If you're an eligible service member or veteran, consider applying for a VA mortgage when you're ready to buy a home. VA home loans are issued by private lenders but guaranteed by the U.S. Department of Veterans Affairs (VA). Because the VA guarantee protects lenders from losses, qualifying requirements for VA loans are less stringent than for standard loans. Interest rates are also competitive, although there are some loan fees to pay.
Military members eligible for VA loans must get a Certificate of Eligibility to apply. Borrowers have a choice of lenders and can get a new mortgage or a cash-out refinance loan. A wide variety of lenders make these loans, but the best VA loan lenders offer loans with no down payment requirements, no private mortgage insurance, and relaxed credit score standards.
Best for: Easy application process
The fact that it is the largest VA home lender speaks volumes. But Veterans United also offers an array of terms and loan products, in addition to competitive rates. Read Full Review
Best for: Diverse loan types and terms
Competitive rates and a diverse set of loan terms and products are a rare combo. Fast service simplifies the homebuying process even more. Read Full Review
Best for: Diverse loan offerings
Diverse loan products and terms make it a flexible lender for many needs, including several no PMI options to choose from.
VA loans are issued by private lenders that rely on a guarantee made by Veterans Affairs that protects them in case of default. The VA guarantees a number of loan types including:
In addition to guaranteeing loans made by banks, credit unions, and online lenders, the VA also offers more direct assistance to eligible service members. Direct sources of home-buying help include adapted housing grants for veterans to buy, build, or adapt a home to account for a service-connected disability. There's also a Native American Direct Loan program that helps eligible Native American veterans buy, build, or improve homes on Federal Trust land.
These loans often have lower interest rates and easier qualifying requirements than conventional mortgages not guaranteed by the VA. Eligible service members and their families can qualify for a loan with no down payment, and they don't have to pay private mortgage insurance (PMI). PMI is required on some other types of loans with a down payment below 20%.
However, the VA does charge a one-time VA funding fee, which varies depending on your service record, whether you've gotten a VA loan before, and the size of your down payment. The funding fee is between 1.4% and 3.6% of the amount you're borrowing. However, veterans receiving disability compensation are exempt from this fee.
Veterans who meet length-of-service requirements, active duty service members, certain current or former National Guard or Reserve members, and surviving spouses of veterans who passed away on active duty may all be eligible for a VA loan. You can check www.ebenefits.va.gov or call 877-827-3702 to determine if you meet the service history requirements.
In addition to your service record, additional requirements include:
Many banks, online lenders, and credit unions offer VA loans. To find the right lender:
It is best to get quotes from several mortgage lenders as each can set their own terms and interest rates as long as they conform to broad VA guidelines for issuing loans.
A VA loan is a good option if:
There is no minimum credit score requirement set by Veterans Affairs for VA loans. Lenders who offer these loans, however, may set their own minimum score limits.
VA loans do not require a down payment unless the lender requires one or the purchase price of the home exceeds the reasonable value of the property. Unlike most other types of loans, you don't have to pay private mortgage insurance even if you put down a low down payment or no down payment.
The biggest drawback to VA mortgage is that you're required to pay an upfront funding fee that's calculated based on a percentage of the loan amount. The fee varies depending on several factors, including the size of your down payment, but it is waived if you receive VA disability compensation.
A funding fee is an upfront one-time fee you have to pay when you get a VA mortgage loan. It's between 1.4% and 3.6% of the loan amount and can be included in the loan so you pay it off over time. You do not have to pay this fee if you receive disability compensation from the VA.
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