December 01, 2014
Though there are many options for home loans, members of the military looking to buy a new home should take a look at VA Mortgages. This type of loan, regulated by the Department of Veterans Affairs, has some decided advantages over conventional mortgages: namely that you don’t necessarily need to put up a down payment and you won’t have to pay private mortgage insurance even if you don’t meet the typical down payment requirements.
Want to know more? Read our list of frequently asked questions to find out what you need to know about VA home loans.
What Does a VA Loan Offer?
VA mortgages are particularly compelling because they don’t always require a down payment (or a large down payment). While you can sometimes find loans with low down payment requirements, they typically require you to pay PMI (private mortgage insurance) to protect the lender in case you default — but with VA mortgages, there’s no PMI since the VA guarantees the loan. Each service-member or veteran that meets eligibility requirements has a basic entitlement, which is the amount the VA will guarantee to the lenders. Lenders will typically offer up to four times that amount in a mortgage without a down payment, which can make a VA loan an easy way to get in to a new home.
However, some VA loans do have a funding.
What Can I Do With A VA Loan?
VA mortgages can help you build, purchase, renovate, or refinance your primary home. Second homes or vacation homes aren’t eligible.
What Will a VA Loan Cost Me?
VA loans have a funding fee you must pay to the VA (or finance as part of your loan) — though disabled veterans and surviving spouses are typically exempt. The exact fee varies depending on the type of service and how much of a down payment you’re putting down, with higher fees for lower down payments. However, even if you don’t pay a down payment, you won’t have to pay any type of mortgage insurance — which is definitely an advantage if you can’t come up with the 20% down payment typically required to avoid PMI on a conventional loan.
Before you decide to go with a low or no down payment VA loan, you’ll want to do the math: will it cost you more or less in the long-run to pay the up-front financing fee than to pay the down payment and get a conventional mortgage?
Can I Qualify For A VA Loan?
Veterans and current members of the military (including Reserves and National Guard) are eligible for VA loans once they meet active duty service requirements (which vary). Surviving spouses may also qualify.
Though VA loans are typically easier to qualify for than conventional loans, lenders may require a certain credit score to get a loan or get the best rates — talk to your lender and don’t be afraid to shop around to find a lender that offers you the best terms.
VA loans follow a process very similar to conventional loans, but in addition to the regular paperwork you will need a certificate of eligibility from the VA to apply and a VA appraisal of the property (which your lender should take care of).