(VA) Veterans Affairs Mortgage Loans
VA Loans are guaranteed by the United States Department of Veterans Affairs
The basic intention of the VA home loan program is to supply home financing to eligible Veterans, service members, and eligible surviving spouses to help them purchase properties with no down payment.
VA Loan Requirements
In order to qualify for the VA loan program, the homebuyer must have served 90 consecutive days of service during wartime, or served 181 days of service during peacetime. You can also qualify if the homebuyer spent more than 6 years in the National Guard or Reserves. If the homebuyer is a spouse of a service member who died in the line of duty or as a result of a service-related disability, then the spouse can also qualify for the program. The borrow must still meet standard income to debt ratio guidelines and satisfactory credit to qualify.
VA Loan Benefits
0% Down payment.
No Private Mortgage Insurance required.
Competitive Interest Rates.
No loan limits, but there is a limit to the amount of money you may borrow or the amount the program will guarantee.
Lower closing costs.
Easier to qualify because the loan is backed by the government so banks assume less risk.
VA Loan Disadvantages
The VA requires several forms in order to prove eligibility. This process can be a bit daunting, but many VA qualified lender will assist you with this process.
In order for the VA to guarantee a loan, it charges a funding fee which is a percentage of the home price so that the VA can cover operating costs. Even with lower closing costs, when factoring in the funding fee you could end up with a loan that exceeds the fair market value of the home.
VA loans can take slightly longer to close than conventional or FHA loans.
The VA has very strict guidelines for home appraisal.