The VA loan program was established after World War II to give veterans the ability to more effortlessly integrate themselves back to civilian life. VA loans are a great way for active military members and U.S. military veterans to secure a home loan without a down payment.
What is a VA loan?
A VA loan is a loan that is guaranteed by the U.S. Department of Veterans Affairs. They are provided by lenders such as banks or credit unions. A VA loan is unique as it is only available for U.S. veterans, active duty military members, and spouses of U.S. veterans or members of the military.
With a VA loan, the lender guarantees a home loan by paying the lender if the buyer is unable to make payments. This reduces the risk for lenders, which in return allows them to offer better rates and not require a down payment.
Who qualifies for a VA loan?
As mentioned, a VA loan is a home loan provided to active duty members of the military and U.S. veterans. The spouse of a qualified member can also receive a VA loan as well. There may be certain requirements that must be met to qualify (i.e. length of service requirement). As is the case with other loans, borrowers must meet the credit and income requirements the private lender has as well. The credit score requirement may vary based on the lender, but it can be as low as 580.
What are the benefits of a VA loan?
The VA loan program was designed to offer special benefits for active and former military members. Several of the more notable benefits of a VA loan include:
- No down payment is required
- The interest rates are competitive
- Reduces closing costs
- Allows for a lower credit score (with some lenders)
The specific benefits you receive from a VA loan may depend on your situation. The best way to determine if a VA loan is right for you is to discuss a VA loan with a real estate agent.
What are the disadvantages of a VA loan?
The VA loan program does not require the borrower to purchase mortgage insurance, but they are required to pay what is known as a VA loan funding fee. This funding fee allows the government to cover the cost of foreclosure if the borrower defaults on the loan. In addition, not all properties are eligible for a VA loan. Only properties that meet the necessary requirements after a VA loan appraiser inspects the property qualify. You can also not use a VA loan for a vacation or investment.
How can I apply for a VA loan?
You must first obtain a VA certificate of eligibility. This lets the lender know that the VA loan is backed by the U.S. Department of Veterans Affairs. You can then find a lender, find your home, and start the purchase and closing processes.
EXIT Realty Bob Lamb & Associates is Murfreesboro’s most innovative real estate team.
EXIT Realty Bob Lamb & Associates
2630 Memorial Blvd, Murfreesboro, TN 37129