5 Things You Need To Know About VA Loans
Protecting our country and serving in the US Armed Forces is the most selfless act an American can perform. No matter the branch in which you’ve served or are currently serving, each and every person that makes a commitment to protect our great nation is a hero. To recognize and honor those that have served, the federal government has granted banks and mortgage companies the opportunity to pay back a small fraction of the debt they owe to servicemen and women by providing VA loans.
VA loans are exclusive home mortgage loans offered by lenders to service members, veterans, and eligible surviving spouses. This type of loan offers certain benefits that FHA, conventional, USDA, and other types of home mortgage loans simply don’t offer. In order to take full advantage of this life-changing loan that was designed with you in mind, there are a few things that you need to know.
Hands down, a VA loan is the best type home mortgage in the market. The benefits are numerous but the most salient perk is that no down payment is required for a VA borrower. Compare this with the 5% and 3.5% rates that conventional and FHA loans ask require.
Mortgage insurance adds to the already heft monthly payments that FHA and conventional loans ask of borrowers. Luckily for you, no private mortgage insurance is required for VA borrowers. There is however a mandatory funding fee attached to VA loans, however this is much more cost-friendly than paying for private mortgage insurance.
Civilians with poor credit often find themselves on the outside looking in or paying loan premiums. Those that have served however typically need only a 620 credit score to secure a loan. This score is far lower than those needed to receive a conventional or FHA loan.
Having access to a VA loan is a privilege that you’ve earned. Not just anyone is eligible for a VA home mortgage loan. While the loan is open to veterans, active duty service members, reservists, National Guard members, and spouses of those that have served, there are still certain requirements that must be met in order to become eligible. Those looking to take advantage of VA loans benefits must meet at least one of the following requirements.
- You have served 90 consecutive days of active service during wartime.
- You have served 181 days of active service during peacetime.
- You have more than 6 years of service in the National Guard or Reserves.
- You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.
There seems to be a rumor running wild within the VA community that a VA loan can only be used once. This is false. The origin of this falsehood comes from the rule that no single person eligible for a VA loan can utilize two at once. Once the initial loan is paid off you remain eligible to take full advantage of the program again. There are minor differences between the terms of the first and second VA loan, but by and large you will still receive all the same benefits.
Townhomes, condos, mobile, and manufactured homes can all be purchased with a VA loan. Houseboats, properties abroad, or second homes however cannot be bought with the assistance of a VA mortgage loan. Loans granted by the U.S. Department of Veteran Affairs can only be used to buy a property that will be used as a permanent residence. An active duty service member does however have the ability to rent our their home if they get transferred overseas. Once a home is purchased, homeowners generally need to occupy that home before 60 days after purchase. There are exceptions to this rule however. Retiring service members may be able to negotiate a move-in date, property repairs may warrant a later occupancy date, or intermittent deployment may also be an exception to this rule. If a service member is away on duty, a spouse may satisfy the occupancy requirements.
Not only can these loans be used to purchase a home but also to refinance one. Those who qualify have the option of utilizing a cash-out refinance home loan or an interest rate reduction refinance loan (IRRRL). The former is often used to refinance a non-VA loan into a VA loan. Those that have served also use it to pay off debt, school, or make home improvements. Affiliated Mortgage is one of the few lenders that allows homeowners to refinance up to 100% of their home’s value to pay off home mortgages.
The latter loan enables homeowners to reduce monthly mortgage payments or stabilize monthly payments by shifting to a fixed rate loan. If you choose an IRRRL you’ll be able to reduce monthly interest payments without providing an abundance of documents. Neither credit checks nor appraisals are needed to secure this type of loan thus streamlining the process.
At Affiliated Mortgage, the topic of VA loans is a personal one. Many of our loan officers are veterans, spouses, or active members. We have a “take care of our own” mentality when serving the military family. Learn about who we are and how we can help you by coming to our monthly Mortgage Club event on the ‘Day” of “Month” to learn more about how you can get the most out of a VA loan.
Don't miss out on February 20th at 5:30 PM the upcoming Mortgage Club Event: VA Loans by Sarah Bowser!Register Now!
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