How Does the VA Home Loan Work and Who is Eligible for One?
Are you a veteran considering your options for purchasing a home?
Did you know that since its inception in 1944, the VA Home Loan program has backed more than 22 million home loans for veterans?
The cost of buying a home can be overwhelming, but it doesn’t need to be. If you find yourself wondering how does the VA home loan work, read on for a quick guide!
1. What is a VA Home Loan?
Veterans Affairs mortgages, also known as VA loans, are special loans that help US military on active duty and veterans afford housing.
The program was designed to provide housing assistance to veterans and their families. It has helped millions of veterans achieve the dream of homeownership since President Franklin D. Roosevelt signed the GI Bill of Rights in 1944.
2. What are the Benefits?
There are a number of advantages to VA home loans compared to other mortgages.
Loans that are guaranteed by the VA require no down payment, which is a huge plus.
VA loans also don’t require mortgage insurance, which helps keep monthly costs down for VA borrowers. This varies from other loans such as FHA and low-money-down loans, which can carry insurance fees of $100 or higher per month.
3. Who Is Eligible?
Members of the regular military, reservists, veterans, and National Guard can apply for VA home loans.
Active-duty military, such as the Army, Navy, Air Force, and Marines, usually qualify after 6 months of service. Reserves and National Guard members need to wait six years to apply.
However, all of these categories are typically eligible after 90 days of service during war-time.
Military spouses who lost a loved one during active duty or due to a service-related disability can also apply.
4. Where Does The Loan Money Come From?
It’s important to understand that is not the VA itself that is issuing VA home loans.
The agency works with lenders, like banks and mortgage brokers, to guaranty each qualified VA mortgage loan.
This means that the money comes from the lender, but the VA promises to repay a quarter of the loan if a borrower defaults.
5. How Does the VA Home Loan Work: Fees and Other Requirements
The costs of getting a VA loan are generally lower than other mortgages, but there still are fees and requirements.
For example, for a no money down VA loan, you might pay a fee of 2.15% of the mortgage amount.
Also, while the VA doesn’t require a certain credit score for these special loans, lenders do have internal requirements. They typically want applicants to have a score of 620 or higher.
Don’t despair if you have a bad credit rating though. The guidelines for VA loans are more flexible than other loans!
Looking for a VA Home Loan?
Now you have a solid background in VA home loans and are well prepared to start the application process!
Remember, before you start shopping for a home, it’s important to have a grasp on your financial situation. Determining your eligibility for a VA loan is a great place to start!
Are you still asking yourself “how does the VA home loan work”?
Do you have more specific questions that we didn’t cover? Contact us to get a free quote and we’ll be happy to answer your questions!