Committing to the purchase of your first home can be an overwhelming process. If you are a qualifying member of the armed forces, a Veteran or qualifying spouse, a VA loan may offer more lenient income and credit requirements. Backed by the Department of Veteran’s Affairs, VA loans exist to help renters become homeowners. Here’s what you need to do to take advantage of this fantastic opportunity.
Decide if a VA Loan is Right for You
If you are an active service member or a veteran, you must have a valid Certificate of Eligibility (COE) to qualify for a VA loan. VA loans offer a wide variety of benefits for every homebuyer by helping one purchase a home at competitive interest rates often without a down payment or private mortgage insurance (PMI). Additionally, first-time homebuyers who obtain a VA loan to finance the purchase of their home are eligible for the same benefits as every other VA loan holder.
Each VA loan requires a one-time funding fee which you must pay to finance your loan. This VA funding fee is financed into the total loan amount and can range from 1.25% to 3.3% depending on the down payment amount and the type of military service.
No Down Payment Requirements with VA Loans
While most mortgage products require that at least a small percentage of the total loan amount be delivered upfront in the form of a down payment, all VA loans qualify for funding without an initial down payment from the borrower. Not being required to put a down payment on your property may be especially advantageous for first-time homebuyers, many of whom may not be in the financial position to put down the sometimes hefty sum required to finance their first home.
PMI Is Not Required With VA Loans
Most mortgages require private mortgage insurance, or PMI, for borrowers who do not provide a 20% down payment (which is calculated based on the purchase price of the property). VA loans do not require private mortgage insurance, therefore the homebuyer may save thousands of dollars over the life of the loan.
Credit Requirements Associated With VA Loans
As a first-time homebuyer, you may not have the extensive credit history most lenders require for a traditional mortgage. VA loans may offer the solution you need. VA loans provide more lenient credit and income requirements, which can be the difference between renting and buying a home. Lenders will analyze the borrower’s credit profile and review credit scores to determine credit eligibility for a VA loan.
Limits on Fees With VA Mortgages
If no down payment, no PMI, and more lenient credit requirements haven’t persuaded you to use a VA loan to finance your home, VA loans also protect your financial interests by limiting closing costs, which are paid to the mortgage lender. The VA limits the origination fee lenders charge to be a maximum of 1% of the total loan amount.
Qualifications for a VA Loan
To qualify for a VA loan you must have completed 181 days, or six months, of active service during peacetime or 90 consecutive days of active service during times of war. Reserve and National Guard service members also qualify after six years of service.
Spouses of deceased military members also qualify for a VA loan if you lost your spouse in the line of duty, or because of disabilities or injuries directly related to their active service.
Begin the Process for a VA Loan
If you’ve determined that you qualify for a VA loan, or have questions about the qualifying process, please call or email one of our loan officers at Standard Mortgage (NMLS#: 44912) today.