VA loans are one of the greatest benefits for veterans and active duty.
In an effort to help service members obtain long term financing to buy homes, the Department of Veteran Affairs partnered up with banks, credit unions, mortgage companies and other private lenders to provide special loans to eligible service members.
A lot of areas in the U.S. lacked private lenders to help service members obtain va home loans, so the VA designated certain areas as credit shortage areas to offer VA Loans to.
Another issue the VA was noticing is that a lot of veterans wanted to buy homes but simply couldn’t afford the down payments required. To combat this issue, Veteran Affairs provide 100% financing options which allows eligible service members to purchase a home without a down payment.
The loans have proved to be successful so far, as over 18 million VA loans have been granted so far. However, a large portion of veterans who are eligible for VA Loans don’t take advantage of this tremendous benefit available to them. One reason why Veterans aren’t taking advantage of VA loans is simply because they don’t know whether or not they qualify. The process of getting a VA loan is nothing to be intimidated or worried about. There’s generally a two step process. Making sure you meet the service qualifications and then getting approved by a lender.
Getting a VA Loan
Unfortunately, VA loans aren’t available for all service members. Certain service requirements have to be before you can qualify for a VA loan. In order to qualify for the loan you must have 6 years of experience in the National Guard or reserves, at least 91 days of active duty service, have a spouse who was killed in action, have 181 Days of Peacetime Active Duty Service, or received an honorable discharge. If you meet any of these requirements you can consult with a VA loan specialist to obtain your certificate of eligibility. This certificate is necessary to be approved by a lender for the VA home Loan. After you’ve received your certificate of Eligibility, you can move on to seeking approval from your lender.
Any bank, credit union, Mortgage Company or other private lending company can give a VA Loan so you have a variety of choices to choose from.
It’s important to note that although all of these lenders can grant a VA Loan, some of them don’t. Once you’ve selected a lender the next step will be to provide them with the information necessary for approval. This information generally will include proof of your financials such as pay stubs, any information on other outstanding debts you have, information on any checking or saving accounts you have, and any other information they find pertinent. Although your credit is not a deciding factor for loan approval, lenders will still run a credit check because they do take it into account, especially when determining your interest rate. Lenders may also ask you to provide information on previous employers and some require references. The documentation required will vary based on lenders but these are the most common things that lenders look for.
Pros and Cons of VA Loans
While VA loans are great, they do have some disadvantages. For one, they cannot be used for real estate investments. VA loans are only granted for your primary residence, so if you plan on buying multiple homes for investing, you’ll have to look into a conventional loan. Also, VA home loans are only good for a certain amount. This will put a limit on houses you have to choose from. Of course the upside of this is that you won’t have to provide a down payment for the house that you do choose. Another advantage that VA loans have over conventional loans is that they are available even for people who don’t have stellar credit.
Myths about VA Home Loans
There are a lot of myths associated with VA loans. These myths are leading people to be ill informed about VA loans. One common myth about VA loans is that they have better interest rates than conventional loans. While you do have the potential to have a lower interest rate, it is dependent on factors such as your credit and market. You have less than average credit, expect to pay a higher interest than someone with a 900 FICO score doing a conventional loan. Another myth is that VA loans are difficult to get. As you see above, the approval process is not very difficult and only requires a little paperwork and patience. A myth that is stopping a lot people from getting VA loans is that VA loans are only for Veterans. VA loans are available for active duty military that meet specific requirements as well as veterans.
If you’re looking into purchasing a home, look into VA loans as a great alternative to a conventional loan. If you have any questions as to your eligibility or lenders in your area they do VA Loans, consult a VA loan specialist. They will gladly answer any questions you have and help you start the process of obtaining a VA Loan.
Find out more: http://www.benefits.va.gov/homeloans/