible underwriting requirements also mean that VA loans don’t take longer to close than other types of loans.
No Private Mortgage Insurance (PMI) or Mortgage Insurance Premiums (MIP)
When borrowers’ down payments are less than 20% of the value of the home they’re buying, conventional and FHA loans require them to pay private mortgage insurance premiums to protect the lender. This isn’t the case for VA loans, which have no PMI or MIP requirements, even if you put 0% down. This benefit alone can allow borrowers to afford even more home than they would with another type of loan simply by eliminating those insurance payments.
Use Your VA Loan Benefit More than Once!
So long as you have remaining entitlement and/or have paid off your existing VA loan, you can continue to use your VA loan benefits! This means that you can buy a home, sell it, receive your updated Certificate of Eligibility (COE), and reuse 100% of your borrowing power! Depending on your eligibility, you can even have up to three loans at the same time. Talk about the gift that keeps on giving.
Tap In To Rates Lower than Conventional Loans
Lenders typically charge lower rates for VA loans than they do for conventional loans. Historically, VA rates are around 0.5% lower than conventional rates. When combined with the lack of mortgage insurance premiums, borrowers can almost always afford more house with a VA loan than they would with a conventional loan.
How Can I Get a VA Loan?
Getting a VA loan is simple! Just connect with a member of my team for a pre-approval and we’ll move forward from there.
As someone who was able to buy their first home with the VA home loan benefit, I can promise that myself and my team will provide you with a smooth homebuying experience. As always, I’ll be able to answer any additional questions that you have about VA loans and will give you insight solely based on what’s best for you and your family. Click here and let’s connect!