A VA (Veterans Administration) guaranteed home loan is the preferred loan program for active, non-active, Reserve, National Guard, and retired military of the armed forces because there is no down payment needed and no private monthly mortgage insurance required. There are many benefits of a VA home loan that you should understand before speaking with a lender.
Much like an FHA loan, the Veterans Administration does not actually issue home loans to veterans. Instead, it makes home loans easier to get by guaranteeing that lenders will be repaid the full amount issued. This protects lenders from the risk of default on the loan.
In exchange for the VA guarantee, lenders provide easier loan processing and make it far easier to get into a home from a cost perspective. In many cases, the borrower will not be required to make a down payment or a nominal one if necessary. The borrower will also not be require to pay private mortgage insurance, which non-military borrowers typically must pay on loans made with less than a 20 percent down payment.
Primary Benefits of a VA Mortgage:
- 100% financing
- No monthly private mortgage insurance is required
- There is a limitation on buyers’ closing costs
- The loan is assumable, subject to VA approval of the assumer’s credit
- 30 year fixed loan
- Seller can pay up to 4% of the veterans closing costs and even pay down they buyer’s debt to help lower their debt-to-income ratio
- Interest rates are similar to FHA rates
- You don’t need perfect credit
To obtain a VA loan, a person must meet a few general requirements that are subject to approval by a qualified lender. Obviously, they must have served in the military. Specifically, you must served in active duty during World War II or later and not have received a dishonorable discharge. Individuals serving during times of war must have put in at least 90 active duty days.
Individuals serving during periods of peace must have put in 180 days. For veterans who served after 1980, the qualification time period is two years unless active duty occurred during either of the Gulf Wars. In such situations, the time period is 90 days. Obviously, it gets a bit confusing. Make sure to speak with your local office to determine your eligibility.
VA guaranteed loans are excellent financial products for purchasing a home. Every veteran should consider VA financing first when researching his or her home loan options.