One of the best home financing options for veterans is the VA home loan. Borrowers with less-than-perfect credit, high debt ratios, and little money down can apply for a VA loan.
There are several reasons, but the number one reason is that there is no down payment requirement, which makes this loan perfect for first time home buyers.
Listed below are other reasons to go with a VA loan.
Nearly all home loans require PMI if a down payment of less than 20% is made. The VA home loan is the only loan program that doesn't require mortgage insurance.
For a $300,000 mortgage with a 10 percent down payment, this can mean an extra $100 to $200 a month. Avoiding mortgage insurance allows veterans to qualify for more, and also have a lower mortgage payment.
The veteran's administration has no minimum credit score requirement, but each lender does. Veterans administration doesn't offer home loan financing; they provide the basic guidelines that lenders follow.
We have a minimum credit score requirement of 620.
Since the VA loan is a government loan, the interest rates are much lower than a traditional mortgage. Ultimately, the interest rate is based on credit score, debt to income ratio factors, and the type of home being purchased (single-family, condo, multi-unit, etc.)
VA home loans are assumable. If you decide to sell your property later, a qualified buyer can assume the home loan, and it's payment obligations. Your buyer doesn't have to be a veteran. However, we don't recommend this as it could negatively affect your certificate of eligibility.
VA loans make it very easy to refinance in the future. For a rate and term refinance, there is no need for an appraisal or any income verification.
If you decide to do a cash-out loan to make home improvements or pay for a large bill, you can do a cash-out of up to 100%. No other loan program offers this. The cash-out loan would be a fully-documented loan which does require income verification and an appraisal.
When purchasing a home, there are buyers closing costs and seller closing costs. A request for the seller to pay all closing costs can be made when writing the offer. Closing costs for buyers can range anywhere from 3% to 6% (depends on purchase price).
Unless - your entitlement isn't high enough for zero down. This is usually the case if you currently have a VA loan or had a foreclosure or short sale on a VA loan.
Although a down payment isn't required, applicants can choose to make a down payment.
The debt to income ratio guidelines is much more lenient than a conventional or FHA loan. We have helped veterans with debt to income ratios as high as 70%. How high an applicant can go will depend on the overall file analysis. FHA can go as high as 49%, and Conventional is typically capped at 47%.
To qualify for a VA home loan, you must meet the income and credit requirements and have the proper service eligibility requirements.
To be eligible, you'll need to meet one of the following service histories.
World War II September 16, 1940 to July 25, 1947
Korean War June 27, 1950 to January 31, 1955
Vietnam War August 5, 1964 to May 7, 1975
Persian Gulf War August 2, 1990 to present
Peacetime any timeframe between wartime periods above.
As a part of the loan process, you'll be asked questions about where you are employed and the monthly income.
You must be able to provide income documentation to show how much is coming in per month. We usually request the following: paystubs and w2s. If you are self-employed, we ask for the last two years of tax returns. If you are retired or disabled, we request the award letters, which verify how much is received each month.
Credit scores are decision-making tools that we use to help anticipate how likely you are to repay your loan on time. VA loan has the most lenient credit qualifying requirements.
During the loan pre-approval process, a mortgage credit report will be required on all borrowers. A credit score is pulled from each of the credit bureaus; Experian, Transunion, and Equifax.
We use the mid score as the qualifying score.
If you have a credit score, the minimum credit score we can work with is 620. We can also qualify borrowers who don't have a credit score at all.
Here are a few credit items that we don't allow:
Student loans in collections. If you currently have student loans that are in collections, they must be taken out of collections to qualify. Repayment agreements will be acceptable.
Child support collections. These collections will also have to be brought current, or you must have a repayment agreement in place.
Judgments or tax liens. Liens must be paid in full at closing or have a repayment agreement in place. Judgments also have the same requirements. They must be paid in full or have a repayment agreement in place.
Single-family home. All single-family residences are eligible to be financed with a VA loan as long as they meet the VA property standards.
Condos. Condo complexes do have to be VA approved before a VA loan can be completed.
Manufactured homes. These types of homes must be on a permanent foundation.
Mobile homes. Mobile homes must be at least a double-wide and on a permanent foundation.