A VA loan is a mortgage loan with $0 down payments. The loan can be accessed through a program funded by the Department of Veteran Affairs (VA) in the United States.
The VA loan helps the members, eligible spouses and veterans to become homeowners. The terms and conditions, as well as the qualification standards, are set by the VA and offered by private lenders.
VA loans include the following benefits:
- No down payment unless it’s a requirement from your lender, or when the buying price is more than the property value.
- No premium requirement for private mortgage insurance.
- The lender may decide not to charge you the prepayment penalty.
- There is available aid from the VA to help the borrowers who might default.
- Many states give out additional benefits to the veterans including property tax reductions.
How Do The VA Loans For Veterans Work?
You must go through the following simple steps:
- Get prequalified – get a reliable VA lender and then prequalify to get an approximate figure of what you can qualify for. The prequalification depends on your income level, credit history as well as other financial conditions.
- Get preapproved – once you have passed the prequalification stage; the lenders will go through your personal and financial information to verify if the details are correct. If they are satisfied with the data, you will receive a pre-approval letter. The letter will show the home sellers as well as the real estate agents that you are a serious buyer who has whatever it takes to get the house.
- Put an offer – when you and your agent get the right house for your VA loan, you will craft a negotiation and provide for the contract. It’s always advisable to look for an agent who is familiar with the VA loans.
- Underwriting and VA appraisal – your lender will order a good VA appraisal for your property once you have put the offer. The underwriters will evaluate your income as well as all the other financial details and then prepare to close the offer if everything is okay.
- Closing – you will be given legal documents to sign and then get the keys for your new home.
The Three Facts About VA Loans:
1. You Can Use Them Only for Certain Types of Homes
VA loans are only used for primary residences. You should therefore not bother yourself getting them if you want to purchase a vacation house or an investment property.
Also, the VA loan may not be suitable for you if you are planning to a fixer-upper, downtown or a working farm. You can, however, use this benefit to purchase a multiple units house provided that you will be residing in one of the units.
2. You Still Have to Meet the Requirements
You cannot get the VA loans unless you first meet the qualification requirements.
Luckily, the credit requirements for these loans are not as strict as compared to the conventional loans offered by private lenders such as mortgage companies and banking institutions.
In most occasions, the lenders require the applicant to have a credit score not less than 620.
3. You Can Obtain a VA Loan When Serving Overseas
VA loans are open to everyone including the military workers working abroad. The workers can also grant a power of attorney to their spouses or any other trusted people to sign in the documentation for them.
The agreement offers a 60-day occupancy loan, although it’s only the spouse who can testify that.
Differences Between Veteran Loans and Traditional Loans
- Down payment – most conventional loans require a down payment while the VA doesn’t have the down payment.
- Qualification standards – although each loan has different requirements, the VA loan is more lenient. This is because of the government guarantee and hence less risky.
- Private mortgage insurance (PMI) – unlike conventional loans, VA loans do not require the PMI since they are backed up by the government.
- Interest rates – since the VA loans have the government guarantee; their rates and fees are relatively lower than the conventional loans.
Although VA loans are considered to be a federal program, the government does not give out the loans directly. Instead, the veterans receive them through private lenders including the Veteran’s United Home finance.
The guaranty is offered by the Department of Veteran Affairs in the country. The guaranty protects the lenders against total loss should the borrower’s defaults.