By using a loan backed by the Department of Veterans Affairs, more than 19 million veterans and service members have financed their home. The VA Home Loan Guaranty program offers a plethora of advantages to borrowers. Military homebuyers should at least consider a VA loan as an option to finance a home, whether it’s their first home or their dream home on a beach front.
Although the VA loan program comes with several financial perks, the most popular one is the possibility of paying nothing down. Certain veterans and active-duty members qualify for zero percent down to finance a home worth up to $417,000. That maximum for VA loans is higher in more expensive housing markets, but $417,000 is most common.
While the minimal down payments save money in the short term, negotiable interest rates with VA loans save military homebuyers thousands of dollars in the long run. Since the VA guarantees up to 25 percent of each loan, VA-approved lenders are willing to lower interest rates. Because of the VA’s guarantee, the lenders incur less risk. Furthermore, active-duty personnel have capped interest rates. Other upsides to the VA loan program include:
- No private mortgage insurance (PMI) each month
- Up to 6 percent of closing and concession costs paid by the seller
- Refinancing options that lower interest rates
- No prepayment penalties
Qualifying for a VA loan is easier for military members, too. Almost 80 percent of those who qualified for a VA loan could not qualify for a conventional loan. This is due in part to more lenient qualifying standards. VA-approved lenders don’t expect unmarked credit histories, and look for credit scores of 620 or higher. Also, a previous bankruptcy or foreclosure does not automatically disqualify VA loan applicants.
You may qualify for a VA loan if:
- You served on active duty for 90 days during wartime or 181 days during peacetime
- As a member of the National Guard or Reserves, you served for at least six years
- You’re the spouse of a service member who died in the line of duty or because of a service-related injury and you have not remarried
The first step in getting a VA loan is completing a Certificate of Eligibility (COE). This document asks for basic information and confirms that you meet the initial requirements for the VA loan program. The COE form is available through the VA or a VA-approved lender. For more information on VA loans, contact a VA-certified lender – such as VA Mortgage Center.