VA Loan Guide for Military Home Buyers

Views: 164

There are many great home financing advantages to being a military veteran or active military. One of the biggest pluses that you can enjoy is getting a VA loan with competitive interest rates, low closing costs and no down-payment required. If you are VA eligible you owe it to yourself to learn about the benefits of a Military loan guaranteed by the U.S. government. In the last few decades there is no more attractive mortgage than the VA loan programs that are available to qualified veterans and people that are active in the U.S. military armed forces, such as, the Army, Navy, Marines, Air Force, coast Guards and Reserves.

Do your research online to find VA approved mortgage lenders that offer the best VA loan programs for your credit, goals and financial situation.

VA Loan

A VA loan is guaranteed by the Veterans Affairs Administration. This means that if you were to not pay the mortgage, the VA will pay back your lender. This guarantee means a great deal. It makes many more mortgage lenders likely to give loans to veterans with moderate income and average or even poor credit.

The benefits do not stop there, however. You also have the possibility of getting a VA home loan with 100% finance programs. Only VA and USDA loans offer zero-down home loan programs. That’s right. You may not even need to put money down to get your mortgage. For many vets, it means they only have to worry about paying closing costs of 3% or 4% of the loan amount.

If you are a vet and are thinking of applying for a VA loan, we want to provide you with this helpful guide to make the process easier:

  • Regular active duty military can apply for a VA loan after six months of service or 90 days for the Gulf War. Retired vets have to have completed 181 days or service and received an honorable discharge. Surviving spouses can be eligible for the benefit too if they remarry after the age of 57.
  • You do not need your Certificate of Eligibility to start. Lenders will get this critical document once you have applied for your VA loan.
  • Think about your credit score. While many military mortgage lenders will be very flexible with VA loans, you will have an easier time qualifying if your credit score is at least 620, and a 680 or better makes things very easy.
  • Cut down your debt to income ratio to 41%. If you have less debt, you will have a much easier time qualifying for a loan. You should try to pay down your credit cards as much as you can which will raise your score a good deal, as much as 40 points. Also, you should not have any late payments on any bills for at least a year.
  • Get together all of the paperwork you will need. You should have your bank statements, two years of tax returns, a month’s worth of pay stubs, and a profit loss statement if you work for yourself.
  • Get a pre-approval. This will come from a VA-approved lender who will pull your credit and verify your employment and income information. That way, when you go shopping for houses, you can show that you have been pre-approved. This will make it much easier to put in a bid on a house and have it seriously considered.
  • Find agents who know VA loans. It is helpful to work with a real estate agent who is familiar with the VA loan process. He or she can help you to steer clear of houses that are going to get hung up in the military loan approval process. They also can use their knowledge in some cases to reduce your closing costs.
  • Be ready for upfront costs. Even if you get 100% financing, you will need to pay for an appraisal and put down an earnest money deposit ($1,000 is very common). Also, while the seller can pay part of your closing costs, you should be ready to pay all of them yourself.
  • You can use your VA loan benefit multiple times. In most cases, you can only have one VA home loan at a time, though there are exceptions.
  • If you lost a VA loan in a foreclosure, this will not prevent you from getting another VA mortgage.

Can I Qualify for a VA Loan with Limited or No Credit?

va mortgage loan

The Veterans Administration makes home loans available to US military veterans and active members who meet minimum VA loan guidelines. The VA is not a lender itself; it guarantees the loans in case of default and makes it more likely that mortgage lenders will make home loans to veterans. The VA loan program is a major benefit to military members because of no down payment, low interest rate and PMI not being required.

VA loans offer no minimum credit score, so vets who have poor credit and a lack of resources to be home owners may be able to be approved. While FICO score requirements are very flexible for VA home financing, there are other factors that may make purchasing a home harder for people with lower credit scores. It is still possible to get a VA loan with bad credit scores in 2018.

Other VA Mortgage Loan Benefits to Consider

  • 100% financing is still available: This is one of the few loans on the market today that is truly 100% financing. Unless you are buying a home in an approved rural area, the closest you can get outside of the VA loan is the FHA program with a 3.5% down payment, and some Fannie Mae and Freddie Mac programs with a 3% down payment.
  • No mortgage insurance: Most people who make less than a 20% down payment on a home must pay for mortgage insurance. This is a considerable expense each month on top of your mortgage payment. This is not required with VA mortgages.
  • Low interest rates: Whatever the current market rates are, your VA loan interest rate may be even lower.
  • DTI: Your debt to income ratio can be higher than other loans, including Fannie and Freddie, and FHA
  • Generally easier to qualify for: The VA loan program is a benefit for military members and retired veterans, so this program is extremely flexible and easy to qualify for.

Debt to Income Ratios

The VA does not have a maximum debt to income (DTI) ratio. But lenders do set their own maximum DTI for these loans. Most lenders have a maximum DTI of 41%. But this is not a hard limit, and there can be exceptions. To qualify for a VA loan with a debt to income ratio above 41%, you should have other compensating factors, such as a lot of savings, ability to make a down payment, higher earning potential, or a high credit score.

The takeaway is that VA loans are a great benefit for those who can qualify for them. Credit score requirements are very reasonable, so you should definitely apply if you think you qualify as a current or retired military member.

Something for Military Veterans to Chew On

Anyone who has military experience and can qualify for a VA mortgage should strongly consider doing so. The VA loan requirements are very flexible and one of the few mortgage loans you can get today that features 100% financing. There used to be many programs available for 100% VA financing, but most of those were gone with the Great Recession.

As a veteran, you still can get a home with no money down. That said, you still need to make sure that you have the income to afford paying the loan each month. Also, you should try to get your credit score up as much as you can before you do a VA mortgage application.

Lastly, even though VA loans are largely the same, the interest rates can vary from lender to lender. It will always benefit you in the end to do your shopping and homework. You could get the very same loan product with different lenders and have two different interest rates. Your VA home loan benefit is one of the biggest advantages of your military service, and you should take advantage of it as often as you can.

Sources: VA Benefits           Learn More About VA Housing Programs             About Government Loans

About Bryan Dornan

With over 20 years in the mortgage industry, Bryan Dornan has started several companies, such as the Lead Planet, Mortgage Lenders Plus and the Refi Guide. Mr. Dornan has written hundreds of finance related articles in an effort to promote home-ownership to consumers across the United States.