2017 Guide to VA Home Loans

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Are you active or retired military? You may be able to qualify for a Veteran’s Administration financing, also known as the VA home loan. For borrowers who are or were in the US military, VA home loans are one of the best options for people serving in the U.S. Armed Forces to buy a house.

If you want to buy a home and are a military veteran or active duty, keep reading to learn more about current VA home loan guidelines for 2017.

Overview of VA Home Loans

VA loans are one of the significant benefits you get for serving your country. People who qualify for a VA loan do not have to deal with as much hassle as far as qualifying for a VA loan, and the rates are usually excellent as well.

VA home loans

It is worth your time to find VA mortgage lenders that specialize in military home financing.

Here are some of the key things to know about VA loans in 2017:

  • No down payment needed: For most Americans, no down payment home loans are a thing of the past. The closest most people can get is a 3.5% down FHA loan. But if you can qualify for a VA loan, it usually can be with no money down. All you need to pay is closing costs and the VA funding fee.
  • No mortgage insurance: If you qualify for a VA loan, you do not have to pay for mortgage insurance or PMI. This is usually required for people who have less than 20% stake in the property. PMI will typically add $100 or more to your monthly payment.
  • Flexible lending requirements: Many other lenders have higher credit standards than a decade ago. But the VA home loan is a military benefit, so the standards are quite flexible. As long as you have a credit score of 620 or higher, you should be able to qualify for a VA home loan.
  • Low interest VA rates: VA home loans are usually lower than market rates, so you should be able to have one of the lowest possible monthly payments.
  • No pre-payment penalties: If you want to pay off the loan early or refinance, you will not be penalized.

Those are the most important features of VA loans today. Now let’s examine what you need to qualify.

Military Service Requirements

You have to be eligible for a VA loan to get one. Active military and veterans must mean certain qualification standards regarding their service. The current standards to qualify from a service perspective are:

  • Serve at least 90 consecutive days active during wartime
  • Serve at least 181 consecutive days during peacetime
  • Serve at least 6 years for the National Guard or Reserves
  • Be the surviving military spouse for those who died in the line of duty or with a service-related, major disability

If you meet some or all of these requirements, you qualify for a VA loan from a service perspective. You will still need to qualify financially, however.

Pre-Approval VA Home Loan Requirements

Once you have shown a lender your income, tax and payroll documentation, he or she can give you a pre-approval letter. This letter is usually needed when you are going to look at homes to purchase. The owner of the property wants to see that you have the ability to get a home loan.

The VA pre-approval letter will usually say that you have been pre-approved for a VA home loan up to a certain amount. You will still need to fully qualify for a VA loan, but the pre-approval letter is a critical step.

Credit Requirements on VA Loans

VA loans are very flexible in terms of qualifying, but you will still need to have acceptable credit to get a VA loan. Here are some of the common things you will need to answer with your lender:

  • Credit score: As long as it is 620 or higher, you should be able to qualify with most VA mortgage companies. If you are lower than that, you may have problems. Ask the lender to check with all three credit bureaus and try to get a score at or above 620. However some VA approved lenders will offer VA loans for bad credit as long as the borrower meets the other VA guidelines.
  • Collections or judgments: If you have past due accounts or accounts that have gone into collection, you may have problems getting a VA loan until those are resolved.
  • Foreclosures or bankruptcies: If you have a bankruptcy or foreclosure, you will usually need to wait at least a year before being approved for a home loan
  • Current income: Is your income stable and can you afford the monthly payment? Even though most veterans can get a VA home loan, the lender must ensure that you have the ability to pay the loan

VA Home Loan Amounts

How much home you can buy with a VA loan depends upon your income and debts, but most lenders currently cap VA home loans at $417,000. Higher than that and VA will not pay back the lender in case you default.

Closing Costs on VA Loans

All mortgages have closing costs. You will need to pay for an appraisal, title charges and possibly discount points. Also, you may need to pay a credit report fee.

The Bottom Line

A VA home loan is one of the best benefits today of military service once you get home. You can get a loan with no money down, no mortgage insurance and a very low interest rate. It also is easy to qualify for a VA home loan.

If you are a military vet or current military, you should see if you can qualify for a VA loan before you consider any other mortgage product.