The VA loan was born in 1944 after FDR signed into law the GI Bill of Rights. It was created for the purpose to give veterans and their families an avenue to home ownership. These loans are made through private lenders which are guaranteed by the Department of Veterans Affairs.
Who is eligible?
To be eligible for a CA loan you need to be active-duty military personnel and have been serving for about six months according to BankRate. Reservists and members of the National Guard have a longer period to wait before they can apply — 6 years. This can change if they are called to active duty, which reduces their wait period to only 181 days of service.
However, active duty, reservists, and National Guard members are generally eligible after 90 days of service during wartime. For veterans, you are eligible if you have “served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continues days during peacetime.” If you are interested in trying to get a VA loan, you must get a Certificate of Eligibility (COE).
The benefits of a VA loan
Obtaining a VA loan is a foot in the door for those who would otherwise have a tough time qualifying for a more conventional mortgage. The VA guarantees a maximum of 25 percent of a home loan up to a $113,275, which in turns creates the maximum loan ceiling of $453,100.
One of the biggest benefits of a VA loan is that you can get the mortgage without a down payment. Furthermore, unlike conventional loans which require mortgage insurance for those who put down less than 20 percent, VA loans do not require borrowers to get insurance. This could mean hundreds of dollars saved that would have otherwise been spent on insurance.
Are there any other requirements?
Keep in mind that even if you meet all of the eligibility requirements, you still need to meet credit/income requirements. Generally speaking, they want to see a credit score of 620 or higher, proof of your income capability, and that you do not currently have a large amount of debt. However, it is a benefits program, so there will be some leniency on these matters.
What else should I know?
VA loans do carry a one-time fee that varies depending on the type of veteran and the down payment according to “5 things to know about getting a VA loan.” The fee sits at 2.15 percent of the entire loan amount if you are in the armed forces and are getting a VA loan for the first time without a down payment. If you can put down 10 percent, then it goes down to 1.25 percent. And if you receive disability compensation, then the fee is waived.
And finally, one of the most reassuring benefits of a VA Loan is the aid that is available to those who are struggling to make payments. The VA can step in and negotiate with the lender on behalf of the borrower to establish repayment plans, modify the loan, or determine other options that can keep a borrower out of foreclosure. For more information on VA loans, visit the VA website here.