VA Loans are home and personal loans for our nation’s veterans, active duty service members, and their families. This program has lots of great benefits that make VA loans a powerful money-saving option for eligible borrowers.
As with any home loan, the first step is getting pre-approved. Pre-approval is an important step because it lays the foundation for your home financing process, establishes how much home you can afford, and determines a reasonable monthly mortgage payment for your budget.
Benefits
Government Insured
VA loans are backed by the full faith and credit of the United States Government. This reassurance allows lenders to offer lower interest rates and better terms.
Lower Interest Rates
The government doesn’t set interest rates, lenders do. But federally backed loans give lenders the security to offer financing at lower interest rates.
Rates for VA loans are usually .5% to 1% lower than rates offered on conventional mortgages.
No Down Payment
Most other loans require some type of upfront down payment to secure the transaction. For FHA loans, this can be as low as 3.5%. For conventional loans, this can be as much as 20% But VA loans don’t require a down payment! This offers borrowers consider savings at closing and removes the stress of finding out of pocket cash to buy a home.
For example, 20% down on a $150,000 home is $30,000. On a $250,000 home, it’s $50,000. The upfront savings are considerable!
No Private Mortgage Insurance
Private Mortgage Insurance (PMI) protects lenders in the event of default, but with VA loans, the government assumes this risk for veterans.
This can save you between $150 and $345 per month in insurance premiums, depending on the amount of your mortgage.
No Prepayment Penalty
Many lenders include penalties that allow them to recoup a profit if the borrower fulfills the loan obligation early, but VA Loans do not have prepayment penalties.
Basic Housing Allowance
The Basic Housing Allowance (BHA) is an allowance given to qualified active service members. This amount varies based on pay grade, location, and family size.
The good news is certain borrowers might qualify to count their BHA towards monthly income for a home loan! Every situation is different, so you’ll want to ask your lender if you’re eligible.
VA Loan Requirements
No Dishonorable Discharge
If you were dishonorably discharged from military service, you won’t be eligible to participate in the VA Home Loan program.
VA Loan Certificate of Eligibility
The Certificate of Eligibility (COE) indicates the potential buyer’s entitlement and eligibility to participate in the VA Home Loan program.
There are three easy ways to apply for your COE. First, you’ll need to locate your DD-214.
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Your VA approved lender can typically obtain your COE quickly and easily for you.
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If you’d prefer to do it yourself, you can apply online through the VA’s e-benefits portal.
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Or, you can apply by mail using the form 26-1880.
No Income Threshold
The VA Loan program doesn’t require a certain level of income. Instead, they look for stable, reliable income that can comfortably pay all of your bills and new mortgage.
The VA also requires a certain amount of “residual income” from their buyers. This left-over money each month acts as a cushion in the event of emergency, and the program has resulted in significantly fewer defaults.
Qualifying for a VA Loan
Credit Score
VA doesn’t set an official credit score, but most lenders look for a 620. Your lender will pull your scores from three major credit agencies to compare.
Remember, the higher your score, the better your interest rate will be. It’s always a good idea to pay down any outstanding debts and check your report for any accounts in collection so you can start this process from the best possible point.
Debt to Income Ratio
Your debt to income ratio is very important in determining how much home you can afford. Lenders will examine your bank statements, w2’s and pay stubs as well as existing credit, personal, or auto debts, and current monthly expenses.
How to Apply
The loan process typically takes 30-45 days once you’re under contract on your new home.
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Reach out to a VA approved lender to begin the process.
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Obtain your CEO, or have your lender handle the paperwork for you.
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Finalize your application and provide all necessary paperwork, such as W2, pay stubs, bank statements, proof of assets and monthly bills.
Duck Brother’s Real Estate
At Duck Brother’s Real Estate, we are proud to be Americans and proud to support our past and present service members. Our military makes the ultimate sacrifice to protect our country and our families, and it is our duty and honor to help each and every service member to achieve their American Dream.
If you need help locating a VA approved lender, we can connect you with reputable companies we know and trust. Our goal is to make your journey to homeownership smooth and stress free! We take pride in building lasting friendships with our clients and want to help you slow down and enjoy the experience.
If you’re ready to explore your options for reaching homeownership, please call 254-613-6326 or visit www.duckbrothersrealestate.com. We can’t wait find the home of your dreams!
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