Millions of service members are eligible for a VA loan. However, fewer than 10 percent of the nation’s 24 million veterans have decided to take advantage of this benefit according to Veterans Today. Often times many issues affect a veteran’s decision to purchase a home. A qualified veteran, maybe in the middle of a military career or uncertain of any near future relocations which hinder them from owning a home. While these veterans are out renting and paying someone else’s mortgage, they are undoubtedly bypassing one of the most beneficial and flexible home purchasing programs on the market today. These veterans are unaware that they are foregoing an opportunity that a large percentage of non-military homebuyers only wish they had access to.
Many veterans are also unaware of the rules and regulations that govern how a veteran or active military member can apply for a VA home loan. While there are occupancy requirements that generally state the borrower must move into the home within 60 days of closing, there are other rules that offer a great deal of flexibility for borrowers who are about to retire, separate from the military, or relocate within a specific time frame. The VA also covers what a veteran can do if they must move out of the home due to reassignment or career changes.
Even though VA guidelines require borrowers to use their home as the primary residence, there are separate rules for those who have a spouse occupying the home in the borrower’s absence or while on military deployment which may provide an out for additional properties. To be eligible for a VA Loan, veterans, active duty service members, National Guard members, and reservists must meet the service requirements set by the Department of Veterans Affairs. Spouses of military members who have died while on active duty, or as a result of a service-connected disability, may also be eligible. It’s ultimately up to the VA to determine eligibility for the home loan program, but you may be eligible if you meet one or more of the following conditions:
Served 90 consecutive days of active service during wartime:
1. Served 181 days of active service during peacetime
2. Have more than 6 years of service in the National Guard or Reserves
3. Spouse of a service member who has died in the line of duty or as a result of a service-related disability. (More than 3,000 surviving spouses purchased a home with their fallen partner’s VA benefit in 2015 according to the USDVA. Un-remarried husbands and wives of Service Persons who were killed in action can buy a home with 0 money down and no mortgage insurance, as well as the VA funding fee waived. There’s no way to repay the spouse of a fallen hero, but this benefit is set in place in hopes to help them move forward after tragedy.)
Once you become eligible the hard parts are over! Believe me, when I tell you, It’s a whole lot easier qualifying for a VA loan compared to FHA or Conventional loans. Now like all mortgages, VA loans do require some documentation, an acceptable credit score, sufficient income to make sure you can afford your monthly payments and obtaining your Certificate of Eligibility (COE) which verifies your length and character of service to make you eligible to use the VA home loan benefit. But, because VA loans come with a guaranty, this enables you to get by with lenient guidelines for lower credit scores, past bankruptcy, and foreclosures. That’s right! Unlike most loan programs, a lower credit score, bankruptcy or foreclosure does not automatically disqualify you from a VA home loan. In addition, The VA will consider your credit re-established when you have shown two years of clean credit following a foreclosure or bankruptcy.
Now that we know what it takes to become eligible and then qualify for a VA loan, here are the 3 major benefits of VA Loans.
1. Lower Loan Rates
According to loan software company Ellie Mae, VA loan rates are typically about 0.25% lower than those of conventional loans (even for those with less favorable credit scores). The VA backs your mortgage, making it a lower risk for any lender, which translates to more savings for you Veterans. Not to mention, VA loans have some of the lowest foreclosure rates of any loan type, further reducing the risk for lenders.
2. No Down Payment
This is perhaps the biggest advantage to a VA loan. Not needing a down payment dramatically reduces your initial investment, allowing you to get more house for less money from the very start. Mortgage programs like conventional loans require buyers to at least 10% down. Which adds up to $25,000 on a $250,000 home. VA loans allow you to buy immediately, rather than after years of saving for a down payment.
3. No Mortgage Insurance
Typically, lenders require you to pay for mortgage insurance if your down payment is less than 20 percent. This insurance, which is known as private mortgage insurance (PMI) for a conventional loan and a mortgage insurance premium (MIP) for an FHA loan, protects the lender in the event that you default on your loan. According to PMI provider MGIC, PMI costs about $150 a month on a $250,000 loan. With a VA loan, you will be able to afford a home $30,000 more with the same monthly payment, simply be eliminating PMI, greatly increasing your buying power.
Hopefully, after reading this article, all veterans out there who are not already taking advantage of this one of a kind loan decide to do so now. This government budget was set aside to repay you for what you have done for this country, don’t let your services go unrewarded. You deserve to take full advantage of all the benefits available to you, if you have any questions concerning what you are eligible for, feel free to get in contact with one of our experts VA mortgage professionals to walk you through the process.