25 Mar The Ultimate Guide To VA Home Loan
Intended to help Veterans purchase homes without any down payment or outstanding credit, VA home loan is a program initiated by the US Department of Veterans Affairs. Created in 1944, VA mortgages have helped more than 25 million military members. With flexible guidelines, easy application process and some astounding benefits, this revolutionary mortgage facility has acted as a lifeline for many Veterans.
Following is a breakdown of things you should know about VA home loans-
Eligibility Criteria For VA Home Loan
A Veteran/active military member is eligible for a VA home loan if they meet the following requirements-
Applying for COE- A COE or Certificate of Eligibility is a validation from the department that an applicant is eligible for a VA mortgage. One can apply for it online or through a VA-approved lender. To obtain COE, an applicant must meet either of the following requirements-
- He/she is a Veteran/active military member who has served at least 181 days during peacetime, OR
- He/she is a Veteran/active military member who has served at least 90 days during wartime, OR
- He/she is a reservist with six years of experience, OR
- He/she is a spouse of a Veteran who either went MIA, was a POW or died while on service or from a service-related injury/disability.
Home Occupancy Requirements
Along with getting the COE, an applicant must also meet home occupancy requirements to qualify for a VA home loan.
The house selected must be for primary residence only and the borrower must move in within 60 days of the loan closing.
How Are VA Loans Different From Traditional Mortgage?
VA loans are quite different from the traditional loans available in the market. Along with requiring no down payment and having flexible guidelines, here’s how a VA loan differs from a conventional loan–
- They do not require Private Mortgage Insurance (PMI)- A typical traditional loan would require an applicant to pay PMI unless he/she is willing to pay at least a 20% down payment. However, VA mortgages would not require an applicant to pay PMI, even if he/she chooses no down payment options.
- Lower Interest Rates- The VA makes sure that VA loans have the lowest interest rates in the market, unlike conventional loans, which require an applicant to have outstanding credit to get lower rates.
- Flexible Guidelines- Along with having a more effortless application procedure, a VA home loan won’t require its applicants to have a high credit score. In fact, VA loans are also available to those applicants who have had a foreclosure before.
Types Of VA Loans
- VA Purchase loan– VA purchase loans can be used to purchase single-family homes, duplex, new constructions, condominiums and manufactured homes.
- VA IRRRL- VA Interest Rate Reduction Refinance Loan (IRRRL) allows applicants to refinance their existing VA loan for lower interest rates.
VA Cash-out Refinance- This refinancing VA home loan option enables applicants to refinance their VA/Non-VA loan and take out cash from home’s equity. This cash can be used for home renovations, paying off debts, paying school bills or whatever the borrower desires.