Everything You Need To Know About VA Loans

What is a VA Loan?

VA loans are the most powerful lending program on the market, and are a lifesaver for the majority of military borrowers. This flexible, $0 down payment mortgage option are available to Veterans, Service Members, select military spouses, and have helped more than 22 million service members become homeowners since 1944. The loans are issued by private lenders and are popular as they are guaranteed by the U.S department of Veterans affairs (VA).

Why Get a VA Loan?

The VA home loan was created by the US government to help returning service members purchase homes without needing a down payment or excellent credit. Today, this program has guaranteed more than 22 million Service Members and their families purchase homes or refinance their mortgages.

In recent years, it has become even more important. Lenders have tightened their requirements in the wake of the housing market collapse, making the VA loan a lifeline Military homebuyers, many of whom find difficulty when faced with tough credit standards and down payment requirements.

VA LOANS	TRADITIONAL MORTGAGES
0% Down VA Loans are among the last 0% down home loans available on the market today.	Up to 20% Down Conventional loans generally require down payments that can reach up to 20% to secure a home loan.
No PMI Since VA Loans are government backed, banks do not require you to buy Private Mortgage Insurance.	PMI Required Private Mortgage Insurance is a requirement for borrowers who finance more than 80% of their home’s value.
Competitive Interest Rates The VA guaranty gives lenders a greater degree of safety and flexibility, which typically means a more competitive rate than non-VA loans.	Increased Risk for Lenders Without government backing, banks are taking on more risk which, in turn, can result in a less-competitive interest rate on your home loan.
Easier to Qualify Because the loan is backed by the government, banks assume less risk and have less stringent qualification standards for VA Loans, making them easier to obtain.	Standard Qualification Procedures Conventional options hold stricter qualification procedures that can put homeownership out of reach for some homebuyers.

 

How do VA Loans Work (What Steps Are Needed)?

Get prequalified with a VA lender to get an estimate of how much house you can afford based on your income, credit, entitlement and other financial factors. You can get a quote with Veterans United Home Loans online at any time.

Get pre-approved. It puts you in the driver’s seat to take action when you find a home you love. Lenders will verify income and financial information (to get a clear sense of your purchasing power) and send you a preapproval letter. The letter shows real estate agents and home sellers you’re a strong and serious buyer.

Put in an offer when you and your agent find the perfect VA loan approved home. It’s important to find a VA loan savvy agent you trust that also knows the ins and outs of VA loans.

Get an Appraisal (and Underwriting): Once you’re under contract, your lender will order a VA appraisal of the property. Underwriters will evaluate your income, financial and related documents along with the appraisal once it’s finalized. If everything checks out, you’ll be issued a clear to close.

Close: You’ll sign all kinds of legal documents and paperwork at your loan closing and get the keys to your new home.

 

What Are Some Other Important Things to Know About VA Loans?

1. They’re reusable. Your full VA entitlement can be used over and over again as long as you pay off the loan each time.

 

2. They’re only for certain types of homes. They are mainly designed for properties in “move-in ready” condition, including single-family homes, condos, modular housing, some multi-unit properties and more.

 

3. They’re for primary residences only. VA loans are for primary residences, not for investment property or a vacation home in Mexico, although you can use this benefit to buy a duplex or another multiunit property, provided you live in one of the units. The VA does offer exceptions to this rule.

 

4. They’re not issued by the VA. Instead, the agency provides a guaranty on each qualified mortgage loan.

 

5. They’re guaranteed by the government. The agency typically guarantees up to a quarter of the loan amount. The guaranty gives lenders confidence and helps service members secure great terms and rates.

 

6. They’re available despite foreclosure or bankruptcy. Service members with a history of bankruptcy or foreclosure can secure a VA loan. Even borrowers who have had a VA loan foreclosed on can still utilize their VA loan benefit.

 

7. They don’t have mortgage insurance. The VA’s guaranty eliminates the need for any mortgage insurance or mortgage insurance premium, helping borrowers save even more money each month.

 

8. They come with a mandatory fee. There’s no mortgage insurance with VA loans, but there is the VA Funding Fee. This fee helps the VA keep the program going and is required on both purchase and refinance loans. It can be rolled into the loan amount and waived entirely for those with service-connected disabilities.

 

9. They have limits on co-borrowers. Ulike other loan programs, the VA loan program does not let you get a loan with just about anybody. Having a co-borrower who isn’t your spouse or another veteran with VA loan entitlement will require a down payment, and not every VA lender offers these.

10. They don’t have a prepayment penalty. You can make extra payments any time you want, saving you a ton of interest. You can even structure your payments to automatically deduct a little extra every month.