The United States Armed Forces is perhaps the strongest military force in the world. To reward military members and their families for their dedication to serving the country, the U.S. Department of Veterans Affairs offers low-cost home loans to service members that extend even after the veteran has passed away. The surviving spouse of a veteran can still use their eligibility for a VA loan to qualify and get a low-cost home loan that makes homeownership a possibility.
Are you curious about how VA loans work and whether or not you qualify? Continue reading to find out everything you need to know about VA loans and how they work.
What is a VA loan?
A VA loan is a special loan program backed by the United States government that aims to make homeownership easy for service members and their families. These loans often come with generous interest rates and no monthly mortgage insurance.
VA loans provide a ton of benefits for all military members regardless of their branch of service, including:
- Possibly no down payment requirements. Most loan programs require the borrower to put money down at closing. However, VA loans don’t always have a down payment requirement, which may make it very easy for veterans to buy a home and qualify for a mortgage.
- Interest rates. The interest rate is the rate at which you must pay back your loan to the lender. Veterans and active duty service members often get competitive interest rates which make homeownership affordable.
- Less stringent credit requirements. Unlike conventional loans, most VA loans don’t require an excellent credit score to qualify for a reasonable interest rate and financing terms.
Drawbacks of VA loans
While VA loans provide a ton of benefits for military members and their families, there are some downsides you should consider before applying for a VA loan.
- Most people don’t qualify. Since VA loans are only available to service members and their families, qualifying for a VA loan is impossible without a military member in your family.
- The VA funding fee. The VA funding fee is similar to the Federal Housing Administration (FHA) and its upfront mortgage insurance premium. However, the VA funding fee is generally 2.3% of your total loan balance and can be financed if needed.
- No investment properties or second homes. Unfortunately, VA loans are for the military members’ primary residence only, and you cannot finance real estate investments or second homes with a VA loan.
VA loan requirements
Even if you have a military member in your family, you’ll need to meet certain requirements if you want to get approved for a VA loan. First, you’ll need to meet the debt-to-income requirement which is a maximum of 41%, however, you may qualify for an exception based on your income level.
Next, VA borrowers must credit-qualify for VA loans. Most lenders want to see a minimum credit score of 620 which is right on par with the credit requirements of conventional loans.
Are you looking to buy or sell a home in the Massapequa area? The Kim Holland Homes Team can help ensure you qualify for a mortgage and choose a home that’s right for you and your family.