5 Facts about VA Home Loans You Might Not Know
VA home loans provide the accessibility to homeownership for veterans and military service members that they otherwise might not have. Whether you have been researching this military benefit for a while or you are just getting started, here are 5 things you might not be aware of regarding the VA Loan.
- There are no requirements for a minimum credit score
Yes, the private lenders who finance your VA home mortgage, do have to take into consideration the overall credit history of each applicant, as well as their monthly finances and income, but they are not required to accept or deny a borrower of a VA Loan based on a minimum credit score. This allows many service members and veterans who haven’t been able to keep a solid grip on their credit score an opportunity to still purchase a home.
It’s good to keep in mind, though, if an applicant has an extremely low credit score, to go along with very poor credit history, the chances of obtaining a VA mortgage are very slim. In addition, each private lender does have the option to apply overlays to the mortgage terms, which could enact a required minimum credit score. If you find yourself dealing with one of these lenders and not being able to obtain a loan, shop around and find a lender who will not impose an overlay.
- Disabled veterans and service members may be eligible for VA Grants
VA Grants are available to those members of the military (past and present) who are disabled due to a service-related injury. These VA Grants are intended for homeowners to make improvements to their homes in order to increase its accessibility and provide a boundary-free living space.
When a disabled service member or veteran is receiving funding for a VA Loan, they can obtain a VA Grant in connection with it. This gives the borrower the ability to purchase, build, or renovate, an existing home.
The following grants are in place for service members and veterans and are funded by the VA :
- Special Housing Adaption (SHA) Grant
- Specially Adapted Housing (SAH) Grant
- Temporary Residential Assistance (TRA) Grant
- Military spouses my qualify in some situations
There are certain circumstances where the spouse of a deceased military member may qualify for a VA home loan. The spouse must not be remarried and the following criteria must be present in regards to their deceased veteran or service member husband or wife:
- Was a Prisoner of War (POW) or Missing in Action (MIA) for a minimum time period of 90 days (spouse may qualify for a 1 time use of the VA Loan program)
- Died in a service related incident or as a result of a service related disability
- At their time of death, they were pronounced permanently and totally disabled for a specified amount of time and they met the eligibility requirements for disability benefits
- In some cases, you may rent out your home
Part of the terms of a VA home mortgage include verifying that you intend to occupy the home you are receiving the loan for. This essentially means you may not purchase a home with a VA Loan and subsequently rent it out. However, if you buy a duplex, triplex, or fourplex, and are living in one of the units, you may rent out the other units.
Remember, if you are applying for a refinancing loan through the IRRRL program, you only have to verify that you previously occupied the house. So, you may opt to rent out your home as a result of that program.
- The VA Home Loan is assumable to other parties
The program’s assumability benefit allows a home seller a serious advantage when putting their home on the market. As a home seller, you should receive approval by either the VA, the lender, or the loan servicer, prior to any transactions. As long as you do that, you are at a distinct advantage, especially now when interest rates are steadily climbing. If you can offer a potential homebuyer a lower interest rate, they are more likely to purchase your house over another house without this benefit.
For the buyer, assuming the VA Loan benefits can often be quicker, simpler, and cost less money, than obtaining a new traditional loan. Just again remember, you must first obtain approval from the VA, lender, or the loan servicer, or else you will receive a notice from the VA at closing that your loan is “Due at Sale,” of your home. This is regardless of if you are current or have missed any payments on the mortgage.
Make sure to discuss your specific needs with your qualified VA lender. It’s important to know the VA does not set the interest rates for VA home loans. It only backs, or guarantees, the loans in the case of default. This leads to less risk by lenders. However, each individual lender will fund the loan and determine your interest rate. So, shop around and get enough quotes that you feel good about the interest rate you are signing up for.