Va Loans: So what's the fuss?
What Exactly is a VA Loan?
Why Does it Pay to Apply for a VA Loan?VA Loans have several tempting benefits attached to them, including:
- Varied Credit is Accepted
Most VA Loans are administered by private lenders such as banks and credit unions, so the VA is rarely involved in the process. While the VA itself does not have a minimum credit score required to qualify for loan, your private lender may have a designated benchmark credit score, often set at a 640 minimum.
- No Private Mortgage Insurance (PMI) Required
PMI is typically required by banks if you do not have at least 20% of the purchase price when acquiring a loan. This ensures the Bank itself does not lose money in the case of default or foreclosure. Because a VA backs your loan, they are agreeing to cover that risk, which saves you money!
- No Down Payment for Purchase Required
It is pretty rare to find yourself in a home-buying situation requiring zero-down, but VA Loans are one of those diamonds in the rough! While you can make a down payment, 80% of those loans are made without one, pending the sale price does not exceed the appraised value.
- Unlimited Borrowing Potential
This sounds great right? While it can be very beneficial, VA will only back a maximum of 25% of your entire loan, capping off at no more than $121,087, which equates to a home totaling $484,350. A home beyond that valuation will only be covered up to the bench-marked amount.
- No Prepayment Penalties
Are you really good at budgeting? With a VA Loan, if you pay it off early, you will not incur any additional fees some institutions require.
- No First Time Home Buyer Requirement
The VA allows you to use VA Loans more than once, meaning you do not need to be considered a First Time Homer Buyer to receive the benefit, provided you pay off each loan completely.
- Reduced Closing Costs
The VA regulates how much you as a buyer can be charged for closing costs, and 4% of those costs can be paid by the seller.
Am I Eligible?
While only the VA can determine if you are eligible for a VA Loan, listed below are a few of their standard guideline requirements, of which you must meet at least one of:
(to see the full qualifications visit Benefits.VA.gov)
- "You are an active duty service member or an honorably discharged veteran who has 90 consecutive days of active service during wartime or 181 days of active service during peacetime." - DaveRamsey.com
- You have served at least six years in the Selected Reserve or National Guard
- Your spouse, a service member, died in the line of duty
- You must have satisfactory credit, sufficient income, and a valid Certificate of Eligibility (COE) to be eligible for a VA-guaranteed home loan.
- The home must be for your own personal occupancy
Something to Note*
While there is no down payment required with a VA Loan, you are charged a"funding fee" which ranges from 1.25%-3.3% of the entire loan amount. For example, a $250,000 loan would have a funding fee of approximately $3,125 - $8,250. You have the option to include this fee in the financing, or pay it upfront; although, if you chose to finance then it is added to the monthly payment amount due, meaning this fee accrues interest and increases your total payments.
However, you can be exempt from this fee if you are a:
- Veteran receiving VA compensation for a service-connected disability
- Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay
- Surviving spouse of a Veteran who died in service or from a service-connected disability
While a VA Loan does offer lots of benefits in terms of ease of application and acceptance, it may not be the best fit for everyone who qualifies. Profinium has in-house experts who are ready to help our past, present, and spouses of those who served. Feel free to message us to learn more about VA Loan Options.