The Veterans Administration (VA) home loan is one of the most powerful benefits available for active duty military members, Guard and Reserve members, and veterans. If you qualify for a VA loan, the loan serves as a guaranty for purchases of real estate of up to $424,000 (and even higher in certain areas), which means you can buy a home with no down payment.
No PMI = Big Savings for Your Family
There is no private mortgage insurance (PMI) requirement with a VA guaranteed loan, which could offer you substantial savings on your monthly mortgage payments. As an added benefit, you may also get a break on some of your closing costs. You can even use your VA loan benefit to refinance an existing loan -- even if it is not a VA loan. The Veterans Administration also performs personal loan servicing and offers financial counseling to help those with temporary financial difficulties.
How to Determine Eligibility
To take advantage of your VA loan, you must first determine if you are eligible for the loan. If you qualify, you will need to apply for a Certificate of Eligibility, and work with a lender that specializes in VA loans. From there, you’ll work with a real estate agent and the lender on applying for a mortgage. Once your lender has a signed purchase contract in hand, they will order a VA appraisal, which will make sure the price you’ve agreed to pay for the home corresponds with the current value. Another very important part of the VA appraisal is to inspect the home to make sure it meets VA minimum property requirements (VA MPRs).
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5 Tips to Know Before Applying for a VA Loan
1. You don’t need your Certificate of Eligibility in hand to start the VA home loan process. Lenders will often get this for you during the pre-approval process.
2. Your credit score is important when it comes to applying for a home loan. The 620 credit score most VA lenders look for is lower than what you’ll need for conventional financing, but a higher credit score can also help you lock in a lower interest rate.
3. A VA loan comes with occupancy requirements: You’re expected to be living in the home as your primary residence within 60 days of closing. If this might be a problem, be sure to communicate with your VA loan officer.
4. Having stable, reliable income is another key for VA loan approval. Be sure you meet the VA’s requirements for residual income, which is basically how much you have left over each month after paying major expenses.
5. Find a real estate agent who is familiar with the VA loan process. The VA loan has unique rules and guidelines, and working with an experienced agent can help avoid a lot of headaches.