If you are a military veteran or service member looking to buy a home, the U.S. Department of Veterans Affairs offers a powerful tool to help you achieve this goal. The VA loan program makes homeownership more accessible by guaranteeing home loans, lowering barriers to entry, and reducing many of the costs associated with buying a house. Here’s what you should know about how this program works and how you can take advantage of its benefits.
VA loans are more accessible than traditional loans
VA loans are guaranteed by the VA, allowing private lenders to take on more risk and lower their thresholds for loan approval. For example, with a VA loan, you can often purchase a home without a down payment. You can also qualify with a lower credit score and a higher debt-to-income ratio than what you’d need for a traditional loan.
Costs are generally lower for VA loans
Many of the costs associated with buying a house are lower with a VA loan. You won’t be required to buy private mortgage insurance, the interest rates you pay are typically less than with a conventional loan, and a cap on closing costs could save you money as well. However, you will need to pay a VA funding fee, which is typically assessed as a percentage of the loan’s total value.
The home you buy must be approved by the VA
Since the VA is backing your loan, the agency will need to sign off on the home you’re buying. According to an article by Kirk Pepi for Money, the goal is to ensure that the structure is “safe, sanitary, and structurally sound.” Multi-unit homes, mobile and modular homes, and condos can qualify as long as they meet certain requirements. However, if you won’t be occupying the home as your primary residence, your loan won’t be approved. This means that investment properties and vacation homes can’t be financed with a VA loan.
VA loans can be used for more than home purchases
You can use a VA loan for more than just a home purchase, notes Erik J. Martin in an article for Bankrate. If you’re looking to refinance the mortgage on a home you purchased earlier with a VA loan, you can take out what’s known as a VA Interest Rate Reduction Refinance Loan, or IRRRL. You can also replace a conventional home loan with a VA loan. VA loans are also available to finance construction of a new home or upgrades to an existing one.
Vets and active-duty military are eligible for VA loans
Eligibility requirements for VA loans vary based on your military service status. According to the VA, if you are an active-duty service member, you can qualify if you’ve served for at least 90 consecutive days. If you are an honorably discharged veteran or a National Guard or Reserve member, eligibility requirements depend on your dates of service. You can also qualify if you’re the spouse of a service member who died in the line of duty, died from a service-related disability, or is missing in action. Once you’re confirmed to be eligible, the VA will issue a Certificate of Eligibility so you can move forward with your loan application.
Whether you’re struggling to qualify for a conventional loan or simply looking to save money, a VA loan is well worth looking into as you assess your options for financing a home purchase.
Waukesha State Bank offers VA loans and more! Learn more at https://www.waukeshabank.com/mortgage-loans-buy