For a home-buyer, securing a loan can be an intimidating process. It’s so exciting to take that major step forward into a new chapter of your lifemwhen buying a home, but it can also feel like baring your financial soul for scrutiny. Many mortgage lenders require their borrowers to jump through several hoops to qualify (which is perfectly understandable, but it doesn’t change the fact that jumping through literal hoops in your backyard would be ten times more fun). However, if you’re a veteran in the U.S. military, you’re in luck! The Department of Veterans Affairs has an amazing mortgage loan program designed to make home-buying for veterans a stress-free experience (well, less stressful, anyway). The VA Loan is a mortgage loan that allows qualifying veterans to purchase a primary residence without having to put any money down towards the sale of the home. Sound awesome? Keep reading for the three essentials you need to know about VA Loans.
While the VA serves all veterans, eligibility for a VA loan varies according to type of service. Here’s how it breaks down:
- Active duty veterans must have served at least 90 consecutive days of active service during wartime or 181 consecutive days during peacetime. Some services require two full years of military service.
- National Guard or Reserves veterans must have more than six years of service under their belt, 0r 181 days if called into active service before those six years are up.
- Spouses also qualify if married to a service member who died in the line of duty or died due to a service-related disability.
- Once these requirements are met, you need a certificate of eligibility, which can be downloaded through the VA website and mailed into the VA office. Easy peasy!
- Discharge must be under honorable conditions — dishonorable service can make a veteran ineligible, regardless of time served.
Income and Credit Requirements.
The VA Loan has no income threshold, but does require that the borrower maintain a certain amount of residual income every month and have proof of steady, reliable income. This residual income requirement has allowed the VA Loan to maintain one of the lowest foreclosure rates of all major lending options. There’s no minimum credit score requirement either, but the VA adds the caveat that borrowers are still subject to the credit requirements of private lenders who finance home purchases. The magic credit score for most private lenders is 620 and up.
Mortgage and Mortgage Assistance
One of the great things about the VA Loan is that there’s no mortgage insurance no matter how little you put down. You just pay a one-time funding fee that varies according to type of service. Here’s how the fee works:
Active Duty: 2.15% of the loan amount (the fee is reduced to 1.25% if you make a 10% down payment.)
Reserves and National Guard: 2.40% of the loan amount.
Subsequent Use: 3.3% for each time the VA loan is used thereafter. The VA entitlement may be restored for multiple uses as long as entitlement remains.
Disabled Veterans: VA Funding Fee is waived for those eligible veterans with a disability rating of 10% or more.
If for any reason you cannot pay your mortgage, the VA will negotiate with the lender on your behalf. Their financial advisers will work with you to structure repayment plans and explore other foreclosure alternatives — you can even use VA home-loan benefits up to two years after bankruptcy or foreclosure.
If you’re a veteran in the U.S. military in the market for a new home, consider taking advantage of this great mortgage loan option and reach out to Mary Durr, REALTOR, our in-house veteran and agent.
For more information about VA loan programs, please visit Veterans United, our preferred full-service home loan specialists for veterans.