Buying a new home can be a great investment and a way to provide for your family. While there are many types of mortgage loans available, a VA Loan is designed specifically for U.S. Veterans.
VA loans are a type of mortgage loan for buying a home. What makes them special is that they are guaranteed by the U.S. Department of Veterans Affairs and offered by participated approved lenders. These loans are set aside for active duty service members, U.S. veterans, reservists and members of the National Guard and some surviving spouses of veterans.
What Are the Benefits of VA Loans?
There are several reasons that VA loans are attractive and popular with military personnel and their families:
- Competitive interest rates: VA loans may have lower interest rates when buying a home, sometimes less than or equal to traditional bank financing. That can save you lots of money on your purchase.
- No required down payment: You don’t need to have a large bank account to qualify. VA loans offer incredible zero down payment terms.
- No PMI payments: One of the most popular benefits of VA loans is that you don’t have to make any Private Mortgage Insurance payments. These savings make a difference in your monthly budget.
- Assistance with payment negotiations: If you fall behind on payments for some reason, the Department of Veteran Affairs gets involved to help negotiate with the bank.
- No prepayment penalties: You never have to worry about penalties if you want to pay off a larger loan amount in advance.
- Purchase and Cash-Out refinance programs: Whether you’re buying a home or needing cash from a refinance, VA loans can be used in both cases.
How Do VA Loans Work?
As mentioned earlier, the U.S. Department of Veterans Affairs backs VA loans. This makes banks feel more comfortable extending financing because they know the government will reimburse a large part of the loan if homeowners can’t pay. As of 2019, the U.S. Department of Veterans Affairs backs 25% of the total loan value. For a house that costs $200,000, that would be $50,000.
Are You Eligible for a VA Loan?
To be eligible for a VA loan, there are two main types of requirements. First, you need to comply with the military qualifications from the Department of Veterans Affairs. If you’re an active-duty member with six months of service, a National Guard member or reservist with six years of service, or a U.S. military veteran, you automatically qualify. Husbands or wives of personnel who gave the ultimate sacrifice during active duty can also apply.
The next part of qualifying has to do with meeting the financial requirements of lenders. These requirements can vary from bank to bank. Therefore, do some research between mortgage lenders and see which the best fit is for you.
How Do You Apply for a VA Loan?
- Get Your COE: The first step in getting started is obtaining your Certificate of Eligibility from the VA. You can do this online through the VA’s webpage or an affiliated lender.
- Find the right lender: Not all banks work with the VA. Find a lender you trust, and make sure they offer VA loan financing.
- Get pre-qualified: This means showing your credit history and pre-qualifying for a certain loan amount.
- Complete the mortgage process: Once you’ve found a house you like, your mortgage lender will request a VA appraisal. Then, they will prepare the final contract details. Once you’ve signed your mortgage agreement, you can move into your new home.
Is a VA Loan Right for You?
There are always multiple avenues for buying a home. If you have excellent credit and enough money saved for a down payment, you may benefit from other mortgage loan programs from a trustworthy lender, such as FHA loans or a 15-year traditional loan. If you’re looking to make little to no down payment, then VA loans are a logical and incredible tool for buying a great house for you and your family. You served your country. Let us serve you. Contact Blackhawk Bank for more information on VA loans.