09 Jan Understanding VA Home Loans Guidelines: Eligibility & Limitations
Thank you for your service if you are a veteran! If you are reading this blog, you are perhaps considering buying a home and would like to know more about VA loans. VA home loans are a fantastic perk that might assist you in purchasing your dream residence.
What Is A VA Home Loan?
A VA home loan is a mortgage option available to qualified veterans, active serving service members, and their families with little or no down payment. Private lenders make VA loans, partially backed by the Department of Veterans Affairs (VA). Since becoming a VA lender in 2011, Capital Bank Home Loans has closed thousands of VA loans and employs some of the best VA Mortgage Bankers in the industry.
Different Types Of VA Home Loans
There are usually four types of VA home loans you can apply for:
- Purchase loans
- Cash-out refinance loans
- Interest rate reduction refinance loans
- Native American direct loans
Benefits Of VA Home Loans
What, therefore, makes a VA loan so unique? Only qualified veterans, active duty service members, and in some situations, their spouses are eligible for VA loans, which offer exclusive benefits. You become a less dangerous borrower to your private lender thanks to VA loans, backed up to 25% of the loan value by the government. If you are qualified, this allows you more freedom in the home-buying process.
Primary advantages of VA loans include:
No Down Payment: There may not always be a down payment needed. That is correct! Veterans who meet the requirements can receive 100% funding for certain VA loans.
No PMI: There is no private mortgage insurance with a VA home loan, one of its main advantages (PMI). If you put less than 20% down on your loan, you will often need to pay private mortgage insurance on top of your principal and interest payments. Even if you choose to make no down payment on your VA loan, PMI won’t be required.
No limitations on where or how much you can purchase: The amount you can borrow from the Department of Veterans Affairs is not capped, but you must still be eligible by providing documentation of your income.
VA Home Loans Requirements
Now that you know the advantages of a VA home loan, let’s discuss some prerequisites. The following are typical prerequisites for VA loan applications:
Credit Score
Your credit history is crucial when applying for a VA home loan, as it is with most financial-related matters. Your private lender may require a minimal credit score, even while the VA does not. If your mortgage lender has a minimum credit score requirement, ask them about it.
Can you still qualify with a shaky credit score?
Some lenders will let you qualify for a VA loan even if your credit score is low, but you might have to pay more.
Debt to Income Ratio
Your debt-to-income ratio (DTI) is another crucial consideration for VA loans. Again, the precise DTI required for loan approval may vary depending on your lender and particular circumstances. Still, generally speaking, you can anticipate that a VA loan will accept a DTI of no more than 45%.
VA Home Loans Restrictions
After discussing the prerequisites for VA loans, it’s vital to note that there are still certain limitations on the kinds of homes you can buy.
Primary Residence
Your primary residence must be the property you intend to buy with a VA loan. This means that after acquiring the home, you and your family must plan to reside there. Vacation homes or investment properties are not eligible for VA loans.
Your home must pass all the MPRs
One of the more challenging components of VA loan limits to convey is this. Your property must be eligible for a VA loan before you may buy a home. The VA will send a specifically selected VA appraiser to evaluate the home. The VA property standards are well-detailed here, but in principle, your house needs to be a typical (non-unique) residence that is in good operating order.
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