Welcome back to my next installment in the Mortgage Series! This post is focused on the VA Loan, which is an excellent option for those who qualify. The VA (Veterans Administration) Loan has been around since 1944 for members of the United States Military, originally passed by Congress as part of the G.I. Bill to assist soldiers who were returning home from World War II. Those who qualify for VA financing may be men and women from any branch of the military who are veterans or active duty service members, Reserve, or National Guard; widowed spouses of our fallen soldiers also qualify for this loan. There are currently more than 27 million veterans who are eligible for a VA Home Loan, but many are not aware of the option. This fact is unfortunate because the VA Loan has exceptional benefits for men and women who have served our country.
The VA Loan can be used to purchase a home or refinance an existing mortgage. No down payment is necessary (that means 100% financing!) and no private mortgage insurance is required. These benefits alone are outstanding ways for veterans to save money on this major financial investment. A few other benefits include limited closing costs for the buyer, fixed-rate loan terms up to 30 years, low interest rates similar to those of an FHA loan, and borrowers do not need perfect credit to qualify like many other loans require. These benefits are provided to make homeownership as feasible as possible for those who have served in the U.S. military.
The Federal Government is able to provide these terms because, like the FHA Loan, it does not actually provide the financing, only guarantees it through private local lenders. Buyers who explore the option of the VA Loan should note that the VA does not actually provide the funds to buy a home. The Department of Veterans Affairs simply agrees to pay the lender a percentage of the loan should the buyer default. Of course, all parties involved make every effort to ensure that does not happen!
Now that we’ve discussed the many benefits of this type of home financing, let’s go over the fine print. To qualify, applicants must have records of current military service or validate they were given an honorable discharge. Those who served in World War II, the Korean War, or the Vietnam War must have had at least 90 days of active service. Veterans who have enlisted since 1980 must show proof of active service lasting at least 180 days, and in some cases two years. The documents required to show proof of service can be in the form of a DD214 for discharged veterans or a statement of service for those who are still serving. Lenders will also request a certificate of eligibility to approve a VA Loan. In addition to these military service guidelines, there are some lending limits on the purchase price of the desired home. In most areas, the VA Loan limit is $417,000 but it can be as high as $625,000 in high-cost markets.
Buyers should work out those qualifying details with the lender directly, just as they should go over credit scores, debt-to-income ratios, and interest rates. Every lender is different, so it is in your best interest to take the opportunity the sit down with your loan officer to get all the details catered to you and your particular situation – everyone appreciates customized service, right?
Our servicemen and servicewomen are some of the bravest, brightest, and most selfless people we will ever know. I hope this information helps them realize they can achieve the dream of home ownership, and I also hope they will take advantage of this financing option available only to them. It truly is a fantastic option that makes financing a home much more attainable for many people. If you’re a veteran reading this post, thank you for your service.
Check back next time – I will be covering USDA Loans!