3 Things to Know About Getting a VA Loan
Veterans Affairs mortgages, better known as VA loans, make it easier for veterans to get financing to buy a home. VA loans do not always require a down payment and are available to military veterans and active military members. These home loans are made through private lenders and are guaranteed by the Department of Veterans Affairs, so they do not require mortgage insurance. There’s no minimum credit score requirement.
The VA loan remains one of the few mortgage options for borrowers who don’t have the money for a down payment. VA loans are somewhat easier to qualify for than conventional mortgages. The U.S. Department of Veterans Affairs is not a direct lender. The loan is made through a private lender and partially guaranteed by the VA, as long as guidelines are met.
If you think you may be eligible for a VA loan, here are some things you must know about the program.
Qualifications For A VA Loan
Most members of the regular military, veterans, reservists and National Guard are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability also can apply. Active-duty military personnel generally qualify after about six months of service. Reservists and members of the National Guard must wait six years to apply, but if they are called to active duty before that, they gain eligibility after 181 days of service.
Associated Costs
Although the costs of getting a VA loan are usually lower than they are for other types of mortgages, they still carry a one-time funding fee that varies, depending on the down payment and the type of veteran. A borrower in the armed forces getting a VA loan for the first time, with no money down, would pay a fee of 2.15% of the loan amount. The fee is reduced to 1.25% of the loan amount if the borrower makes a down payment of 10% or more. Reservists and National Guard members normally pay about a quarter of a percentage point more in fees than active-duty members pay. Those using the VA loan program for the second time, without a down payment, would pay 3.3 percent of the total loan amount.
Credit Requirements
The VA does not require a certain credit score for a VA loan, but lenders have their own internal requirements. Most lenders want an applicant with a credit score of 620 or higher. Borrowers must show sufficient income to repay the loan and shouldn’t have a heavy debt load, but the guidelines are usually more flexible than they are for conventional loans. VA guidelines allow veterans to use their home-loan benefits a year or two after bankruptcy or foreclosure. VA loans are available only to finance a primary home. A VA loan cannot be used to purchase or refinance vacation and investment homes.
