Veterans Administration (VA) loans are among the most commonly used kinds of loans available in the current financial market. They are a great option for those who qualify and are typically used to purchase or refinance a home, as well as enhance the value of a home. Click HERE to pre-qualify.
Here are 10 essential aspects to be aware of prior to applying for an VA loan:
1.) This is considered to be a guarantee loan. The Veterans Administration loan is a secured loan offered by the U.S. Department of Veterans Affairs This means that the lender who offers the loan to the borrower is protected from loss if the buyer is unable to repay the loan.
2.) Not all people are eligible to receive an VA loan. You must be an active duty or veteran military personnel to be eligible in the process of VA financing. Veterans are eligible for VA financing through any mortgage lender participating in the VA home loan program and the valid certification of eligibility (COE) must be provided together with income and credit requirements to be able to qualify in the application for loan.
3.) It offers lower rates for eligible veterans. When you take out the VA loan it is common for the borrower to receive an interest rate that is lower than what typically offered by other types of loans. Additionally it is possible to get a VA loan may be used to get lower rates for refinancing with a maximum loan of 100% in value.
4.) It provides the flexibility of credit standards. Minimum credit scores acceptable for an VA loan is around 620. However, depending on the specific circumstances, some lenders will allow credit scores that is as low as 560. Additionally, while other loan types might have similar credit score guidelines A credit score that is 620 is required for the purpose of obtaining a Conventional and FHA loan will carry greater obligations for the borrower, and may require more of a down amount.
5) There there is not any Private Mortgage Insurance (PMI) needed on VA loans, and the program is also used to remove Mortgage Insurance (MI) for other loan. For instance, one could refinance a loan they have already taken out by changing the loan program to an VA loan, thereby getting rid of the PMI and cutting down the monthly mortgage payments. Even though mortgage insurance isn’t mandatory for VA loans however, the VA has a funding cost to guarantee the lender in case of default on their mortgage However unlike PMI that is in place throughout the term of the loan in other loans, like FHA and USDA The financing fee (FF) can be paid in cash upfront by the seller or buyer or paid into the loan amount. Additionally, lenders can pay financing fee credit options that are available for VA loans if you request up to 3.3 percent. Some veterans might also be exempt from having to pay a funding fee for their loan (additional documentation is required).
Six) Veterans Administration loans often don’t require the payment of a down. In general, a VA loan doesn’t require the payment of a down payment. However when the loan amount is higher than that of the VA maximum for the specific county in which it is situated the borrower has to make the down amount. The down payment amount will be different dependent on the amount of VA entitlement amount and also the appraisal value or purchase price of the property and will be an amount that is the sum of these two.
7) A person can be qualified to receive several Veterans Administration loan at the at the same at the same time. There is no limitation on the number of VA loans an individual can get at a time, provided that there’s a VA entitlement to use. If the loan is greater than 144,000, the entitlement typically is 25 percent from the VA financing limit of the county in which the property being financed is.
8.) It is possible to avoid a prepayment penalty for Veterans Administration loans. Every VA loan is able to be completely paid back anytime, which is an advantage as it will help you to save huge sums of cash on interest.
9) The period of seasoning for bankruptcy, foreclosures or short sales is longer in the case of Veterans Administration loans when compared to other kinds of loans, like Conventional and FHA. In the majority of instances, one is eligible for the VA loan after two years of filing bankruptcy or closing on their home in contrast to a time period of four years for bankruptcy, and 7 years in foreclosure for the Conventional kind of loan.
10) It is only used to buy an primary residence. The VA benefits are not able to be used to buy another home or an investment property. However it is possible to refinance an existing VA loan that was used previously as a principal residence in order to reduce rates of interest (VA IRR).