VA Home Loans
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VA Home Loans
Everything You Need to Know About VA Home Loans and How They Work
Are you a military veteran who is looking to buy a house as your primary residence? The VA Loan program allows you to secure a place for yourself with little or no cash. The US Department of Veterans Affairs backs up a VA Home Loan and the guarantee itself reduces the risk involved for the lender.
There are plenty of reasons that make this Loan a great choice for military servicemen such as the credit requirement being lax and the absence of a down payment. Unlike other loans, the buyers don’t have to pay for the insurance or a premium, instead, there is a VA funding fee to be paid at the start.
How does one qualify for a VA Home Loan?
VA Home Loan is only for properties that are meant to be used as the primary residence of the borrower. The loan can’t be used for investment purposes or for financing a vacation house. If you want to refinance the loan, there are programs that can help you find a lower rate loan.
Since the loan is for military servicemen, you should either be part of the military or honorably discharged veteran to be able to apply. Also, you would have to have served at least 90 consecutive days in service during wartime or 181 days in active service in times of peace to be eligible. There is also a requirement of the borrower having served six years in either the National Guard or Selective Reserve. If you are a spouse of a military serviceman who fits the criteria mentioned but has died in the line of duty, you will still be able to apply for a VA Loan using a VA Certificate of Eligibility or a COE.
Key Features of a VA Home Loan
A VA Home Loan is provided by financial institutions such as banks and mortgage companies. If you default on your loan the VA will guarantee an amount on your behalf to the lender. This amount is known as the VA Loan entitlement and falls into two categories; the basic entitlement and bonus entitlement.
The basic entitlement accounts for less than 25% of the total mortgage whereas a bonus entitlement provides you with an additional 25% of the Federal Housing Finance Agency Loan limit. The bonus entitlement works best for homes that are expensive or are located in expensive areas.
If you want to opt for a VA loan, you will have to search a bit because not every lender offers it. The rates and closing costs for VA Home Loans vary from lender to lender. You can use this loan to either purchase the property of your choice or upgrade the house that you’re already living in. The VA can help you work through the terms of the loan and negotiate with the lender to find you the best possible deal. The lenders define the criteria for the amount of loan you can apply for and the closing costs. This loan program is aimed to facilitate military servicemen and their families and can be a super helpful way of financing a primary residence.
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