If you’ve served our country in the military and are looking to settle back into civilian life, you may be eligible for a veteran loan — commonly known as a VA loan. A VA home loan is intended to give back a little to the men and women who have bravely volunteered their lives and service for our country. Over 125,000 home loans in 2015 went to veterans who were buying a home for the first time, and having the VA home loan on your side can certainly make a difference in terms of interest rates and financing. It’s also not just veterans who benefit — if you’re the spouse of a service member who was killed in the line of duty, you may also be eligible for a veteran loan. So what are benefits of VA loan vs conventional loan? What loan requirements are there? Read on for more information.
How Do You Qualify For a Veteran Loan?
In order to be eligible for a VA loan, you need to have served 181 during peacetime, 90 days during a war, or six years in the National Guard or Reserves. If your spouse was killed in the line of duty and you don’t remarry, you may also be able to qualify for a VA loan.
The VA itself doesn’t require a minimum credit score, but many lenders ask for a credit score of at least 620.
Some of the other eligibility requirement for the VA loan program[4] and some specific home loan benefits include the length of service or service commitment, duty status and character of service. The program does allow for benefits to Surviving Spouses.
The VA does not have a minimum credit score used for pre-qualifying for a mortgage loan, however, most Lenders require a minimum credit score of at least 620. You’ll need to submit copies of your W-2 for the last two years, copies of the last two pay stubs, a list of other assets, your DD 214 or certificate of guarantee. In lieu of pay stubs, if you’re self-employed, you’ll need two years of tax returns.
The History of the VA Loan
To date, the government has insured over 20 million VA loans, meaning that over 20 million veterans are now the proud owners of a home. In just 2016, over 700,000 home loans were guaranteed all across the country. The program was begun in 1944, as the Servicemen’s Readjustment Act and in 1978, the Veterans Housing Benefits Improvement Act, the benefits were expanded to reach more veterans.
The Servicemembers’ Civil Relief Act works with the VA program and freezes home loan interest rates at 6%, in case the veteran is called back up into active duty, putting a strain on finances.
What are the Benefits of a Veteran Loan?
With a VA loan, you don’t need mortgage insurance and allow for 100% financing. The rates are also excellent — they can be as much as 50 basis points lower than what’s available for conventional mortgage loans. They can also get up to $6,000 for making energy efficient improvements on their home. Since there’s no monthly private mortgage insurance cost, a greater amount of the mortgage payment is applied directly to the loan amount.
Furthermore, with a VA loan, veterans can qualify for bigger loan amounts compared to traditional loans. It is worth noting that the maximum VA loan guarantee will depend on the county. As of January 2017, the maximum loan amount without a down payment is a little under $425,000.
There’s also a limitation put on the closing costs and you’ll get lower interest rates on average, as compared to a conventional loan. If you’re in danger of foreclosing, the VA loan program offers foreclosure avoidance advocacy, to help you find alternatives.
If you’ve served in the military, and always wanted to have the security of owning the roof over your head, consider applying for a VA loan, and take advantage of the benefits offered by the government as thanks for your service.