VA home loans have become popular of late, and the United States Department of Veterans Affairs has been helping eligible people become proud homeowners since 1944.
Eligibility
Almost all members of the military, National Guard, and reservists are entitled to the benefits of this loan. Members must have a minimum service of the following:
- 181 days of active duty during peacetime
- 90 days of active duty during wartime
- Less than 90 days for a service-related disability
- Six years in the National Guard or in the Reserves
It is important to note that veterans who have been dishonorably discharged are not eligible for the loan. Surviving spouses of a veteran are eligible if:
- The veteran died while serving duty because of a service-related injury.
- They are not remarried.
Benefits of a VA home loan
Let us take a closer look at some of the benefits of a VA home loan.
No requirement of down payment
Given that your loan is guaranteed by the VA, you may take out a mortgage without a down payment. This is a huge advantage as on regular Federal and Housing Administration (FHA) loans, the down payment is around 3.5% to 5% of the loan amount, that means on a loan amount of $300,000, the down payment may be as high as $15,000. For many young men and women in the army, they may not have that kind of money lying around.
No requirement of mortgage insurance
The FHA mandates mortgage insurance if your down payment is less than 20% of your property value. As such, a borrower must make payments between 0.3% and 1.5% of the loan amount per year. However, VA loans have no such requirement for mortgage insurance, and this translates into huge savings.
Lower credit score
VA loans are guaranteed by the VA, and even if you have low credit scores, you can get a loan depending on the credit score requirement of the lenders. Lenders ideally want a score of 620, however, if a down payment of 10% is made, then a FICO score of as low as 500 would suffice.
Myths associated with a VA home loan
It is important to note that there is a lot of misconception about VA loans and here are three common myths debunked.
Only retired or discharged veterans can avail of VA loans
Former servicemen and women may avail of this loan. Active service members may also be entitled to this loan.
VA loans are insufficient
Loan amounts differ in each state and go up in counties that are more expensive. The liability amount undertaken by the VA may differ from one county to another.
Foreclosure/bankruptcy bars you from availing of a VA loan
VA loans are more accommodating than other loans. If your credit score picks up, employment history is good, and your payments are made on time, you can apply for a VA loan within 12 months from filing Chapter 13 bankruptcy.
