VA Loan Considerations
Interest Rates and Fees
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What is a VA loan?
VA loans are mortgages that are made by private lenders, but partially supported by the Department of Veterans Affairs. They hold no limits for the amount to be borrowed but have limits on how much amount the VA guarantee.
Primary benefit of VA loans, mortgages also known as Veterans Affairs mortgages, has to be the consistency to offer lower rates than traditional bank financing.
Qualified borrowers may only use VA loans for their primary residence. You can not finance an investment property or holiday home with a VA loan.
The main attraction of a VA mortgage is to make it easier to get funding, providing loans without down-payment and more lenient credit and income requirements than conventional mortgages. Once you have your Certificate of Eligibility or COE, you can enroll for a VA home loan.
Who are eligible for it?
Most members of the regular armed forces, veterans, reservists and National Guard are eligible to apply for a VA loan. Spouses of servicemen who died during active duty or as a result of service-connected disability can also apply.
Military personnel on active duty are generally accessed from six months of service. Reservists and National Guard members must wait six years to apply, but if they are promoted to active duty prior to that, they get eligibility after 181 days of service.
Here’s the eligibility criteria:
- Served 90 consecutive days of active duty during wartime
- Served 181 days of active service in peacetime
- If you have been an active member of the National Guard or Reserve 6 years or more
- If you are married to a service member who died in the line of duty or as a result of service-connected disability
It is important to note that gaining a COE does not mean veterans qualify for a mortgage — they are two separate processes. Once you qualify for a COE, you can shop for a mortgage. However, you still have to meet the requirements of the lender that include things like income verification, credit (FICO), and debt-to-income ratio.
How to apply for this loan?
After obtaining the certificate of eligibility (COE), you can apply for a VA loan. The process of application is very clear, however be aware that not all lenders originate VA loans. Here’s what you’ll need to do to apply:
Look for a VA lender. You can do this by searching on the VA website, getting recommendations from colleagues or doing your own research online. Make sure you shop around for the best offer, as lender’s terms may vary.
Apply for a VA loan through the lender.
What credit score is required for this loan?
The VA doesn’t set a minimum credit rating requirement for VA loan, but also doesn’t not make the loan. Lenders who make loans typically have a benchmark credit score. That benchmark differs ads per the lender, but a score of 620 FICO score is a common requirement for a VA loan.
Advantages and Disadvantages
- 100% financing and no down payment.
- No limit on how much to borrow.
- No minimum credit score.
- Lower interest rates.
- No private mortgage insurance (PMI).
- Security Properties.
- Lower closing costs.
- Funding Fee.
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