What is a VA Loan? The benefits, how to apply, and eligibility
Veterans Affairs (VA) loans are a type of mortgage loan that is available to veterans, active-duty service members, and their surviving spouses. VA loans are designed to provide eligible borrowers with affordable home financing options, with flexible credit requirements and no down payment requirements. In this blog post, we will explore the benefits of VA loans, how to qualify for a VA loan, and the application process.
Benefits of VA Loans
VA loans offer several benefits to eligible borrowers, including:
1. No down payment required: One of the most significant advantages of VA loans is that they do not require a down payment. This can be especially beneficial for first-time homebuyers who may not have saved up a significant amount of money for a down payment. With a VA loan, eligible borrowers can finance up to 100% of the purchase price of the home.
2. Lower interest rates: VA loans typically offer lower interest rates than traditional mortgage loans. This can result in significant savings over the life of the loan, as borrowers will pay less in interest charges.
3. No private mortgage insurance (PMI) required: With a VA loan, borrowers are not required to pay for private mortgage insurance (PMI). PMI is typically required for borrowers who make a down payment of less than 20% of the purchase price of the home. By eliminating the need for PMI, VA loan borrowers can save money on their monthly mortgage payments.
4. More lenient credit requirements: VA loans are designed to help eligible borrowers who may have less than perfect credit. While credit requirements still exist, they are generally more lenient than those associated with traditional mortgage loans. This can make it easier for borrowers with lower credit scores to qualify for a VA loan.
5. Assumable mortgages: VA loans are assumable, which means that if the borrower decides to sell the home, the buyer can take over the existing VA loan. This can be a significant selling point for sellers, as it can make their home more attractive to potential buyers.
VA Loan Qualifications & Benefits
To be eligible for a VA loan, borrowers must meet certain requirements. These requirements vary depending on whether the borrower is a veteran, active-duty service member, or surviving spouse.
For veterans and active-duty service members, the basic eligibility requirements for a VA loan include:
1. Service requirements: The borrower must have served at least 90 consecutive days of active service during wartime, or 181 days of active service during peacetime. National Guard and Reserve members may also be eligible if they have served for at least six years.
2. Discharge status: The borrower must have been discharged under conditions other than dishonorable.
For surviving spouses, the eligibility requirements for a VA loan include:
1. Marriage requirements: The borrower must have been married to the service member at the time of their death, and must not have remarried.
2. Service requirements: The service member must have died while on active duty or as a result of a service-connected disability.
In addition to the basic eligibility requirements, borrowers must also meet certain financial requirements in order to qualify for a VA loan. This includes demonstrating a steady income and a good credit history.
Application Process for a VA Loan
The application process for a VA loan is similar to that of a traditional mortgage loan. Here are the steps involved in applying for a VA loan:
1. Select a VA approved lender: Not all lenders can facilitate VA loans, they must be approved by the U.S. Department of Veterans Affairs. Even among those approved lenders, there are specialists who concentrate almost exclusively on the VA loan program for military clients.
2. Determine eligibility: Before applying for a VA loan, borrowers must first determine whether they are eligible. An experienced lender can help you obtain what’s called a Certificate of Eligibility (COE). The COE will prove that you meet initial eligibility standards for VA loan benefits.
3. Get Pre-Approved for a Mortgage
Getting a pre-approval letter from a lender will show that you are a serious buyer and will give you an idea of how much you can afford to spend on a home. You can shop around for the best mortgage rates and terms before you get pre-approved.
4. Search for a home and sign a purchase agreement
Working with a real estate agent to find the perfect home is without a doubt the most enjoyable step in this process and specialists can help you get the most out of your VA benefits. Once you’ve got a signed purchase agreement, you can move forward in the loan process.
5. Appraisals, and inspections
To finish your initial application, a signed purchase document is a necessary document Once your lender has the contract, they will order the VA appraisal. This appraisal does not replace a normal home inspection.
6. Documentation and next steps
Submitting financial documents to your VA-approved lender will show that you have the ability to qualify for the loan. If the home passes appraisal for value and VA minimum property requirements, and it’s verified by the lender that you qualify for your loan, the underwriter will give his or her stamp of approval.
6. Close and move in
Review the closing disclosure which outlines terms, final costs, and any outstanding fees included in your loan. Then you can meet with your closing agent and any necessary parties to confirm that all required documents are signed. Then the agent will ensure that all funds are paid and properly disbursed, including closing fees and escrow payments. Finally, the property title will pass from the seller to you.