For many years, the majority of mortgage loan lenders avoided VA, or Veterans Administration loans due to their time consuming processes and unique/challenging requirements. However, throughout the past several years, the government has simplified the process of obtaining a VA home loan to make them more attractive to lenders and borrowers. If you're interested in securing a VA home loan, then you should take a few minutes to continue reading. While the following information is a general overview, if you're still interested, you should contact a lender who specializes in VA home loans to determine whether or not this is an attractive option for you.
VA Home Loans | A Brief Overview
For years, mortgage lenders were offering zero down home loans, but after the market crashed in 2009, the home loan industry began to shift. While conventional home loans now require some money down and are strict regarding their minimum credit scores and financial history, a VA loan is unique within the industry as it offers military service members – both present and past – the ability to buy a home without having to pay a down payment. This can result in real savings for military members, which allows them to keep more of their money while still securing a stable and respectable home loan.
VA Home Loans | Advantages
There are many advantages to a VA mortgage loan. While some of these advantages may not be applicable to all buyers, the following is considered universally beneficial for all those who are eligible for such a loan:
VA Home Loan | Disadvantages
Although the disadvantages of a VA home loan may not outweigh its benefits, they are still worth considering:
VA Home Loans | A Brief Overview
For years, mortgage lenders were offering zero down home loans, but after the market crashed in 2009, the home loan industry began to shift. While conventional home loans now require some money down and are strict regarding their minimum credit scores and financial history, a VA loan is unique within the industry as it offers military service members – both present and past – the ability to buy a home without having to pay a down payment. This can result in real savings for military members, which allows them to keep more of their money while still securing a stable and respectable home loan.
VA Home Loans | Advantages
There are many advantages to a VA mortgage loan. While some of these advantages may not be applicable to all buyers, the following is considered universally beneficial for all those who are eligible for such a loan:
- No Down Payment – This is perhaps the biggest benefit of a VA mortgage. Qualified buyers can be approved for a loan up to $417,000 without having to pay any money down. When compared to many other loan options, this results in saving thousands of dollars.
- No PMI Required – PMI, or Private Mortgage Insurance, is a requirement for all conventional home loans who are unable to pay at least 20 percent of the loan value upfront. Because there are no PMI requirements for a VA mortgage, you'll end up saving thousands of dollars.
- Higher DTI Requirements – In a conventional mortgage, most lenders require borrowers to feature a DTI ratio no greater than 38 percent; however, for VA loans, you may qualify with a DTI ratio of 41 percent or less. Even if your DTI is greater than 41 percent, you may still qualify for a home loan.
- Zero Prepayment Penalty – Unlike most conventional loans, a VA home loan does not feature a prepayment penalty should you wish to completely pay off your mortgage before its duration is complete.
VA Home Loan | Disadvantages
Although the disadvantages of a VA home loan may not outweigh its benefits, they are still worth considering:
- VA Home Loan Funding Fee – In order to execute the loan, all borrowers are required to pay a VA Funding Fee, which is a fee delivered directly to the VA agency as a means of keeping this government division open and operating. Its cost may be required, but you can add the cost of the fee into your loan. However, if you have a service-related disability, you are exempt from paying this fee.
- Primary Residence Requirement – Unlike conventional loans, a VA mortgage can only be used to purchase your primary residence. This means you are unable to apply for a VA home loan if you intend on using it to purchase a secondary property or an investment home.
- Sellers Are Wary – It's not uncommon for a home seller to not accept an offer from a VA home loan, since there is no down payment required and less information regarding credit scores (www.your650score.com). While many sellers who are wary of this type of loan are simply uninformed, as their concerns are based on misconceptions and common myths, it's still an issue for millions throughout the country.